Why Utah 529 instead of Vanguard 529?

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longview
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Why Utah 529 instead of Vanguard 529?

Post by longview » Fri Sep 13, 2013 4:44 pm

Everyone recommends the Utah 529, because of the Vanguard funds. But they don't recommend the Vanguard 529.

If you are in a state with no tax advantage why not just go direct with the Vanguard 529? I must be missing something.


Thanks to anyone who can clear this up for me.

(I ask because I want to move my 529 from BrightStart to somewhere else)
(To color my comments: my situation is ER trying to make a large portfolio that is 99% taxable last 45 years)

abonder
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Re: Why Utah 529 instead of Vanguard 529?

Post by abonder » Fri Sep 13, 2013 4:51 pm

I have had the exact same question for a while and haven't found a clear answer. Would love to hear thoughts.

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pennstater2005
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Re: Why Utah 529 instead of Vanguard 529?

Post by pennstater2005 » Fri Sep 13, 2013 5:31 pm

I use the PA 529 because it has Vanguard funds and I get the PA tax deduction. Not sure why folks recommend the Utah 529 over Vanguards own 529.
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mikep
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Re: Why Utah 529 instead of Vanguard 529?

Post by mikep » Fri Sep 13, 2013 5:34 pm

I use Utah 529 because it has lower ER, lower account minimums and fees, ability to create your own smoother age based plan, no jagged 25% drops every 5 years like NV 529 from Vanguard.

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Re: Why Utah 529 instead of Vanguard 529?

Post by dimdum » Fri Sep 13, 2013 5:37 pm

I'm in same boat, in CA with no tax adv and want to open 529. Debating between VG and Utah.

livesoft
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Re: Why Utah 529 instead of Vanguard 529?

Post by livesoft » Fri Sep 13, 2013 5:37 pm

The Vanguard plan had higher expense ratios in the past than it does now.

529 plans seem to be constantly changing. I know a few years ago, the NY plan looked good, but it had no international fund option and did not include int'l in its age-based options, so I dismissed it just for that reason alone. It probably has an int'l option now.

And maybe the Pennsylvania plan didn't use Vanguard funds 10 years ago? (I don't know)

With the state plans changing so much, almost any article on 529 plans is probably out-dated. Nevertheless, through thick and thin, Utah has remained a good plan and gotten even better.
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mhc
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Re: Why Utah 529 instead of Vanguard 529?

Post by mhc » Fri Sep 13, 2013 5:46 pm

I use the Vanguard 529 because I already had an account with Vanguard.

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CABob
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Re: Why Utah 529 instead of Vanguard 529?

Post by CABob » Fri Sep 13, 2013 5:59 pm

I guess I am confused. I thought one had to go through one of the states' 529 plan whether it is Utah, Nevada, or some other state.
Bob

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JamesSFO
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Re: Why Utah 529 instead of Vanguard 529?

Post by JamesSFO » Fri Sep 13, 2013 6:15 pm

NY's 529 with Vanguard funds has lower ERs than the Utah plan when I last looked...

mikep
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Re: Why Utah 529 instead of Vanguard 529?

Post by mikep » Fri Sep 13, 2013 6:18 pm

Also, total international stock index costs 0.55% from Vanguard directly. That is the main reason I did not sign up with Vanguard.

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Re: Why Utah 529 instead of Vanguard 529?

Post by Grt2bOutdoors » Fri Sep 13, 2013 6:23 pm

JamesSFO wrote:NY's 529 with Vanguard funds has lower ERs than the Utah plan when I last looked...
The NY529 plan went through a recent (within the last 2-3 years) redesign. The original asset manager was TIAA-CREF and their performance was not that good, the fees were also much higher like 40-60 bps. Enter into the picture Upromise Investments at the next contract renewal, then Vanguard as investment subadvisor and then came much lower fees.
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Re: Why Utah 529 instead of Vanguard 529?

Post by Grt2bOutdoors » Fri Sep 13, 2013 6:26 pm

mikep wrote:I use Utah 529 because it has lower ER, lower account minimums and fees, ability to create your own smoother age based plan, no jagged 25% drops every 5 years like NV 529 from Vanguard.
+1 Same here. And it's only gotten better, with the addition of the DFA and new Vanguard fund options. The other thing I've noticed is they are constantly seeking to find equivalent funds for lower cost. I use the age-based option, in that time, they've reduced costs twice. That's another plus for Utah - nothing wrong with practicing conservatism with my money.
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Re: Why Utah 529 instead of Vanguard 529?

Post by livesoft » Fri Sep 13, 2013 6:49 pm

CABob wrote:I guess I am confused. I thought one had to go through one of the states' 529 plan whether it is Utah, Nevada, or some other state.
I believe the "vanguard" plan IS the Nevada plan. Can you check?
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Bruce
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Re: Why Utah 529 instead of Vanguard 529?

