Scholar's Choice 529 (Colorado)

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CaleJay
Posts: 3
Joined: Thu Oct 11, 2018 11:14 am

Scholar's Choice 529 (Colorado)

Post by CaleJay » Thu Oct 11, 2018 11:36 am

Hey guys. First timer here and I must say this is a cool group of people. 99% courteous and helpful which is very refreshing.

I have 3 kids (Ages 6, 5, 2) and opened Scholar's Choice 529 in Colorado thru EJ a few years ago. Balances are: $8,600; $6,100; $2,700. I recently moved our IRA's to Vanguard because of the ridiculous fees. Any of you ever heard what EJ charges to give them money!?! :P

I'm trying to figure out how to get these 529's out of EJ control and into self managed accts and avoiding any tax implications since I saved a little on Colorado state income tax by contributing over the last few years. I have until 12/31 to contribute for this tax year and need all the write-offs I can get as it was a very blessed year.

I see there is a CollegeInvest 529 thru Colorado that looks to have a 0.36% annual fee. The current plan I'm in is around 1.04% plus front-load

Questions are: 1.) Would there be a tax liability for transferring from one Colorado 529 plan to another Colorado 529 if both offered the same state tax deductions? 2.) Am I being short-sighted about Colorado and should I consider another completely different/better plan since I only get a 5% state deduction for contributions anyway?

Any help would be greatly appreciated

bloom2708
Posts: 4997
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Scholar's Choice 529 (Colorado)

Post by bloom2708 » Thu Oct 11, 2018 12:50 pm

1. There should be no tax consequences. Contact the new 529 provider and they will pull the funds from EJ. Good to escape (entirely) from EJ.

2. Staying in state allows you to get your state tax deduction. If you didn't get a state tax deduction, then you could consider on of the lowest cost Vanguard based plans/states.

The tax deduction gets you one portion of the benefit of the 529. The other is tax-free growth for 10-12 years.

We did 50% to 529 and 50% to a taxable account at Vanguard for each kid. Hedging on scholarships or a kid not going to college. Kept it fairly aggressive until ~5 years out and then dialed back on the stocks.

Oldest is a freshman in college. Her funds are ST bonds now. Even that isn't completely risk free with rates rising, but good enough.

When you start paying, taking some from 529 and some from elsewhere is nice as it allows you to take the American Opportunity Tax Credit available. Not there if you use all 529 funds to pay.
"We are not here to please, but to provoke thoughtfulness." --Unknown Boglehead

focusedonwhatmatters
Posts: 125
Joined: Wed Nov 29, 2017 11:49 am

Re: Scholar's Choice 529 (Colorado)

Post by focusedonwhatmatters » Thu Oct 11, 2018 2:15 pm

Welcome to the forum! (And congratulations on separating from EJ!)

The CollegeInvest Direct Portfolio is run by Vanguard. The fee decreased in July 2018 to 0.34%. The tax benefit for CO, plus the low fees and good performance of the funds make it an excellent choice.

To have your existing 529 transferred in kind/rolled over from your existing 529 to the Direct Portfolio 529 without tax consequence, you will need to first set up an account for each of your three kids:
http://cdn.unite529.com/jcdn/files/PDF/ ... ollkit.pdf

then fill out three of these:
http://cdn.unite529.com/jcdn/files/PDF/ ... llover.pdf

I haven't gone through the transfer process, but I see no reason to involve your EJ sales person.

You might also want to check out this easy method of adding to your CO 529s through this shopping portal:
https://www.upromise.com
They recently redesigned the Upromise website and I have a hard time navigating it, but basically you get a Upromise credit card, which you do NOT have to use to shop through the portal, but if you do, you get extra money to your account. When you shop through the portal, you get a percentage of your purchase back. The percentages vary by retailer, but sometimes go over 12%. They automatically transfer it to the CollegeInvest 529 Direct Portfolio.

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fortfun
Posts: 1202
Joined: Tue Apr 19, 2016 7:31 pm

Re: Scholar's Choice 529 (Colorado)

Post by fortfun » Thu Oct 11, 2018 7:19 pm

CaleJay wrote:
Thu Oct 11, 2018 11:36 am
Hey guys. First timer here and I must say this is a cool group of people. 99% courteous and helpful which is very refreshing.

I have 3 kids (Ages 6, 5, 2) and opened Scholar's Choice 529 in Colorado thru EJ a few years ago. Balances are: $8,600; $6,100; $2,700. I recently moved our IRA's to Vanguard because of the ridiculous fees. Any of you ever heard what EJ charges to give them money!?! :P

I'm trying to figure out how to get these 529's out of EJ control and into self managed accts and avoiding any tax implications since I saved a little on Colorado state income tax by contributing over the last few years. I have until 12/31 to contribute for this tax year and need all the write-offs I can get as it was a very blessed year.

I see there is a CollegeInvest 529 thru Colorado that looks to have a 0.36% annual fee. The current plan I'm in is around 1.04% plus front-load

Questions are: 1.) Would there be a tax liability for transferring from one Colorado 529 plan to another Colorado 529 if both offered the same state tax deductions? 2.) Am I being short-sighted about Colorado and should I consider another completely different/better plan since I only get a 5% state deduction for contributions anyway?

