Have you heard the saying, “Being wrong feels just like being right?”
I’ve been mistaken about something important for almost seventeen years…
After listening to Tom the Savings Captain’s podcast “Setting Our Kids Up for Money Success,” a very important discovery was made.
Tom talked about 529 college savings plans and that every state’s plan is different.
So, I thought I’d check up on the Illinois 529 plan we’ve invested in since 2007.
I found a Morningstar article listing Illinois’ Bright Start Direct-Sold College Savings as a second-tier 529 plan, behind Utah and Pennsylvania’s gold-rated plans.
 Morningstar.com |
It’s a solid plan, but ours is called “Bright Directions.”
 BrightDirections.com |
So what gives?
When we found out my wife was pregnant with our first child, we knew we wanted to give them something we never had…money for college.
So, I walked into our local bank and said I’d like to save money for my kid’s college, and the banker enrolled me in the Bright Directions 529 college savings plan.
I remember him asking if we wanted to be aggressive, moderate, or conservative, and I said “aggressive.”
We set up a direct monthly deposit, and that was that.
We repeated the process a little over a year later when we found out we were pregnant again.
Aside from checking the balance a few times a year, it’s been an afterthought on autopilot.
So, back to today. Looking into what we had here under a different name, something about the bright directions logo jumped out at me for the first time…
My heart sunk into my stomach when I read that word… ADVISOR.
That means there will be extra fees for the advisor, which will drag down the portfolio’s long-term performance.
Ugh.
I’m in Fund 100-A, which has an expense ratio of 0.79% and a sales charge of 3.50%.
3.50%! Every time I contribute!
For many years, we’ve contributed $300 a month ($150 for each kid), which means I’ve been paying a sales charge of $126/year.
Yes, it’s not the end of the world, but the point here is that I didn’t fully understand what I was being sold.
And, up until I started becoming a more knowledgeable investor, I wouldn’t have known this.
Bright Start is a DIY 529 college savings vehicle with no sales charges. One of the available funds is a Vanguard S&P 500 index fund with an expense ratio of just 0.09%.
Bright Directions (which is managed by the same entity as Bright Start) is an advisor-based 529 plan.
Our daughters are 15 and 16, so they’re close to college, and we now have a decision to make because…
An awesome new development with 529 plans is that starting in 2024, you can roll unused 529 assets—up to a lifetime limit of $35,000—into the account beneficiary’s Roth IRA.
If we open a Bright Start (DIY 529 fund) account now and roll their assets into it, we can’t shift any funds into a ROTH for at least 15 years.
My daughters are unsure of their future education, but they have time to figure it out.
No decision has been made as of this writing, but I’m fully aware of what we’re investing in.
You can’t get too down on not knowing what you didn’t know, but you need to understand what you’re invested in because nobody cares about your money as much as you do.
Simple questions about any investment should be asked, like…
- Exactly how does this investment make money?
- Will I track this myself, or does someone else do it?
- What are the risks?
- What are the exact fees that I will be paying?
- Are there any tax implications?
Our kids’ combined college 529s have just passed the $100K mark, so while it could have been higher had I known better, they will have an option my wife and I never had.
Perhaps this is a “good” problem to have…
I’d love to know if you ever had a similar awakening by hitting reply.
😁THANK YOU to everyone who responded to the last newsletter!!
Check out the portfolios and podcasts, or see what’s cooking on YouTube.
That said, let’s get to this week’s portfolio activity.
Dividends Received ~$138.68
- Johnson & Johnson (JNJ) | $137.64
- Visa (V) | $1.04
Dividends Received Year to Date~
$3,151.25
Stocks Sold (AVERAGE)
Stocks Bought (AVERAGE)
- 2 Visa (V) | $269.25
- 3 Agree Realty (ADC) | $61.22
- 5 VICI Properties (VICI) | $28.84
- 3 Johnson & Johnson (JNJ) | $147.18
- 2 Harrow Inc. (HROW) | $17.20
Notable Ex-Dividends This Week + SSD Score
- 6/11 NVIDIA (NVDA), 0.03% | 89VS
- 6/12 Public Storage (PSA), 4.38% | 96VS
- 6/12 Texas Roadhouse (TXRH), 1.45% | 80S
- 6/14 Automatic Data Processing (ADP), 2.22% | 97VS
- 6/14 Coca-Cola (KO), 3.04% | 80S
- 6/14 Nasdaq (NDAQ), 1.67% | 61S
- 6/14 Altria (MO), 8.39% | 55BS
- 6/14 Ares Capital (ARCC), 8.92% | 59BS
- 6/14 Meta Platforms (META), 0.41% | 70S
🗣️Quote of the week🗣️
“The worst thing a company can do, like a sports team, is to start playing defense because you’re afraid to fail… that is a disease.” –Howard Schultz
–Howard Schultz on the Acquired Podcast
🎦If you missed it, we chatted with Nicholas Bratto, SeekingAlpha.com writer, to talk ETF investing.
Investing Newsletters You Might Like
⭐Ryne Williams writes a free weekly dividend newsletter and creates multiple top-notch YouTube videos every week.
🤑Rick Stambaugh from Orange Mountain Financial brings you ‘Grow Retirement Income.’ He’s a seasoned pro with over 30 years in trading and a passion for guiding folks to a prosperous retirement.
⚠️Seeking Alpha Premium SALE!
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🎶Random music from the Dapper Dividends jukebox🎶
The Living End – Monday (Live)
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That said, have a WONDERFUL week, and I’ll see you in the next one.