Post by Bruce » Fri Sep 13, 2013 7:47 pm

Yes, it is the Nevada plan, or at least the low cost plan among several others offered by the State of Nevada college savings plan program.
https://nevadatreasurer.gov/collegesavings.htm

from the Vanguard website
https://personal.vanguard.com/us/whatwe ... e_overview

"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. The Vanguard Group, Inc., serves as the Investment Manager and through its affiliate, Vanguard Marketing Corporation, markets and distributes the Plan. Upromise Investments, Inc., serves as Program Manager and has overall responsibility for the day-to-day operations, including effecting transactions. The Plan’s portfolios, although they invest in Vanguard mutual funds, are not mutual funds. Investment returns are not guaranteed and you could lose money by investing in the plan."
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Re: Why Utah 529 instead of Vanguard 529?

Post by nyblitz » Fri Sep 13, 2013 7:59 pm

I like the Nevada plan:

1. It's already on the Vanguard website, so no new passwords to require tracking
2. The Agressive Growth portfolio has an er of .25 and is 70% Total US and 30% Total International (includes small cap unlike many other international plans), which is close enough to what I want for this account

Lots of other good options in the Nevada plan (and others)

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Re: Why Utah 529 instead of Vanguard 529?

Post by in_reality » Sat Sep 14, 2013 12:54 am

Utah has one primary advantage in my opinion. Remember this is a college saving account where you may be facing a rather set timeframe in which to use the money.

In that regard, Utah has a better selection of shorter term bond funds.

The bond funds offered by the Vanguard/Nevada plan are all intermediate term (see https://personal.vanguard.com/us/funds/ ... ios/bytype). Utah offers a couple of short term ones: (1) Vanguard Short-Term Investment-Grade Fund (VFSIX) and (2) Vanguard Short-Term Bond Index Fund (VBIPX) [both of which have a Risk potential of 1] that are not offered within the Nevada plan [which only seems to offer bonds funds with a risk potential of at least 2].

While recent performance may likely be an anomaly, the intermediate terms bond funds available in the Vanguard/Nevada plan were in the red while the short term ones offered by Utah were just slightly down or stayed above water last I checked. Of course you can do intermediate term at Utah too or you can do an even lower risk money market type thing at either Nevada or Utah.

I talked to the Vanguard 529 people about it and they were like "yeah good point, but Nevada has a big say in the plan and it is not all up to us".

So while personally I am in the Vanguard 529 plan, I think it should include some lower risk bond funds which offer a little higher rate of return than a money market (or
Interest Accumulation Portfolio as Vanguard's 529 calls it).

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Re: Why Utah 529 instead of Vanguard 529?

Post by Grt2bOutdoors » Sat Sep 14, 2013 8:59 am

One other point about the Utah plan - they offer FDIC insured options, so as you get closer to college, you can either transfer or allocate more to an FDIC insured savings account, thus protecting your principal from fluctuation with insurance protection.
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Re: Why Utah 529 instead of Vanguard 529?

Post by White Coat Investor » Sat Sep 14, 2013 9:10 am

The Utah 529 has one more advantage that hasn't been mentioned....a 5% credit on your state taxes. Always be sure to check out your own state's 529 before choosing a Utah, NY, or NV plan.
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longview
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Re: Why Utah 529 instead of Vanguard 529?

Post by longview » Sat Sep 14, 2013 10:52 am

Thanks for the feedback everyone.
(To color my comments: my situation is ER trying to make a large portfolio that is 99% taxable last 45 years)

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Go Blue 99
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Re: Why Utah 529 instead of Vanguard 529?

Post by Go Blue 99 » Wed Apr 23, 2014 2:35 pm

Is there a way to determine the % of International in the Vanguard/Nevada 529 portfolios?

I downloaded the guide and it doesn't seem to offer this detail. For example, for the Aggressive Growth Portfolio, it only says:

Through its investment in Vanguard Institutional Total Stock Market Index Fund, the Portfolio indirectly invests in
primarily large-capitalization U.S. stocks, and to a lesser extent in mid-, small-, and micro-capitalization U.S. stocks.
The Fund’s target index represents approximately 100% of the investable U.S. stock market. Through its investment
in Vanguard Total International Stock Index Fund, the Portfolio indirectly invests in international stocks.

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Re: Why Utah 529 instead of Vanguard 529?

Post by archbish99 » Wed Apr 23, 2014 2:38 pm

EmergDoc wrote:The Utah 529 has one more advantage that hasn't been mentioned....a 5% credit on your state taxes. Always be sure to check out your own state's 529 before choosing a Utah, NY, or NV plan.
...for Utah residents, that is.

Those of us in states without income tax have little incentive to prioritize our own state's 529 plans.
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Re: Why Utah 529 instead of Vanguard 529?

