Virginia 529 Plan - College America vs. InVest

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Topic Author
pass81
Posts: 48
Joined: Sat Sep 27, 2014 11:30 am

Virginia 529 Plan - College America vs. InVest

Post by pass81 »

Hi everybody,

We just had a baby, and I am looking to place $4000 in my daughters 529 plan before the end of the year for the tax savings. I am trying to decide between College America and inVest plan in Virginia? Anybody have any guidance? I know with the College America plan, it has to be done through a financial adviser.

Looking for some guidance.

Thanks!
gwrvmd
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Location: Calabash NC

Re: Virginia 529 Plan - College America vs. InVest

Post by gwrvmd »

Contributions to a 529 ESA are not tax deductible. Gains are tax deferred and not paid when the funds are used for educational purposes........Gordon
There's no rush, help take care of the baby!
Disciple of John Neff
Topic Author
pass81
Posts: 48
Joined: Sat Sep 27, 2014 11:30 am

Re: Virginia 529 Plan - College America vs. InVest

Post by pass81 »

I thought it was deductible up to $4000 per year.

http://www.virginia529.com/features-and ... /index.php
centrifuge41
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Re: Virginia 529 Plan - College America vs. InVest

Post by centrifuge41 »

Yeah, for VA residents doing a VA 529 plan, you can deduct 4k off state tax (usually, that's $230 back in your pocket... most people are probably in 5.75% marginal state income tax bracket).

I used to do CollegeWealth when it was paying 2.3% and 2%. Then, when it dropped to 1.5%, I rolled everything out to InVEST. CollegeAmerica looks a lot more expensive (American funds), but I'm not super familiar.
mickens16
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Re: Virginia 529 Plan - College America vs. InVest

Post by mickens16 »

I just want to throw out there that in Virginia it's $4000 per account.
Topic Author
pass81
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Joined: Sat Sep 27, 2014 11:30 am

Re: Virginia 529 Plan - College America vs. InVest

Post by pass81 »

centrifuge41 wrote:Yeah, for VA residents doing a VA 529 plan, you can deduct 4k off state tax (usually, that's $230 back in your pocket... most people are probably in 5.75% marginal state income tax bracket).

I used to do CollegeWealth when it was paying 2.3% and 2%. Then, when it dropped to 1.5%, I rolled everything out to InVEST. CollegeAmerica looks a lot more expensive (American funds), but I'm not super familiar.
How is inVEST? The reviews online talk about their user interface as being very poor... They talk about college America being a very good alternative. I am just notsure about using a financial adviser to buy in.
mcraepat9
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Re: Virginia 529 Plan - College America vs. InVest

Post by mcraepat9 »

Stay far away from the advisor sold plan. The expense overwhelms any marginal benefit provided. If you are going to contribute to a 529 at all, I would contribute the $4000 to the inVest and stick with the low-cost index options (nothing over 30 bps expense ratio).

I acknowledge the interface is very poorly done. However, if you are passively investing for the long haul, does it matter that much to you? You shouldn't be interacting with the plan very much in years 1-17 other than contributing.
Amateur investors are not cool-headed logicians.
Topic Author
pass81
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Re: Virginia 529 Plan - College America vs. InVest

Post by pass81 »

Great, thanks for the advice. Will open the account tomorrow! Thanks!
mcraepat9 wrote:Stay far away from the advisor sold plan. The expense overwhelms any marginal benefit provided. If you are going to contribute to a 529 at all, I would contribute the $4000 to the inVest and stick with the low-cost index options (nothing over 30 bps expense ratio).

I acknowledge the interface is very poorly done. However, if you are passively investing for the long haul, does it matter that much to you? You shouldn't be interacting with the plan very much in years 1-17 other than contributing.
gwrvmd
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Location: Calabash NC

Re: Virginia 529 Plan - College America vs. InVest

Post by gwrvmd »

Yes, you are right, in some states it is deductible from state income tax but that is relatively insignificant
You want the best funds with the lowest Expense Ratios.
Remember, you only get the state tax deduction once, you pay the ER yearly for the next 18 years
You don't have to use your own state.
Probably the most popular 529s on this forum are Nevada and Utah, both mostly Vanguard funds.
I read recently the Nevada Plan which is sold by Vanguard as "its plan" although technically it is Nevada's Plan, has 6x as many 529 plans as Nevada has tax paying households. Used by many families all over the US.
I have six Nevada 529 Plans for grandchildren and you can see I don't live in Nevada and they don't either.
Check the following to compare plans: SavingforCollege.com and CollegeSavings.org
Help take care of the kid then do some research after the kid is in bed, no rush......Gordon
Disciple of John Neff
mickens16
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Re: Virginia 529 Plan - College America vs. InVest

Post by mickens16 »

The Virginia Invest option (Passively Managed Static Portfolios) uses Vanguard funds.
donaldfair71
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Re: Virginia 529 Plan - College America vs. InVest

Post by donaldfair71 »

pass81 wrote:Hi everybody,

We just had a baby, and I am looking to place $4000 in my daughters 529 plan before the end of the year for the tax savings. I am trying to decide between College America and inVest plan in Virginia? Anybody have any guidance? I know with the College America plan, it has to be done through a financial adviser.