Any help would be greatly appreciated
We've been using Vanguard via College-invest for over ten years now. Very happy with the results so far.

jthokie4
Posts: 17
Joined: Thu Apr 07, 2016 11:47 am

Re: Scholar's Choice 529 (Colorado)

Post by jthokie4 » Thu Oct 11, 2018 10:27 pm

I was tempted to go with the CO 529 plan for the tax deduction, but the fees are much lower thru the Vanguard 529. The tax savings ended up being basically a wash with the higher fees.

maddogio
Posts: 66
Joined: Fri Jan 20, 2017 11:38 am

Re: Scholar's Choice 529 (Colorado)

Post by maddogio » Fri Oct 12, 2018 9:16 am

We decided to use the Colorado plan because our income level allows us to chase some free money available through the scholarship and matching grant programs.

focusedonwhatmatters
Posts: 125
Joined: Wed Nov 29, 2017 11:49 am

Re: Scholar's Choice 529 (Colorado)

Post by focusedonwhatmatters » Fri Oct 12, 2018 10:09 am

jthokie4 wrote:
Thu Oct 11, 2018 10:27 pm
I was tempted to go with the CO 529 plan for the tax deduction, but the fees are much lower thru the Vanguard 529. The tax savings ended up being basically a wash with the higher fees.
Now I'm feeling like a numskull...I did not realize there was a difference between CollegeInvest's Vanguard and going directly through Vanguard! But indeed the difference is in the fees...0.34% vs. 0.16%! Since I am not taking a CO state deduction, I have been paying this for nothing....and now I will also look into a transfer.... Thank you, jhokie4, for posting this.

However, this:
maddogio wrote:
Fri Oct 12, 2018 9:16 am
We decided to use the Colorado plan because our income level allows us to chase some free money available through the scholarship and matching grant programs.
maddogio, I saw the information about the scholarship on the CollegeInvest website and qualify for next year. Do you know if this scholarship is automatic, like if you qualify and apply you will receive it? Or are there only a few chosen to receive the scholarship?

maddogio
Posts: 66
Joined: Fri Jan 20, 2017 11:38 am

Re: Scholar's Choice 529 (Colorado)

Post by maddogio » Fri Oct 12, 2018 10:27 am

focusedonwhatmatters wrote:
Fri Oct 12, 2018 10:09 am
maddogio, I saw the information about the scholarship on the CollegeInvest website and qualify for next year. Do you know if this scholarship is automatic, like if you qualify and apply you will receive it? Or are there only a few chosen to receive the scholarship?
I have asked the folks at collegeinvest to clarify, but didn't get a satisfactory response. The language suggests to me that scholarships are essentially first come, first served.

The state has what I consider very attractive measures to promote saving for college. They way I figure, the state tax reduction essentially negates the difference in fees. I've already gleaned some free money from the matching grant program (and they've increased the ceiling of eligibility in recent years). The scholarship program would clearly put collegeinvest ahead. Although there is certainly a non-trivial chance that that program could go away.

focusedonwhatmatters
Posts: 125
Joined: Wed Nov 29, 2017 11:49 am

Re: Scholar's Choice 529 (Colorado)

Post by focusedonwhatmatters » Fri Oct 12, 2018 10:50 am

Thanks. I just got off the phone with CollegeInvest and Vanguard. There are no fees to rollover from the CollegeInvest to plain Vanguard 529. However, the money would be out of the market while the rollover takes place, even if it is to the same fund. In a week like the present one, that could be more costly than leaving it where it is :? Plus, the contributions made when the accounts were opened were with the CO tax deduction, so that would be recaptured.
Last edited by focusedonwhatmatters on Fri Oct 12, 2018 11:06 am, edited 1 time in total.

Horsefly
Posts: 316
Joined: Sat Oct 24, 2015 8:13 am
Location: Colorado, mostly

Re: Scholar's Choice 529 (Colorado)

Post by Horsefly » Fri Oct 12, 2018 11:05 am

We are residents of Colorado, and had CollegeInvest Direct Portfolio 529's for both of our daughters, putting them through undergrad and for their Master's degree. The state tax write-off was great (although not real significant), and the growth in each account over the 17 or so years they were open was pretty great.

Both of my daughters were born before 529's existed. I opened up UTMA's for each of them when they were born, and kept investing in them until I started 529's for them. Turns out the 529's were really going to be enough for their college costs, so I leveled out their UTMA's, and when they each turned 21 (age of majority in Colorado) it essentially became a "gift" (but not subject to gift tax) that they really didn't know was coming. Turned out to be about $35K for each of them. They both are managing their investment accounts now, and are doing it in a pretty good Boglehead way! :sharebeer

CaleJay
Posts: 3
Joined: Thu Oct 11, 2018 11:14 am

Re: Scholar's Choice 529 (Colorado)

Post by CaleJay » Mon Oct 15, 2018 3:53 pm

Thanks to all of you for the replies! I think I have enough ammo to make the necessary changes and start keeping more of my money!

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