Post by White Coat Investor » Wed Apr 23, 2014 2:41 pm

If you're in a state without income tax, your first $2K probably ought to go into an ESA. Then, if you move to a state with an income tax and a 529 deduction, you can move the ESA money to the 529 and get a windfall deduction.

A while back it was looking like ESA contribution limits were going to fall to $500 and I think Vanguard quit letting you open new ones as I recall. Not sure exactly where Vanguard is at with that these days.
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danwhite77
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Re: Why Utah 529 instead of Vanguard 529?

Post by danwhite77 » Wed Apr 23, 2014 2:48 pm

I use the Vanguard (Nevada) plan. As someone else mentioned, 529s are constantly changing, mostly in positive ways. Utah used to have the lowest expense ratios by far while Nevada had somewhat higher ratios, particularly in the age-based options. That was not Vanguard's fault. The way these plans work is that the investment company (e.g., Vanguard) runs the underlying fund with a certain expense ratio. The state then layers on another expense ratio of their own for administrative costs. These two expense ratios layered on together (in addition to any maintenance fees, I think Utah charges a very minimal quarterly flat maintenance fee as well) results in the total expense ratio.

Utah has generally had the lowest fund expenses and administrative expenses for about a decade. Nevada used to be higher due to the higher administrative expense but now that expense has come down significantly. Last time I checked it was basically a wash between Utah and Nevada expenses. I initially selected Nevada because as Vanguard's 529, they had the largest selection of Vanguard funds. That, too, may have changed. I recommend Utah to my friends that aren't interested in the entire array of Vanguard funds (assuming their own in-state plan does not offer a tax break or is poorly run). If you are interested in assembling your own portfolio of Vanguard funds, my experience with Nevada has been great.
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Re: Why Utah 529 instead of Vanguard 529?

Post by killjoy2012 » Wed Apr 23, 2014 3:38 pm

Ok - question. Given:

State Tax Rate: 4.25% (assume resident & deductible)
Annual Contributions: $1-10k
Average In-State 529 Investment ERs: ~0.25% (TIAA-CREF)

Looking at the Utah 529 site, the ER for their investment options are a little cheaper. 0.160% to 0.224%
Nevada 529 appears to be about the same as the TIAA-CREF with ERs of 0.21% or higher.

Where's the decision/tipping point between the 1-time, up front 4.25% deduction ($425 @ 10k/yr) vs. the ~0.05% ER discount over 18 years with an account balance growing from $0 - $xx,xxx over that time? Seems like you would need a fairly large contribution rate for the 18 years to offset the up-front, 1time deduction. No?

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Re: Why Utah 529 instead of Vanguard 529?

Post by White Coat Investor » Wed Apr 23, 2014 3:56 pm

I agree. Get your deduction.
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Re: Why Utah 529 instead of Vanguard 529?

Post by White Coat Investor » Wed Apr 23, 2014 3:57 pm

danwhite77 wrote:I use the Vanguard (Nevada) plan. As someone else mentioned, 529s are constantly changing, mostly in positive ways. Utah used to have the lowest expense ratios by far while Nevada had somewhat higher ratios, particularly in the age-based options. That was not Vanguard's fault. The way these plans work is that the investment company (e.g., Vanguard) runs the underlying fund with a certain expense ratio. The state then layers on another expense ratio of their own for administrative costs. These two expense ratios layered on together (in addition to any maintenance fees, I think Utah charges a very minimal quarterly flat maintenance fee as well) results in the total expense ratio.

Utah has generally had the lowest fund expenses and administrative expenses for about a decade. Nevada used to be higher due to the higher administrative expense but now that expense has come down significantly. Last time I checked it was basically a wash between Utah and Nevada expenses. I initially selected Nevada because as Vanguard's 529, they had the largest selection of Vanguard funds. That, too, may have changed. I recommend Utah to my friends that aren't interested in the entire array of Vanguard funds (assuming their own in-state plan does not offer a tax break or is poorly run). If you are interested in assembling your own portfolio of Vanguard funds, my experience with Nevada has been great.
I actually think NY is the cheapest these days, but we've gotten to the point where we're talking about less than 5 basis points now, which probably doesn't matter.

One thing I find highly annoying with Utah's plan is that they pay the expenses by selling off shares, so your # of shares is constantly changing and it makes updating spreadsheets a pain.
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Nyc1967
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Re: Why Utah 529 instead of Vanguard 529?

Post by Nyc1967 » Wed Apr 23, 2014 4:07 pm

I have the ny529 plan and just put it into moderate growth - I didn't know I had different fund choices other then aggressive /moderate or conservative - am I missing something should I look into something else in the ny529?

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Re: Why Utah 529 instead of Vanguard 529?

