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By Jeff Holt, CFA | 10-18-2017 10:00 AM

Our View Brightens on This Illinois 529 Plan

Bright Start Direct-Sold College Savings Program is now rated Gold thanks to smoother equity adjustments and lower fees.

Jeff Holt: The state of Illinois overhauled its Bright Start Direct-Sold College Savings Program in 2017, and it now stands out as one of the top 529 plans out there. The plan's Morningstar Analyst Rating has been upgraded to Gold from Bronze.

The plan has a lot to offer for both the hands-off investor and the do-it-yourselfer. Hands-off investors may choose from the plan's two types of age-based portfolios: index or multifirm. Investors in these portfolios now ratchet down their equity exposure in smoother 10-percentage-point increments as the beneficiary approaches college age rather than the previous 20 percentage points. As their names imply, the index series invest in passive strategies, and the multifirm ones combine both active and passive strategies from a variety of firms.

For do-it-yourselfers, the plan offers 14 stand-alone strategies across both active and passive approaches that cover various asset classes. Those strategies come from well-regarded investment firms, such as DFA, Dodge & Cox, T. Rowe Price, and Vanguard.

As part of the revamp, the plan also lowered its fees. With expenses between just 12 and 15 basis points, the index series are among the lowest cost options available. The multiseries' use of active strategies results in higher fees, but they are also competitively priced.

The ability to deduct contributions (up to certain limits) from state taxes makes the plan especially attractive for Illinois residents, but even those outside Illinois may want to consider its appeal.

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