I am trying to figure out what is the best investment option for my daughter's college tuition when she turns 18. We currently have Michigan's education savings program (MESP 529) and we deposit $100 each month. My daughter was born in 2016. I just opened the account a year ago. The earning comes to about 5%, which is a bit conservative in my opinion.

If we open an investment plan for her, I would image earning of 8% or so each year. So, would it be better if we switch to a more aggressive investment plan? Are there any other benefits with a 529 plan in terms of tax or so?

  • 2
    Which investment option did you pick?
    – Ben Miller
    Commented Oct 27, 2017 at 18:42
  • Right now we are doing 30% aggressive, 40% moderate, and 30% principle.
    – fhcat
    Commented Oct 27, 2017 at 18:48
  • 1
    So, if 5% isn't agreeable, why not just re-allocate your investments within the 529?
    – Hart CO
    Commented Oct 27, 2017 at 18:55
  • Is there a state tax break for the contributions to the Michigan 529 plan? Commented Oct 27, 2017 at 19:21
  • Michigan taxpayers may also be eligible for a Michigan income tax deduction on contributions made to MESP up to $10,000 for married couples filing jointly or $5,000 for individuals filing single per year.
    – fhcat
    Commented Oct 27, 2017 at 19:34

1 Answer 1


Michigan's 529 plan offers a wide variety of investment options, ranging from a very conservative guaranteed investment option (currently earning 1.75% interest) to a variety of index-based funds, most of which are considered aggressive.

You said that you are unhappy with the 5% you have earned the past year, and that you thought you should be able to get 8% elsewhere. But according to your comment, you have 30% of your money earning a fixed 1.75% rate, and another 40% of your money invested in one of the moderate balanced options (which includes both stocks and bonds). You've only got 30% invested in the more aggressive investments that you seem to be looking for. If you want to be invested more agressively (which is reasonable, since your daughter won't need this money for many years), you can select more aggressive investments inside the 529.

Michigan's 529 offers you the ability to deduct up to $10,000 (if you are married filing jointly) of contributions off your Michigan state income tax each year. In addition, the earnings inside the 529 are federally tax-free if the money is spent on college education.

  • 1
    I guess your answer makes sense. I have adjusted the allocation and will wait to see how it goes. I will probably come back in a couple of months to pick the answer.
    – fhcat
    Commented Oct 27, 2017 at 20:53

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