CA 529 or Vanguard 529?

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aha
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CA 529 or Vanguard 529?

Post by aha » Wed Jul 05, 2017 12:21 am

California doesn't have tax advantage for 529. Is it better to invest in a Vanguard 529 from another state? Utah is highly recommended but I'll probably never move there (not my line of work) to take the tax advantage if any.

CA ScholarShare has a pretty low expense ratio, though. But the TIAA CREF funds are not my favorite. Age based for 0-4 has 20% in fixed income - way too conservative in my opinion.

masteraleph
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Re: CA 529 or Vanguard 529?

Post by masteraleph » Wed Jul 05, 2017 8:58 am

I'd also look into the NY 529- Vanguard funds, universal .16% expense, no other fees. And if you do happen to move to NY at some point (no idea what your line of work is), there is a tax benefit in NY.

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grabiner
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Re: CA 529 or Vanguard 529?

Post by grabiner » Wed Jul 05, 2017 9:23 am

masteraleph wrote:I'd also look into the NY 529- Vanguard funds, universal .16% expense, no other fees. And if you do happen to move to NY at some point (no idea what your line of work is), there is a tax benefit in NY.
The tax benefit is only on contributions; you won't get a benefit for already having money in the NY 529 when you move to NY. If you choose not to invest in your own state's plan (because it is too expensive or because there is no state tax benefit), you might as well use the lowest-cost plan which fits your investment needs.
Wiki David Grabiner

kaneohe
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Re: CA 529 or Vanguard 529?

Post by kaneohe » Wed Jul 05, 2017 9:36 am

aha wrote:..................................................................

CA ScholarShare has a pretty low expense ratio, though. But the TIAA CREF funds are not my favorite. Age based for 0-4 has 20% in fixed income - way too conservative in my opinion.
you can get 0% in passive diversified equity.
https://www.scholarshare.com/research/multi-fund.shtml

need403bhelp
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Re: CA 529 or Vanguard 529?

Post by need403bhelp » Wed Jul 05, 2017 3:24 pm

aha wrote:California doesn't have tax advantage for 529. Is it better to invest in a Vanguard 529 from another state? Utah is highly recommended but I'll probably never move there (not my line of work) to take the tax advantage if any.

CA ScholarShare has a pretty low expense ratio, though. But the TIAA CREF funds are not my favorite. Age based for 0-4 has 20% in fixed income - way too conservative in my opinion.
FWIW, if you are thinking age-based funds, I calculated a weighted ER for CA 529 based on 22 years of funds to compare to NV 529 today.

The weighted ER for CA 529 age-based funds is 0.144% (see my Excel spreadsheet for calculations at https://drive.google.com/open?id=0B4n_r ... nlCT0xDeXc) vs 0.17% for NV/Vanguard plan.

As such, I don't think that a ~3 bp difference is a good reason to go with CA.

On the other hand, if you are planning to "slice and dice" with individual funds, then CA 529 is definitely the cheapest vs NV 529.

Topic Author
aha
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Re: CA 529 or Vanguard 529?

Post by aha » Wed Jul 05, 2017 5:31 pm

I was thinking about age based because it's like target retirement auto adjusted. Diversified equity is good now but then I'll have to adjust when it gets closer.

Any reason NV 529 other than some other state's?

I can always move one 529 to another tax free, right?

need403bhelp
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Re: CA 529 or Vanguard 529?

Post by need403bhelp » Wed Jul 05, 2017 6:50 pm

aha wrote:I was thinking about age based because it's like target retirement auto adjusted. Diversified equity is good now but then I'll have to adjust when it gets closer.

Any reason NV 529 other than some other state's?

I can always move one 529 to another tax free, right?
I'm actually starting to think more and more about CA 529 despite what I posted right before.

