529 Suggestions

M

misirlou

250+ Posts
Any advice on good 529 plans out there?

As best I can tell there are no tax advantages to going with a Texas plan (I'm a Texas resident), and the Texas plans although better than before are not as good as other states.

Based on initial research, the Illinois BrightStart and Ohio CollegeSavings plans (direct buy, not advisor) seem like pretty good deals. My main criteria are low expense ratios followed by investment freedom (i.e. ability to create personalized portfolio). At this point, I'm really only considering index funds although I would like to have freedom in which funds I invest in.

For this reason, I'm liking the Ohio plan best since I can craft my own portfolio and get a low expense ratio (works out to 0.26 to 0.30% depending on which mix I go with). I don't think there any annual maintenance fees (Illinois charges $10 per portfolio), setup fees, or disbursement fees (cannot find proof of this). Illinois also has limited personalization options.

My only concern is that I'm already investing in Vanguard funds, and I would prefer to diversify. However, who else has low expense ratio index funds? Note that the Ohio 529 has lower expense ratios than the Vanguard 529 options (0.50%).

Suggestions?
 
From what I understand you can buy into any states plan and most are portable. I spoke to a finanical guy a while back and he seemed to think that the Virginia and Utah plans are better for some reason.
 
As a financial Advisor that is writing one today for a client, I agree with Cotton eyed horn and say WV plans are the cheapest around, by far.
 
Thanks for the tips. I typed up the below information for myself, but I'm including it here in case anyone else is interested.Overall, based on what is presented on the websites, I am leaning towards the Ohio or Utah plans. The Utah PTIF is something I need to research further since that seems to be the one area giving it an advantage over the Ohio plan. Ohio offers TIPS, which seems to consistently be recommended for a well rounded investment portfolio (i.e. take however much you want in bonds and split it into a bond fund and TIPS; some even recommend TIPS only for smaller investors and do bonds when you want to diversify further).Utah 529 Research:
Administrative maintenance fee of $15 or 0.3% per year, whichever is lower.
Asset fee of 0.22% + Vanguard asset fee ranging from 0.025% (S&P 500 index fund) to 0.43% (intl value fund) with most less than 0.09%.
No setup fee

Unique aspect is the PTIF (public treasurer's investment fund) which is effectively a government money market. Rates have varied from 1.5% to >5% over the past few years, which seem better than most money markets although I have never researched money markets very heavily. At first glance this seems like a bonus particularly for those with older kids (i.e. more heavily in cash).

Compared to Ohio, the expense ratios are comparable within a few hundredths. Both are much better than other states. The S&P 500 index fund has a 0.19% expense ratio in Ohio versus 0.245% in Utah. However, the age based funds range from a bit cheaper in Utah to a bit more expensive.

One advantage of the Ohio is that it offers a TIPS fund. The biggest bonus for Utah seems to be the PTIF, but I need to understand this one better.


Virginia Education Savings Trust (VEST)
$25 setup fee
Expense ratios are a bit higher than Utah or Ohio for the individual investment options. The age based funds have much higher expense ratios (>0.50%).
Limited research seems to indicate that this is one of the more popular options. However, I am curious if they used to have the lowest fees and just never updated to compete with Utah/ Ohio/ WV.

The Virginia CollegeAmerica plan is an advisor plan and has much higher fees.

West Virgina Smart529 Select
Setup fee: None?
Annual Maintenance Fee: $25
- waived if doing automatic investment of $50+ or account balance >$25k
Capped at $262k instead of >$300k like most plans.
- Realistically, these caps will move up over time, and I've got 17 years before my kid goes to college.

Expense ratios are 0.70% to 0.88%, which are much higher than the index fund based 529 plans. They are likely inline with actively managed funds, but I'm not considering those for a college savings plan.

I did check the other two West Virginia plans (WV Direct and Hartford), and those have even higher fees.
 
I'm with Iowa which is a Vanguard Plan...lowest fees when I started but things might have changed. Not a ton of freedom though
 
midtown, what is your opinion on 529 plans? Do you have one set up for that little peanut in your sig? I have one that's not much younger, and I also have several nieces and nephews that I'd like to get set up. It just seems like the higher expense ratios and fees and whatnot could easily outweigh the tax benefits, but I am no expert.
 
Indeed. If you have kids and any thoughts or plans for secondary education then a 529 is pretty much a no brainer. We use Nebraska.

Go direct to the plan don't use an advisor.

This guy is the guru for education planning including 529's.The Link
 
529s do not cover room board and other expenses? I thought that was one of the key selling points. Anyone confirm?
 
Tx Prepaid and most other 529s only include tution and fees, not room and board. These other expenses can be double, so you'll need other resources.
 
midtown, thanks for the response. Quick follow up question:

I have a 9-month old daughter, and Mrs. AV and I both have great jobs. I believe that sending her to college will be a breeze on us financially. But we plan to have more children, and I also have a few nieces and nephews who do not have wealthy families, one niece whose parents have no HS diploma between them.

I'd like to help them all, and obviously my children are first. Ideally, I would pay for the majority of my children's college expenses, and some (but not all) of my nieces' and nephews' expenses.

Can I just set up one, enormous 529 plan and change the beneficiaries as they enter school (or as I see fit), or do I need to set up a different 529 plan for each child? Some of the plans hit you with a minimum annual fee for each account, I've noticed.
 
Midtown,
I'd love to sit down with you and discuss all your options. Just shoot me a PM.

As far as the tx prepaids and most 529s covering more than tuition and fees, where are you getting your information?
 
I'll chime in since I've been researching this heavily the past few days. The non-prepaid 529 allows you to use the 529 for room and board up to what each school states room and board should cost. I have not looked it up for Texas, but if Texas reports to the government for financial aid that R&B costs $10k, then you can spend up to $10k. If your kid wants to be in a place that costs $20k/year, then you pay the difference from something other than the 529 or pay the tax penalty. A few quick searches on Google all confirm this.
 
I assume the coverdell, max contribution of 2k per year, can be used at the same time as the 529?
 
Aquaman, we are doing the Utah plan. I think it is a good choice. For what it is worth, I researched it a lot before making the decision.
 
I'm trying to choose btwn. Utah and Virginia. Does anyone have any experience with either or advice that might push one over the other?
 
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