The Best 529 Plans - Allan Roth

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The Best 529 Plans - Allan Roth

Postby Grt2bOutdoors » Tue May 21, 2013 10:16 pm

Here's a recent article Allan Roth just posted on what he deems are the best 529 plans.

http://www.cbsnews.com/8301-505123_162- ... ege-plans/
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Re: The Best 529 Plans - Allan Roth

Postby learnfpga » Tue May 21, 2013 10:34 pm

+1 for UESP. I have my 529 with them. They have age based option as well as fully customizable option too.
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Re: The Best 529 Plans - Allan Roth

Postby donaldfair71 » Tue May 21, 2013 10:35 pm

Thank you for the link!

This is one of the few critiques/rankings of 529 plans I have seen that draws the advisor-sold plans together with other plans, and acknowledges that difference in the literature. My own state, Virginia, has an above-average non-adviser plan, as well as an adviser-based plan that is much more expensive. For some reason, the adviser-run plan is always ranked higher than the investor-run plan, even though it averages an expense ratio of about .6 more than the do-it-yourself plan.

I think that other articles lean toward directing you toward the CollegeAmerica plan with adviser assistance for the sake of padding wallets. This article seems fair and balanced.
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Re: The Best 529 Plans - Allan Roth

Postby Random Musings » Tue May 21, 2013 10:46 pm

I looked at Utah too, but ended up at Ohio at the time. I'm in around 24-25 basis points using their "core" index options, although the one drawback is that they only have the int'l developed markets index. I think they should move to the TISM.

However, OH does sell those active funds too. I just avoid them.

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Re: The Best 529 Plans - Allan Roth

Postby Grt2bOutdoors » Tue May 21, 2013 10:49 pm

learnfpga wrote:+1 for UESP. I have my 529 with them. They have age based option as well as fully customizable option too.


I use both Utah and Ohio.
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Re: The Best 529 Plans - Allan Roth

Postby EmergDoc » Tue May 21, 2013 10:52 pm

UESP gets even better with a state tax deduction!

I do get annoyed at how they pay the fees though. Your shares are slightly decreased. It makes it a pain sometimes to keep track of.
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Re: The Best 529 Plans - Allan Roth

Postby inbox788 » Tue May 21, 2013 11:15 pm

Grt2bOutdoors wrote:I use both Utah and Ohio.

I was leaning towards those 2, but my latest low fee search discovered that they're 0.2 to 0.25 vs. CA 0.18 and NY 0.17. These are the lowest total fund fees plus management fees plus state fees and apply to only a couple of funds, mainly sp500 or total (US?) market. I may have missed hidden fees (Utah? $15). I don't care much for bonds, but will look at international fund fees to decide. Worst case is 100% sp500 in this account and rebalance in retirement and taxable.
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Re: The Best 529 Plans - Allan Roth

Postby robertalpert » Tue May 21, 2013 11:34 pm

Random Musings wrote:I looked at Utah too, but ended up at Ohio at the time. I'm in around 24-25 basis points using their "core" index options, although the one drawback is that they only have the int'l developed markets index. I think they should move to the TISM.

However, OH does sell those active funds too. I just avoid them.

RM



I also use Ohio, including one active fund (Wellington), along with developed markets and extended market index funds. I agree TISM would be nice to have.
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Re: The Best 529 Plans - Allan Roth

Postby Iorek » Tue May 21, 2013 11:38 pm

I spent some time the last couple of days doing paperwork to shift over to Utah, so I was relieved to see it got the thumbs up.

I think they will waive any account maintenance fees if you agree to electronic delivery of notices (personally I think e-delivery is a great way to avoid being emotional about your investments, because most of the time I don't even look at the e-statements).
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Re: The Best 529 Plans - Allan Roth

Postby inbox788 » Tue May 21, 2013 11:42 pm

Wisconsin is waiving state fees 0.10 till 2017. This makes them look competitive for the next few years. Any other programs pulling similar stunt? They may need to keep it up to remain competitive, but you could always take your account elsewhere. Also, plans up for renewal are likely to have changes, which may be good or bad.

https://www.edvest.com/invest/fees-and-expenses.shtml
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Re: The Best 529 Plans - Allan Roth

Postby lump532 » Wed May 22, 2013 12:03 am

Hello,

My wife and I are on board with the Bogleheads philosophy of low cost investing. I am looking into a 529 for our newborn son and have a question that seems to go along with this thread.