Looking for some guidance.

Thanks!
1. Use InVest. It's passively managed with no need for advisor.

2. Keep in mind that, in Virginia, you are not limited to only 4K to deduct on state tax. You are limited to 4K per identical account. Therfore, if any of the following change:

Owner
Investment
Beneficiary

Then you can deduct up to 4K per account. As a Virginian, keep this in mind.
Topic Author
pass81
Posts: 48
Joined: Sat Sep 27, 2014 11:30 am

Re: Virginia 529 Plan - College America vs. InVest

Post by pass81 »

Thanks for the information. That basically means we could put in $4000 from me and my wife for our new child. I guess that is the max I could put away for her this year that is tax deductible. I am trying to save as much as I can on taxes as my income was higher than expected this year... My in-laws are also setting up an account for her.

Thanks!
donaldfair71 wrote:
pass81 wrote:Hi everybody,

We just had a baby, and I am looking to place $4000 in my daughters 529 plan before the end of the year for the tax savings. I am trying to decide between College America and inVest plan in Virginia? Anybody have any guidance? I know with the College America plan, it has to be done through a financial adviser.

Looking for some guidance.

Thanks!
1. Use InVest. It's passively managed with no need for advisor.

2. Keep in mind that, in Virginia, you are not limited to only 4K to deduct on state tax. You are limited to 4K per identical account. Therfore, if any of the following change:

Owner
Investment
Beneficiary

Then you can deduct up to 4K per account. As a Virginian, keep this in mind.
mattshwink
Posts: 455
Joined: Mon Sep 21, 2015 10:01 am

Re: Virginia 529 Plan - College America vs. InVest

Post by mattshwink »

pass81 wrote:Thanks for the information. That basically means we could put in $4000 from me and my wife for our new child. I guess that is the max I could put away for her this year that is tax deductible. I am trying to save as much as I can on taxes as my income was higher than expected this year... My in-laws are also setting up an account for her.

Thanks!
Actually, you could invest more and still tax deduct it, but it depends on how the money is invested. Each investment in a Virginia 529 is a separate account. So if you and your wife do multiple investments (e.g. the stock index, international index, and bond index) each year you could contribute $12,000 each and tax deduct the full $24,000 (if you contributed $4,000 in each investment). You are still subject to annual gift exclusion by the IRS of $14,000 (so no matter how many 529 accounts you each were to have, you could only each contribute $14,000 - $28,000 total).
yolli71
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Joined: Fri May 20, 2011 9:53 am

Re: Virginia 529 Plan - College America vs. InVest

Post by yolli71 »

pass81 wrote:Great, thanks for the advice. Will open the account tomorrow! Thanks!
mcraepat9 wrote:Stay far away from the advisor sold plan. The expense overwhelms any marginal benefit provided. If you are going to contribute to a 529 at all, I would contribute the $4000 to the inVest and stick with the low-cost index options (nothing over 30 bps expense ratio).

I acknowledge the interface is very poorly done. However, if you are passively investing for the long haul, does it matter that much to you? You shouldn't be interacting with the plan very much in years 1-17 other than contributing.
I chose inVest over College America for this reason.
centrifuge41
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Joined: Mon May 17, 2010 9:04 am

Re: Virginia 529 Plan - College America vs. InVest

Post by centrifuge41 »

Nobody's said this yet, but don't even bother with a 529 unless you/wife max out 401k and Roth/IRA already. The 529 is good for the 23,501st dollar of savings (or, 47,001st dollar of savings for a couple), but the 529 is generally inferior to more 401k and IRA savings, especially if you will probably qualify for financial aid.

In an interesting twist of logic, using a Roth IRA as a college savings account is probably favorable to using a 529 as a college savings account. Lower expense ratios, no increase in expected family contributions (for financial aid purposes), no taxes on dividends and capital gains (similar to 529), and no penalty on withdrawals (on the principal part at least, with a Roth IRA), but additionally, you'd be able to churn the Roth IRA withdrawal money through VA 529 when it's actually time to pay for college, thus saving another 5.75%.
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