529 - Colorado resident

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Joined: Fri May 27, 2016 5:04 pm

529 - Colorado resident

Post by Kow » Mon Nov 06, 2017 3:13 pm

Hi everyone, I just received a question from my brother who just became a new parent. I want to confirm my analyses and see if I was missing any other angles. The question was would he be better off using a Colorado or California 529 plan?

He and his family lives in Colorado but I wouldn't count on them necessarily staying in Colorado for the long term. His wife's family is from California which is always a possibility for them to move. Given that Colorado has the immediate tax break, I thought that would definitely make the most sense, but California has cheaper expense ratios so the numbers get closer over time.

Colorado has a flat 4.63% state income tax which would be allow current income to be deposited pre-tax, but over time the California plan and the cheaper expense ratio bring it closer. Anyway, my end state model (assuming flat $1K deposit each year and for argument's sake a 0.15% expense ratio Ca fund vs 0.36% for Colorado ) would result in about 3% more in the Colorado plan vs. the California plan after 18 years, down to 2% better if he utilizes the cheapest CA expense ratio.

Given they live in Colorado, I assume they should open a Colorado plan currently? If they end up moving, can they start a 2nd plan somewhere else?

I appreciate the time and any response so I can be sure i'm giving the right advice.
Last edited by Kow on Fri Nov 23, 2018 5:56 am, edited 1 time in total.

Posts: 682
Joined: Fri Jan 03, 2014 8:31 pm
Location: Kansas City, MO

Re: 529 - Colorado resident

Post by brad.clarkston » Mon Nov 06, 2017 3:36 pm

Yes get it in the state your living in.

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