529 Plan Fees
Some readers wanted more detailed information on where to find their 529 Plan fees and what they may entail. Today’s video and newsletter is devoted to that topic.
There are at least four levels of fees for 529 plans: underlying fund expenses, program management fees, a state fee and account maintenance fees. Those 4 fees add up to an overall fee for the 529 plan that is deducted straight from your account balance. These are listed as a percentage which means that each year, that percentage of your portfolio balance is paid in fees. Why base it on a percentage? That's a long tale for another day.
Let’s take a quick look at each one:
Fund expenses: Every mutual fund or ETF has a fee to run it: there are people who actually manage the money (making trades, etc). These typically range from about .02%-.1% for index funds and anywhere from .15%-1.5% for actively managed funds. Your 529 plan invests in underlying equity and bond funds that have management fees. If you use an “Index” product, the chances are that you are paying the least amount in fees.
Program Management Fee: The 529 plan also has people managing the accounts, so there’s a fee. My Illinois 529 plan has a fee of .08%. Massachusetts Fidelity Index Funds is .045%, MA Fidelity Funds is .1% and MA Fidelity Multi-Firm Funds is .25% You can see that there is quite a range of associated fees for different account types.
State Fee: There’s a state fee for each plan. Fidelity 529 Plans range from .045% to .1% depending on your plan type.
Account Maintenance Fees: A broker may charge you a fee to operate an account that invests in a 529 Plan. Fidelity does not charge an account fee for MA plans.
Adding all those together, you get a range of .11% all the way to 1.13% for Fidelity MA 529 plans! That’s a 1% difference, which will add up to hundreds (and thousands) of dollars difference in fees paid.
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