Doesn't the fact that our contributions to an out of state plan (we are in Colorado) are not tax deductible from our state taxes offset any savings from using a lower cost 529?

While the Colorado plan (CollageInvest) does have a direct portfolio plan through Vanguard, I'm not excited about the fees or the investment options. I would rather have a more custom account.

I would appetite any thoughts. If this should be posted elsewhere please let me know.
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Re: The Best 529 Plans - Allan Roth

Postby jhh9327 » Wed May 22, 2013 6:15 am

Allan's knock on the NY plan is no international investment in the portfolios, but that isn't entirely accurate (*though it is true in the age based options which is the basis for his analysis). The NY plan offers the following individual portfolio:

Developed Markets Index
Portfolio >>

Underlying investment
Vanguard® Developed Markets Index Fund (100%)

Investment objective
Seeks to track the performance of a benchmark index that measures the investment return of stocks issued by companies located in the major markets of Europe and the Pacific region.

Edited to add * above.
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Re: The Best 529 Plans - Allan Roth

Postby livesoft » Wed May 22, 2013 8:08 am

Nowadays, investors are fortunate to have so many great 529 plans to tax-shelter money in. That wasn't always the case. And which low-cost 529 plan one chooses will not come down to the cost anymore. Instead, it will be about available options (Allan Roth touched on this), ease of contribution/withdrawal, and what the web site and statements look like.

We have used the Utah plan which used the actual NAV shown on the Vanguard web site for all the funds one held with them. As mentioned by EmergeDoc, they deduct their fees by deducting a small number of shares every so often (quarter?). If one is tracking everything to the 4-decimal point, then entering these changes manual for a 5-fund age-based portfolio for 2 children every quarter can be a a real PITA.

Other plans, encapsulate the Vanguard fund prices in "units". The unit price changes behind the scenes to cover the fees. The Ohio plan is like that. If one is tracking their tax-shelter, then they need to get the unit value from the Ohio web site. But one's number of units only changes when one makes a contribution or withdrawal. One's number of units is unchanged by any dividends or capital gains paid by the underlying funds.

With all the anxiety that surfaces in ETF vs mutual fund threads, I'm surprised there isn't more in 529 threads just on the bookkeeping, web site, and statements of 529 plans.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: The Best 529 Plans - Allan Roth

Postby Grt2bOutdoors » Wed May 22, 2013 8:19 am

lump532 wrote:Hello,

My wife and I are on board with the Bogleheads philosophy of low cost investing. I am looking into a 529 for our newborn son and have a question that seems to go along with this thread.

Doesn't the fact that our contributions to an out of state plan (we are in Colorado) are not tax deductible from our state taxes offset any savings from using a lower cost 529?

While the Colorado plan (CollageInvest) does have a direct portfolio plan through Vanguard, I'm not excited about the fees or the investment options. I would rather have a more custom account.

I would appetite any thoughts. If this should be posted elsewhere please let me know.


Can not answer based on limited information. List the two plans you are comparing with er's, your current state tax rate and the amount you are allowed to deduct from your taxes - some states cap it at a specific dollar amount or percentage.
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Re: The Best 529 Plans - Allan Roth

Postby 1210sda » Wed May 22, 2013 8:27 am

Hey Grtb,

Thanks for the post and the link to the article.

Very timely for me. We are on the verge of becoming grandparents and I would like to start a college fund for my soon to be grandson/grandaughter.

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Re: The Best 529 Plans - Allan Roth

Postby inbox788 » Wed May 22, 2013 10:07 am

Grt2bOutdoors wrote:
lump532 wrote:Hello,

My wife and I are on board with the Bogleheads philosophy of low cost investing. I am looking into a 529 for our newborn son and have a question that seems to go along with this thread.

Doesn't the fact that our contributions to an out of state plan (we are in Colorado) are not tax deductible from our state taxes offset any savings from using a lower cost 529?

While the Colorado plan (CollageInvest) does have a direct portfolio plan through Vanguard, I'm not excited about the fees or the investment options. I would rather have a more custom account.

I would appetite any thoughts. If this should be posted elsewhere please let me know.


Can not answer based on limited information. List the two plans you are comparing with er's, your current state tax rate and the amount you are allowed to deduct from your taxes - some states cap it at a specific dollar amount or percentage.