Reasons FOR CA 529:
- ~2.6 bp is 2.6 bp, and although some have mentioned that Vanguard funds have some premium over TIAA-CREF's in terms of their performance, I have yet to see hard data for this on this forum
- CA 529 has max total contribution of $475,000 vs NV 529 max total contribution $370,000
- although, in theory, it is nice to have 3 different age-adjusted portfolios to choose from (NV 529 vs only one passive in CA 529), I would pick the moderate age-adjusted portfolio for NV 529, and this is basically the same as the one passive portfolio in CA 529

Also, I already have a TIAA login (457) & Vanguard login (Roth IRA), so doesn't add hassle of extra login.

I've done a lot of research. Others you can consider:
- NY 529 - all funds (Vanguard) 16 bp (which is 1 bp lower than Vanguard for the age-based, which makes it not super attractive to me)
- NH 529 - fidelity funds and somewhat cheaper that NV 529, but no emerging markets and age-based allocations have some commodities (I chose NH 529 here because it has the largest max contribution, but Fidelity actually manages 4 state plans)
- UT 529 - seems very liked on this forum & has DFA funds for "slice-and-dice," but EF is few BP higher than all the other options, including NV (although not necessarily if you are "slicing and dicing" with NV)

My understanding is that you CAN always move 529 to another tax free.

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Taylor Larimore
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Re: CA 529 or Vanguard 529?

Post by Taylor Larimore » Wed Jul 05, 2017 7:56 pm

aha wrote:California doesn't have tax advantage for 529. Is it better to invest in a Vanguard 529 from another state? Utah is highly recommended but I'll probably never move there (not my line of work) to take the tax advantage if any.

CA ScholarShare has a pretty low expense ratio, though. But the TIAA CREF funds are not my favorite. Age based for 0-4 has 20% in fixed income - way too conservative in my opinion.
AHA:

Morningstar has an excellent analysis of 529 plans including a ranking (plans with Vanguard funds ranked highest). This is the link:

http://news.morningstar.com/articlenet/ ... ?id=718471

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

greybus
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Re: CA 529 or Vanguard 529?

Post by greybus » Wed Jul 05, 2017 9:38 pm

If you are going to use the age-based allocation, you should also look at the "steps" of the glide path where the asset allocations change. Some plans have steep glide paths (that is, fewer steps), while others have more steps and a more shallow glide path. Note that steep or shallow is not better or worse in of itself, but a steep glide path is probably more at risk of volatility/sequence of returns risk vs. a shallow glide path.

New York has 5 year steps, and the allocation changes in 25% increments. NV 529 starts off in 2 year steps (and 10% increments) and then moves to 1 year steps at age 15. CA starts off with 4 year steps until age 8, then 2 year until age 15, then 1 year steps. Fidelity has an even 3 year step.

bogglizer
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Re: CA 529 or Vanguard 529?

Post by bogglizer » Wed Jul 05, 2017 10:29 pm

As a resident of California, I moved my kid's 529 from Scholarshare to Vanguard to consolidate my finances a few years ago. And also because of a long-held personal dislike of TIAA-CREF.

Topic Author
aha
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Re: CA 529 or Vanguard 529?

Post by aha » Wed Jul 05, 2017 10:52 pm

The glide path is a good point. I would prefer a more gradual glide, like how I re-balance annually.

Is the personal dislike of TIAA CREF worth considering for other people?

need403bhelp
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Re: CA 529 or Vanguard 529?

Post by need403bhelp » Thu Jul 06, 2017 9:08 am

aha wrote:The glide path is a good point. I would prefer a more gradual glide, like how I re-balance annually.
Just for clarity, small distinction:
- rebalancing annually is re-balancing BACK to your established asset allocation. My understanding is that, like target date funds in your IRA, this is done frequently by ALL 529s, and certainly more often than when the glide path changes.
- the glide path is basically when the asset allocation ITSELF changes within the funds, so likely different than your annual rebalancing (unless you also changed your allocation between equities and fixed income every year).

Topic Author
aha
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Re: CA 529 or Vanguard 529?

