Advice on 529 in CA

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Topic Author
Arla
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Joined: Thu Mar 22, 2012 10:39 am

Advice on 529 in CA

Post by Arla »

Living in CA, I have one child (and it's highly likely to remain at just one child). He's just turning 4, currently we don't have a 529 plan started for him, and I'm thinking we should start one.

I've been trying to review and find the amount of information about 529's both over, and underwhelming, there seems to be a lot of information, but trying to disect it into any kind of decision is proving difficult.

Right now I'm waivering between the NV and UT plans, NV seems good, it's Vanguard, it has a good amount of individual funds to invest in and pretty low expenses. The Utah plan equally seems pretty good, while it's not vanguard, it has vanguard funds that are available, the first static option (70/30 total stock to international) seems like a nice mix, again expense fees seem pretty good, not too high.

Anywhere else I should be looking? CA seems to give no advanatage to having a 529 (either in state, or out of state).

The other question, what about using IRA's for education (or some other method of paying)? I'm trying to figure with a single child, all the money would need to be spent on his education, or taken out but with tax implications, given that a 4 year old now likely pays 200k-500k for a 4 year college (based on a number of the calculators out there) that's a lot of money.
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Pennstateclj1
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Location: State College, PA

Re: Advice on 529 in CA

Post by Pennstateclj1 »

Based on this post- http://www.bogleheads.org/forum/viewtop ... 6#p1345416

I believe before you fund a 529 for your child, you should focus on yourselves. As self-centered and counterintuitive as this may sound; your child could get scholarships, join the military, get a lucrative job or any number of things before you have to pay for their education. I think the hefty mortgage in your case is a better bet. Payoff the mortgage, maximize your tax-advantaged accounts. When the time comes to fund an education, you'll be able to scale back those contributions because they will be so large by then and you will have no mortgage, you can pretty much pay out of pocket in 14 years when he goes to school. Personally, I'd have him get loans and help him pay those to establish a credit history for him.
ronney
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Joined: Sun Sep 30, 2007 2:35 pm

Re: Advice on 529 in CA

Post by ronney »

Hi Arla,

I was in similar situation 1 month ago. After debating between CA 529 vs Utah 529 vs Vanguard 529 Plan. Here is my final
conclusion. I have yet to open it but when I am ready for it I will open Vanguard 529 Plan.
After further research, Looks like Vanguard 529 Plan looks impressive,
- 0.25 ER for the Moderate Age Based Option,
- This account counts towards the Voyager, Voyager Select, or Flagship status
- Upromise rewards service
http://www.bogleheads.org/forum/viewtop ... =1&t=92927
NorCalDad
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Location: Northern California

Re: Advice on 529 in CA

Post by NorCalDad »

I've also been thinking about this with a young son, and I agree with Pennstateclj1 that first and foremost you should prioritize your retirement savings.

Do you and your spouse have Roths? If not, I would start there. I have not yet opened a 529, but I've made sure that our Roths are fully funded each year. I view that as a backup college account before establishing a 529, in no small part because IRAs are ignored in financial aid calculations.

I'd say that you really want to maximize financial aid. It's hard to know how to do that without knowing what your household income will be in 14 years or what formulas your child's potential schools will use at that time. But I'd recommend researching the financial aid formulas to determine what assets/income may hurt someone at your income level in the financial aid game and then strategize from there.
letsgobobby
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Re: Advice on 529 in CA

Post by letsgobobby »

I very much like Utah, but I kinda wish I'd gone with Nevada as I'd be that much closer to flagship status. They are both very good plans.
TheEternalVortex
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Location: San Jose, CA

Re: Advice on 529 in CA

Post by TheEternalVortex »

I live in CA and did the OH plan. Though honestly I might stop contributing because I'm not sure that a 529 is worth it over taxable investing.
anonenigma
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Re: Advice on 529 in CA

Post by anonenigma »

California has a new official 529 plan, ScholarShare, which is managed by TIAA-CREF. I don't know how it compares to other 529 plans, but the website is http://www.ScholarShare.com
mikep
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Re: Advice on 529 in CA

Post by mikep »

letsgobobby wrote:I very much like Utah, but I kinda wish I'd gone with Nevada as I'd be that much closer to flagship status. They are both very good plans.
Nevada plan charges over 0.5% for total intl.. that's a red flag IMO. Obviously not run "at cost" .. and the $20 annual fee if the market takes the account below $3000.. come on Vanguard ..

