indexfundfan @ indextown

There have been several changes to Fidelity’s 529 College Plans. The most notable are the withdrawal of the 2% rewards card and the introduction of indexed investment options.

Rewards card reduced to 1.5%

The new rewards card is issued by American Express. According to the web page, the features of this card are

• 1.5% of your net retail Card purchases are automatically contributed to your Fidelity-managed 529 Plan account⁴

• Up to $1,500 in annual contributions per Card to your 529 account managed by Fidelity

• Family and friends can also carry College Rewards Cards linked to your Fidelity-managed 529 Plan account

• Identity theft recovery and fraud protection

• No annual fee

The rewards are good by itself but pales in comparison to the old 2% rewards card.

Note that according to this thread on the Fatwallet finance forum, at least one user has reported success with application on the old card. This might be the last chance to get in on the old 2% card. But YMMV.

Indexed investment options added

With the transition of California’s 529 plan from TIAA-CREF to Fidelity, new indexed investment options were added to all of the 529 plans managed by Fidelity. The new options are

The expense ratios of the new options are all at 0.5%. These are all lower expenses compared to the old actively-managed options

I am submitting a request to switch my investments to the lower-cost indexed options. Note that now is a particularly good time for the switch since you are limited to one switch per calendar year and it is already almost December.

From an earlier post, I mentioned that my main college savings actually goes into the Ohio plan. Currently, the college investment allocation is

• 30% US Large cap equity
• 30% US Med/Small cap equity
• 30% International equity
• 10% Fixed income

Compared to Fidelity’s 0.5% expense ratio for all indexed options, the expense ratios of the Ohio plan are

The international equity option from the Ohio plan has the highest expense ratio and the corresponding Fidelity option costs only 7 basis points more. It therefore makes sense for me to use Fidelity’s international equity option for my funds at Fidelity. The following table shows my new overall 529 college allocation.

This entry was posted on Wednesday, November 22nd, 2006 at 10:22 am and is filed under College Saving, Investing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.