Post by aha » Thu Jul 06, 2017 10:38 am

Yes, I change my asset allocation every year by adding 1% in bond. So "rebalance" is not the right word technically. So I understand the age based glide path is rebalance every year to the same asset allocation and change the asset allocation every say 4 or 5 years.

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Re: CA 529 or Vanguard 529?

Post by jlg » Thu Jul 06, 2017 11:42 am

I own both the Vanguard (Nevada) 529 and the MA Fidelity UFund 529. I'm a Mass resident and starting this year there is a small tax advantage available. I was presently surprised by the Fidelity options. They are cheaper than the Vanguard plan, though I haven't moved my money whole sale (just started new contributions.) One very nice feature, which doesn't matter much for me, is that the minimum starting investment with Fidelity is like $50 - not $3000 (like with Vanguard.) This is good for families starting out and encourages incremental savings.

The Fidelity interface is a bit wonky, buggy. I have all my other monies at Vanguard. However, it provides a nice consolidated view with my work 401k, which is also at Fidelity.

I own individual index fund portfolios (these are all portfolios, you don't own individual funds, but the portfolio may be 100% a specific fund and handle dividend reinvestment for you) in both accounts. The Fidelity glide path plans range from 13-17bps - pretty good!

So, if you are looking out of state, consider the MA UFund 529 and see if it works for you.

https://www.fidelity.com/529-plans/massachusetts

majiaknight
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Re: CA 529 or Vanguard 529?

Post by majiaknight » Thu Jul 06, 2017 12:20 pm

I live in CA and choose CA Scholarshare 529 over Vanguard 529 due to the lower ER for the similar index funds. I build a two-fund portfolio for my kid starting w/ a 80/20 ratio:

1) Stock Index
CA: TIAA-CREF Equity Index Fund -- ER: 0.08% (was 0.10% when I created my 529 in 6/2016; great to see the ER is going down!)
Vanguard: Vanguard Total Stock Market Portfolio -- ER: 0.19%

2) Bond Index
CA: TIAA-CREF Bond Index Fund -- ER: 0.15% (was 0.17% when I created my 529 in 6/2016; great to see the ER is going down!)
Vanguard: Vanguard Total Bond Market Index Portfolio -- ER: 0.22%

Or,
Vanguard 20% Stock/80% Bond Portfolio -- ER: 0.17% (Personally I don't like any types of balanced or all-in-one fund in any retirement or taxable accounts which makes my regular rebalance complex as I also consider 529 is part of my family's overall portfolio)


*For CA Scholarshare (Single-Fund Portfolio Options): https://www.scholarshare.com/research/fees.shtml
*For Vanguard: https://investor.vanguard.com/529-plan/ ... nd-returns

The web interface of CA scholarshare is excellent and they even provided the 'rebalance' feature allowing you to specify the percentage of each of your MF holdings if you want to do manual rebalance. The auto-invest function also works great. I own investment accounts at Vanguard, Fidelity, Schwab and several others, and I do regular rebalancing of all accounts and I have no complaints w/ the CA Scholarshare 529 account after a year usage.
Last edited by majiaknight on Thu Jul 06, 2017 12:37 pm, edited 1 time in total.

likashing
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Re: CA 529 or Vanguard 529?

Post by likashing » Thu Jul 06, 2017 12:33 pm

Kind of off topic... but with 2 kids, is it better to have 2 529? Or just 1 529? Pros and cons on 1 vs 2? Thanks!

need403bhelp
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Re: CA 529 or Vanguard 529?

Post by need403bhelp » Thu Jul 06, 2017 12:51 pm

Taylor Larimore wrote:
aha wrote:California doesn't have tax advantage for 529. Is it better to invest in a Vanguard 529 from another state? Utah is highly recommended but I'll probably never move there (not my line of work) to take the tax advantage if any.

CA ScholarShare has a pretty low expense ratio, though. But the TIAA CREF funds are not my favorite. Age based for 0-4 has 20% in fixed income - way too conservative in my opinion.
AHA:

Morningstar has an excellent analysis of 529 plans including a ranking (plans with Vanguard funds ranked highest). This is the link:

http://news.morningstar.com/articlenet/ ... ?id=718471

Best wishes.
Taylor
Taylor,

Thank you so much for your helpful link!