Post by Grt2bOutdoors » Wed Apr 23, 2014 4:11 pm

EmergDoc wrote:
danwhite77 wrote:I use the Vanguard (Nevada) plan. As someone else mentioned, 529s are constantly changing, mostly in positive ways. Utah used to have the lowest expense ratios by far while Nevada had somewhat higher ratios, particularly in the age-based options. That was not Vanguard's fault. The way these plans work is that the investment company (e.g., Vanguard) runs the underlying fund with a certain expense ratio. The state then layers on another expense ratio of their own for administrative costs. These two expense ratios layered on together (in addition to any maintenance fees, I think Utah charges a very minimal quarterly flat maintenance fee as well) results in the total expense ratio.

Utah has generally had the lowest fund expenses and administrative expenses for about a decade. Nevada used to be higher due to the higher administrative expense but now that expense has come down significantly. Last time I checked it was basically a wash between Utah and Nevada expenses. I initially selected Nevada because as Vanguard's 529, they had the largest selection of Vanguard funds. That, too, may have changed. I recommend Utah to my friends that aren't interested in the entire array of Vanguard funds (assuming their own in-state plan does not offer a tax break or is poorly run). If you are interested in assembling your own portfolio of Vanguard funds, my experience with Nevada has been great.
I actually think NY is the cheapest these days, but we've gotten to the point where we're talking about less than 5 basis points now, which probably doesn't matter.

One thing I find highly annoying with Utah's plan is that they pay the expenses by selling off shares, so your # of shares is constantly changing and it makes updating spreadsheets a pain.
Why are you tracking shares by spreadsheet? Just download the quarterly statements, file them away, be done with it.
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Re: Why Utah 529 instead of Vanguard 529?

Post by dickenjb » Wed Apr 23, 2014 5:01 pm

UT plan was the king.

NY plan is the new king.

There is no "Vanguard plan", only the NV plan run by Vanguard. It is a good plan but NY is better.

If you don't get an in state deduction, or if your state allows the deduction no matter which state plan you choose (PA does), go with NY.

Otherwise crunch the numbers - or if your state does not do a clawback, fund the in state plan, get the deduction, then transfer to NY plan.
Last edited by dickenjb on Wed Apr 23, 2014 5:58 pm, edited 1 time in total.

Nyc1967
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Re: Why Utah 529 instead of Vanguard 529?

Post by Nyc1967 » Wed Apr 23, 2014 5:10 pm

I have my kids in age based -- should I change it to individual plans

Any recommendations

Son 1 - 14
Son 2 - 12

Thanks

blackstone
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Re: Why Utah 529 instead of Vanguard 529?

Post by blackstone » Wed Apr 23, 2014 6:31 pm

https://personal.vanguard.com/us/FundsS ... IntExt=INT

It is 70/30
Go Blue 99 wrote:Is there a way to determine the % of International in the Vanguard/Nevada 529 portfolios?

I downloaded the guide and it doesn't seem to offer this detail. For example, for the Aggressive Growth Portfolio, it only says:

Through its investment in Vanguard Institutional Total Stock Market Index Fund, the Portfolio indirectly invests in
primarily large-capitalization U.S. stocks, and to a lesser extent in mid-, small-, and micro-capitalization U.S. stocks.
The Fund’s target index represents approximately 100% of the investable U.S. stock market. Through its investment
in Vanguard Total International Stock Index Fund, the Portfolio indirectly invests in international stocks.

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Re: Why Utah 529 instead of Vanguard 529?

Post by blackstone » Wed Apr 23, 2014 6:32 pm

Just use the Aggresive Growth Portfolio https://personal.vanguard.com/us/FundsS ... IntExt=INT and change your TSM allocation accordingly. The ER will be much lower that way.
mikep wrote:Also, total international stock index costs 0.55% from Vanguard directly. That is the main reason I did not sign up with Vanguard.

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LH
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Re: Why Utah 529 instead of Vanguard 529?

Post by LH » Wed Apr 23, 2014 10:54 pm

I have both the vanguard Nevada 529 as well as Utah possibly for over ten years, definitely 5.

Utah over time seems better, they constantly drop ERs, fees, etc over years. even for out of staters. It has a very good feel to it. It feels almost conscientious. Which is something I don't feel about any other investment.


Having said that, I likely have used Nevadas about equally. One us in wifes name, one in my name. If I had to pick only one, it would be Utah.

Over the years, some states pop up and are better, then fall off... Utah is always in the top 5 or so. It's just been real consistent.

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Re: Why Utah 529 instead of Vanguard 529?

Post by deikel » Fri Apr 25, 2014 10:25 am

Another potential aspect for the folks trying to tax shelter - different plans have different top caps of how much money can be put into the plan before they close off new contributions and what max contributions you can make per year - they are not all equal
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