State plans with benefits bear looking into, despite higher fees. Looks like Colorado tax benefit is nearly 5%. Using simple math, that's 0.5 over 10 years and 0.25 over 20 years. More over shorter period. So, if you're a late starter or procrastinator, it's beneficial to "launder" current earnings into a 529 if your child is going to college soon, simply for the state income tax break. Over a longer time frame, the extra fees will eat away at any benefit, and worst, it eats away on earnings. Fees compound, so will have to run a spreadsheet to see break even scenarios. My guess is around 10 years would be break even with .25 fee difference, but that's just a wild guess. Simple suggestion, if you're doing this longer than 10 years, crunch the numbers, but shorter, and take the income tax break.
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Re: The Best 529 Plans - Allan Roth

Postby Iorek » Wed May 22, 2013 10:15 am

inbox788 wrote:
Grt2bOutdoors wrote:
lump532 wrote:Hello,

My wife and I are on board with the Bogleheads philosophy of low cost investing. I am looking into a 529 for our newborn son and have a question that seems to go along with this thread.

Doesn't the fact that our contributions to an out of state plan (we are in Colorado) are not tax deductible from our state taxes offset any savings from using a lower cost 529?

While the Colorado plan (CollageInvest) does have a direct portfolio plan through Vanguard, I'm not excited about the fees or the investment options. I would rather have a more custom account.

I would appetite any thoughts. If this should be posted elsewhere please let me know.


Can not answer based on limited information. List the two plans you are comparing with er's, your current state tax rate and the amount you are allowed to deduct from your taxes - some states cap it at a specific dollar amount or percentage.

State plans with benefits bear looking into, despite higher fees. Looks like Colorado tax benefit is nearly 5%. Using simple math, that's 0.5 over 10 years and 0.25 over 20 years. More over shorter period. So, if you're a late starter or procrastinator, it's beneficial to "launder" current earnings into a 529 if your child is going to college soon, simply for the state income tax break. Over a longer time frame, the extra fees will eat away at any benefit, and worst, it eats away on earnings. Fees compound, so will have to run a spreadsheet to see break even scenarios. My guess is around 10 years would be break even with .25 fee difference, but that's just a wild guess. Simple suggestion, if you're doing this longer than 10 years, crunch the numbers, but shorter, and take the income tax break.


Not all (or many?) states "recapture" tax deductions if you roll over your 529 to another state, so it's also possible contribute to your home state fund and then once the balance is large enough that the fees matter more than the tax deduction you can roll over the funds to another 529 (I've heard some people even keep the home state plan open for additional contributions and just roll over every couple of years).
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Re: The Best 529 Plans - Allan Roth

Postby dhodson » Wed May 22, 2013 10:16 am

You can always use your state up to the tax benefit limit and then use Utah's r another low cost for the rest.

I didn't see where account maintenance is waived with electronic though.
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Re: The Best 529 Plans - Allan Roth

Postby kenyan » Wed May 22, 2013 10:19 am

As pointed out above, Allan's article contains a factual error with respect to the NY plan. It contains a Developed Market International Fund; it only lacks Emerging Markets.

edit - ok, I see the caveat. I think that's an odd way to look at things, though.
Last edited by kenyan on Wed May 22, 2013 10:21 am, edited 1 time in total.
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Re: The Best 529 Plans - Allan Roth

Postby Iorek » Wed May 22, 2013 10:20 am

dhodson wrote:You can always use your state up to the tax benefit limit and then use Utah's r another low cost for the rest.

I didn't see where account maintenance is waived with electronic though.




UESP Administrative Maintenance Fee

The Administrative Maintenance Fee is $3 per $1,000 of an account balance and is capped at $15 per year. It is assessed on an account’s balance on the last business day of each month. The fee is waived for Utah residents and for all non-Utah residents who elect to view their quarterly account statements online rather than receiving them in the mail.

http://www.uesp.org/About-UESP/Plan-Ben ... aintenance
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Re: The Best 529 Plans - Allan Roth

Postby markcoop » Wed May 22, 2013 10:36 am

One point about diversification.

You can diversify using Coverdell IRAs. I have the bulk of my money in 529 plans. However, I have small value, REITs, and EM all in Coverdell IRAs for the kids.

If you can diversify outside of 529 plans, I believe it may change the rankings a bit.
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Re: The Best 529 Plans - Allan Roth

Postby Grt2bOutdoors » Wed May 22, 2013 10:42 am

markcoop wrote:One point about diversification.