For some reason, when I click on your link, it asks me to register for Morningstar instead of showing any information.

For those who just want to see the rankings without registering, the following should work:

http://news.morningstar.com/articlenet/ ... ?id=775806

Thank you again!

jlg
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Re: CA 529 or Vanguard 529?

Post by jlg » Thu Jul 06, 2017 12:57 pm

likashing wrote:Kind of off topic... but with 2 kids, is it better to have 2 529? Or just 1 529? Pros and cons on 1 vs 2? Thanks!
It really doesn't matter. You can have a single account, and draw from it for both kids, or separate accounts. If the kids have a large age gap, you may consider different asset allocations at any given time - thus two accounts would give you more flexibility. Additionally, relatives can make gift contributions to an account in the specific kids name. Multiple accounts provides a convenience that a single account does not.

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Taylor Larimore
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Re: CA 529 or Vanguard 529?

Post by Taylor Larimore » Thu Jul 06, 2017 1:22 pm

need403bhelp:

Strange. The link you provided is the same I provided (which didn't work for you).

Anyway, all's well that ends well.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

need403bhelp
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Re: CA 529 or Vanguard 529?

Post by need403bhelp » Thu Jul 06, 2017 1:39 pm

Taylor Larimore wrote:need403bhelp:

Strange. The link you provided is the same I provided (which didn't work for you).

Anyway, all's well that ends well.

Best wishes.
Taylor
Thanks, Taylor.

I think the difference is in the id portion at the end of the link. Yours has "id=718471" and mine has "id=775806." Not sure why one makes you sign up for Morningstar first and the other doesn't. If you use an incognito window or "private browsing" (in which you are not signed into morningstar), I bet you could reproduce the difference.

In any case, thank you so much for sharing your link and for all of your wisdom!!! :D

Topic Author
aha
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Re: CA 529 or Vanguard 529?

Post by aha » Thu Jul 06, 2017 4:13 pm

Morningstar rated CA silver. I feel that if I consider CA, I should also look into other silver plans. And what's this program manager Ascensus vs Vanguard?

need403bhelp
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Re: CA 529 or Vanguard 529?

Post by need403bhelp » Thu Jul 06, 2017 4:22 pm

aha wrote:Morningstar rated CA silver. I feel that if I consider CA, I should also look into other silver plans. And what's this program manager Ascensus vs Vanguard?
Hmm... I'm not sure I follow the logic :) .

It looks like MorningStar rated Virginia as Gold for 2016 (latest year available).

Does that mean that you are going to consider Virginia as well? (As far as I can tell from the very quick review at http://news.morningstar.com/articlenet/ ... ?id=775806, it consists of active-managed funds, although at a "low" ER of 0.43%).

Personally (well, based on reading most of the past 529 Bogleheads post), I think good ones to think about: NV, UT, CA, NY, NH (Fidelity plan with highest annual contribution - as otherwise, all 4 Fidelity 529 plans have same investment options and fees).

If you find any other ones worth considering, of course I'd love to hear about it :happy

EDIT: one of the most helpful bogleheads posts when comparing these plans (by greybus), IMHO:

viewtopic.php?t=220692#p3400809

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aha
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Re: CA 529 or Vanguard 529?

Post by aha » Thu Jul 06, 2017 6:24 pm

Well, if they're good enough to have silver like CA, I feel I should at least look at them. Otherwise I may just check out the gold ones. But since CA doesn't sound too bad, other silvers may be just as good. There may be an easy screener to filter out the high fees. VA has total stock market index at 0.12% also.

need403bhelp
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Re: CA 529 or Vanguard 529?

