NASD Outlines Basics of 529 Savings Plan Investing, September 2004

Washington, DC, September 14, 2004 - NASD has published an Investor Alert providing investors an overview of 529 college savings plans, emphasizing the importance of considering plan fees and tax features.

Background
College Savings Plans - School Yourself Before You Invest discusses the basics of 529 savings plans, how they are sold to investors, the potential state tax advantages associated with 529 savings plans, and features to consider when purchasing a plan, including fees and expenses. It also encourages investors to utilize the NASD's "529 College Savings Plan Expense Analyzer," which was developed by the NASD to help investors compare how fees and expenses can impact returns.

Specifically, NASD urges investors to make smart college savings plan choices by:

reviewing the home state's plan first, paying special attention to state tax breaks and fees that are waived or lowered for in-state residents;
considering a plan's investment options;
being aware that broker-sold plans are generally more expensive than direct-sold plans;
comparing expenses, particularly if the state offers both broker-sold and direct-sold plans and if the investor is considering purchasing an out-of-state plan;
independently verifying sales information the investor receives by thoroughly reading the issuer's official disclosure document; and
making sure that the investment meets the investor's objectives and that the investor understands and is comfortable with the risks, costs, and liquidity of the investment.

NASD also encourages investors not to limit their research to college savings plans but to consider other tax advantaged savings options such as prepaid tuition plans, educational savings accounts, custodial accounts, and savings bonds.