You can diversify using Coverdell IRAs. I have the bulk of my money in 529 plans. However, I have small value, REITs, and EM all in Coverdell IRAs for the kids.

If you can diversify outside of 529 plans, I believe it may change the rankings a bit.


Aren't Coverdells subject to an income limitation? If you earn over a certain limit, you aren't eligible.
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Re: The Best 529 Plans - Allan Roth

Postby markcoop » Wed May 22, 2013 11:17 am

Grt2bOutdoors wrote:
markcoop wrote:One point about diversification.

You can diversify using Coverdell IRAs. I have the bulk of my money in 529 plans. However, I have small value, REITs, and EM all in Coverdell IRAs for the kids.

If you can diversify outside of 529 plans, I believe it may change the rankings a bit.


Aren't Coverdells subject to an income limitation? If you earn over a certain limit, you aren't eligible.


I believe they are and in addition, there's a max of 2K per child. For many, it is an option.
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Re: The Best 529 Plans - Allan Roth

Postby Rupert » Wed May 22, 2013 11:30 am

Coverdells do have income limits. Used to be $110,000 (single) or $220,000 (joint) MAGI. Not sure if those numbers changed this year. Of course, you could just gift 2K a year to your kid and let your kid contribute to his/her own Coverdell. So there are ways around the income limits. The great thing about Coverdells is you can use the money for elementary and highschool private school expenses, such as tuition and uniforms, in addition to college expenses.
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Re: The Best 529 Plans - Allan Roth

Postby Grt2bOutdoors » Wed May 22, 2013 11:59 am

Rupert wrote:Coverdells do have income limits. Used to be $110,000 (single) or $220,000 (joint) MAGI. Not sure if those numbers changed this year. Of course, you could just gift 2K a year to your kid and let your kid contribute to his/her own Coverdell. So there are ways around the income limits. The great thing about Coverdells is you can use the money for elementary and highschool private school expenses, such as tuition and uniforms, in addition to college expenses.


How can a child not earning an income open a Coverdell? I believe earned income is the qualifier to open one.
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Re: The Best 529 Plans - Allan Roth

Postby Rupert » Wed May 22, 2013 12:30 pm

Here's what the IRS says about Coverdells: http://www.irs.gov/publications/p970/ch07.html. I don't see anything there about an earned income requirement.

I did a basic Google search for it and found this info at the American Funds site:

Contributions

You can contribute to a Coverdell Education Savings Account even if you don’t have earned income. Contributions are made with after-tax dollars, and you cannot take a deduction for the contribution. Your contribution is limited to $2,000 per year per child until the child reaches the age of 18. Contributions are phased out as your adjusted gross income increases from $190,000 to $220,000 for married couples filing jointly and from $95,000 to $110,000 for individuals.
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Re: The Best 529 Plans - Allan Roth

Postby xram » Thu May 23, 2013 9:49 pm

Can't find the ticker symbols for the NY 529 individual options.

https://www.nysaves.com/nytpl/fundperfo ... Perform.do
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Re: The Best 529 Plans - Allan Roth

Postby kenyan » Fri May 31, 2013 10:25 am

xram wrote:Can't find the ticker symbols for the NY 529 individual options.

https://www.nysaves.com/nytpl/fundperfo ... Perform.do


Underlying investments for those options listed here:

https://www.nysaves.com/content/individualoptions.html
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Re: The Best 529 Plans - Allan Roth

Postby Peter Foley » Fri May 31, 2013 10:54 am

I did my own research for my grandchildren's 529s and came up with a similar list. Mr. Roth had more detail, which I appreciated. We went with the Wisconsin plan for our daughter who lives in Wisconsin and the NY plan for our daughter who lives in Minnesota. While I would agree that the NY plan we chose lacks international, I would also guess that international will be added to these plans at some point in the future - perhaps along the sames lines as Vanguard adding international bonds to target retirement. As pointed out, a future contribution could be used to purchase a developed market component so as to diversify into international.

With both grandchildren under the age of one there will be opportunities to fine tune the investment strategy as we make periodic contributions to the plans.
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Re: The Best 529 Plans - Allan Roth

Postby shashi » Fri May 31, 2013 11:14 am

Living in CA, debated between VG Nevada (which is their main national product - .25%) and NY (.17%). Decided to stick with Nevada in spite of slightly higher cost in favor of keeping all accounts in one view at VG and ease of opening and managing the accounts. Hoping they finally reduce the fees at Nevada to more reasonable levels.
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