I use ESA's and Utah plan after those are fully funded. Utah costs about the same as Nevada age based funds anyways and Utah continues to lower the cost each year. I prefer ESA's since states are not involved taking a cut, but those are capped at 2k/yr and Vanguard doesn't offer them anymore but they have grandfathered in current ones.
grtwallchina75
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Re: Advice on 529 in CA

Post by grtwallchina75 »

Where can I open/fund a ESA plan?

My financial advisor (fee based) advised me Utah and we put all our savings (160K) for our 1 year old TWINS in UT 529.

We used customized option on UT plan and UT offer all Vanguard Funds
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mcrunyan
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Re: Advice on 529 in CA

Post by mcrunyan »

We live in CA and have been in the Utah plan for 3 years with the 70/30 option and have been quite pleased with it. Looked at other plans once or twice in that time, but haven't done so in a year or so.
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drizzle
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Re: Advice on 529 in CA

Post by drizzle »

Now I'm confused, all of you are doing state specific 529's. For me, after seeing that OK had a crummy 529, I went straight to vanguard https://personal.vanguard.com/us/funds/529portfolios and opened one.

Is there any benefit to doing a state specific 529 in a state outside your home state instead of doing a direct vanguard 529?
letsgobobby
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Re: Advice on 529 in CA

Post by letsgobobby »

Utah has lower fees than vanguard's Nevada plan. That's the only advantage.
ronney
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Re: Advice on 529 in CA

Post by ronney »

Hi letsgobobby,

Does Utah plan also have these features?
- This account counts towards the Voyager, Voyager Select, or Flagship status
- Upromise rewards service
letsgobobby
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Re: Advice on 529 in CA

Post by letsgobobby »

ronney wrote:Hi letsgobobby,

Does Utah plan also have these features?
- This account counts towards the Voyager, Voyager Select, or Flagship status
- Upromise rewards service
no on both counts.
expat
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Re: Advice on 529 in CA

Post by expat »

drizzle wrote:Now I'm confused, all of you are doing state specific 529's. For me, after seeing that OK had a crummy 529, I went straight to vanguard https://personal.vanguard.com/us/funds/529portfolios and opened one.

Is there any benefit to doing a state specific 529 in a state outside your home state instead of doing a direct vanguard 529?
All 529 plans are state specific.
The Vanguard 529 College Savings Plan is a Nevada Trust administered by the Board of Trustees of the College Savings Plans of Nevada, chaired by State Treasurer Kate Marshall.

https://personal.vanguard.com/us/whatwe ... anguard529
Stoutboy
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Re: Advice on 529 in CA

Post by Stoutboy »

I started a Nevada (Vanguard) 529 for our son last year when he was born. I'm doing the Aggressive Age Allocation. His grandparents are committed to helping also, but they will use bonds or some other means. I agree with the advice to get your own house well in order before worrying about your child's college expenses. The absolute best gift you can give your child is to ensure you won't be a burden on them in your old age.
Live Free or Diehard
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Re: Advice on 529 in CA

Post by Live Free or Diehard »

ronney wrote:Does Utah plan also have these features?
- This account counts towards the Voyager, Voyager Select, or Flagship status
- Upromise rewards service
You don't have to have any particular 529 plan to get Upromise rewards service. You don't even have to have a 529 plan to get Upromise rewards service. You could actually get more money from Upromise by linking to a Sallie Mae High-Yield Savings account. If you open the savings account and either set up a $25 monthly ACH or deposit $5,000 within 90 days of opening the account, then you get a 10% bonus on your annual earning amount from Upromise. You can also redeem into your savings account in $10 increments instead of the $25 minimum that the 529 plans require. If you still want to put the money into a 529 plan, then you can transfer it from the savings account to whereever you want and then transfer it into whatever 529 plan you want.