Post by need403bhelp » Thu Jul 06, 2017 6:30 pm

aha wrote:Well, if they're good enough to have silver like CA, I feel I should at least look at them. Otherwise I may just check out the gold ones. But since CA doesn't sound too bad, other silvers may be just as good. There may be an easy screener to filter out the high fees. VA has total stock market index at 0.12% also.
Good to know about VA.

You can sign up for Morningstar Premium for a free 2 week trial (you have to enter CC number but they will not charge anything for 2 weeks - you can also use a virtual credit card from Citi, Bank of America, or privacy.com). That way, you can read all of the analyses. The only problem is that you HAVE to call to cancel. With that said, I believe it is a very quick phone call.

Let us know if you find any other good plans!

kaneohe
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Re: CA 529 or Vanguard 529?

Post by kaneohe » Thu Jul 06, 2017 6:32 pm

Does each 529 family get just one color? If so , seems a bit crude if you have a specific interest in a particular type of fund.

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aha
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Re: CA 529 or Vanguard 529?

Post by aha » Thu Jul 06, 2017 6:39 pm

Also what's the gripe about TIAA? I only know it to be for the teachers. But it doesn't seem to get much love on this forum.

I prefer Vanguard partly also because I already have an account. But creating a new one is not a deal breaker, either.

need403bhelp
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Re: CA 529 or Vanguard 529?

Post by need403bhelp » Thu Jul 06, 2017 6:52 pm

aha wrote:Also what's the gripe about TIAA? I only know it to be for the teachers. But it doesn't seem to get much love on this forum.

I prefer Vanguard partly also because I already have an account. But creating a new one is not a deal breaker, either.
I'm also curious. I know there are at least two users on this forum that like TIAA: TheWizard and jalbert. It is also my understanding that TIAA's consumer products (a la IRAs) are not the best in terms of ERs vs their institutional products (and even those range depending on the size of the institution's account with TIAA). I have both TIAA & Fidelity as options for my retirement, and I am actually mixing the two to get access to TIAA Traditional. To be fair, Fidelity has lower ERs (but not by much) except the (developed) international fund in TIAA, which is 1 bp cheaper than the equivalent Fidelity account in my plans.

I've also seen some say that there is a few bp lag in similar TIAA funds vs equivalent Vanguard funds (such as S&P 500 or TSM) that is NOT accounted for by the ER. I recently did a calculation for the S&P 500 fund for the past year (morningstar has a "$10,000 invested in this fund x years ago would equal $y today" feature), and there was NO difference (or perhaps even a very very very slight - i.e., possible rounding error - advantage for TIAA) aside from the 1 bp difference in ERs/cost.

With that said, I'd love to learn more.

Topic Author
aha
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Re: CA 529 or Vanguard 529?

Post by aha » Thu Jul 06, 2017 10:39 pm

Why are some of them managed by Ascensus?

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aha
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Re: CA 529 or Vanguard 529?

Post by aha » Thu Jul 13, 2017 3:49 pm

So I looked at all the investment options at NV, UT, VA, and CA. None of the age-based options is ideal. The customized age-based from UT sounds pretty good other than that the cost is high. So I'm going to slice and dice single funds. That makes VA quite attractive. It doesn't have the lowest fee for all the funds I want. Can I put in different plans, say index US equity and index international equity at CA, total bond market index at VA, and total international bond index at NV, to take advantage of low fees and different assets? Or is it worth the hassle to manage multiple plans?

cal91
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Re: CA 529 or Vanguard 529?

Post by cal91 » Thu Jul 13, 2017 4:18 pm

Does anyone have a good source for 529 plan comparisons?

need403bhelp
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Re: CA 529 or Vanguard 529?

Post by need403bhelp » Tue Aug 01, 2017 5:06 am

Just FYI, since I am still looking at CA 529 vs Vanguard 529, I wanted to understand the age-based glide paths, as I want to use one of those.

I ended up making some Excel charts. I included them below and I hope that they are helpful!

Image

Image

Image

Image

Original Excel spreadsheet used to generate charts: https://drive.google.com/open?id=0B4n_r ... jhyeG9hVmc.

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