So, I don't see how Upromise reward service is an advantage of any particular 529 plan.
Topic Author
Arla
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Joined: Thu Mar 22, 2012 10:39 am

Re: Advice on 529 in CA

Post by Arla »

Thanks to all for all the information, I'm still looking (sorry I didn't respond earlier, post didn't seem to get any responses for a few days so I'd stopped looking assuming it had fallen off the board and no responses would be forthcoming).

I'm torn on paying down the mortgage at this point, with the interest deduction for taxes, the low mortgage rate, and the fact that it's really hard to pull money OUT of a mortgage once it's paid I'm of a preference to not pay off the mortgage too quickly.

I'm going to print both the Utah and Nevada plan documentation out and try to review it all with an eye to what I'm doing now and in the future (also with an eye to grandparents contributing).

I'm assuming that grandparents can contribute to a 529 even if they are foreign? I've not found anything forbidding that (at least not yet).
Easy Rhino
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Re: Advice on 529 in CA

Post by Easy Rhino »

I'm bumping this because I'm planning on opening a 529 for our soon to be newborn (not making regular contributions, but just to deposit gifts).

And while I realize that the CA scholarshare 529 plan doesn't offer any special tax benefits here, it really looks like a good plan.

Fees for passive options are within a hair's breadth of the good Vanguard plans (NY NV UT OH etc).
https://www.scholarshare.com/portfolios ... nses.shtml

And if you prefer active management, they seem to have solid offerings from T Rowe price, DFA and PIMCO.
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kenyan
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Re: Advice on 529 in CA

Post by kenyan »

CA's plan is indeed one of the best out there, and it became better with the switch in management from Fidelity to TIAA-CREF. Its fees are just as low as the Vanguard-based plans, as long as you choose the passive options.

Note the new wiki page for reference:

http://www.bogleheads.org/wiki/529_Cost_Comparisons
Retirement investing is a marathon.
Trezcan
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Re: Advice on 529 in CA

Post by Trezcan »

Arla wrote:I'm trying to figure with a single child, all the money would need to be spent on his education, or taken out but with tax implications, given that a 4 year old now likely pays 200k-500k for a 4 year college (based on a number of the calculators out there) that's a lot of money.
I too have a young child and have been going over these numbers from the online calculators. While we are planning for somewhere in that ballpark, I strongly believe that will not be the cost. Yes, college has been increasing at a rate far above inflation for years now, but just like housing, that cannot continue. Once the cost of goods and services get too far away from income, it will price people out and there will be no one to fill the seats. I don't know what is going to give, but I am fairly certain something will before that time. Probably not good to plan on it, though.
thomasbayarea
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Re: Advice on 529 in CA

Post by thomasbayarea »

We live in CA and we've been contributing to the Utah Plan (UESP) for close to ~5 years now. They were among the best then; I've not looked around since.
letsgobobby
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Re: Advice on 529 in CA

Post by letsgobobby »

Trezcan wrote:
Arla wrote:I'm trying to figure with a single child, all the money would need to be spent on his education, or taken out but with tax implications, given that a 4 year old now likely pays 200k-500k for a 4 year college (based on a number of the calculators out there) that's a lot of money.
I too have a young child and have been going over these numbers from the online calculators. While we are planning for somewhere in that ballpark, I strongly believe that will not be the cost. Yes, college has been increasing at a rate far above inflation for years now, but just like housing, that cannot continue. Once the cost of goods and services get too far away from income, it will price people out and there will be no one to fill the seats. I don't know what is going to give, but I am fairly certain something will before that time. Probably not good to plan on it, though.
There are 7 billion people in the world and a lot of them dream of going to American colleges. Because they also pay good money for the experience they are attractive matriculants. My question is when American taxpayers will wake up to this reality and eventually cry foul. Until then top tier schools will continue to increased their prices because they can.
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