Starting a 529 for my adopted children

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Topic Author
Tayskiing
Posts: 48
Joined: Tue Oct 06, 2015 7:47 pm

Starting a 529 for my adopted children

Post by Tayskiing » Sat Nov 24, 2018 11:03 pm

Hello Bogleheads,
I am torn between the different Colorado 529s. Not even sure if Colorado is the one to go with. I am currently living in California but will be retiring in 2.5 years and moving to Colorado. I am looking to start a 529 for my kids (4, 4, 3 yrs old) that I will be adopting 14 Dec this year.
There are 4 College Savings Plan:
Direct Portfolio
Scholar’s Choice
Smart Choice
Stable Value Plus
https://www.collegeinvest.org/529-plann ... on-charts/

I am looking at 2 primary ones - The Direct Portfolio is with Vanguard managed and has an expense ratio of .33% (looking to do a 75% stock, 25% bond) and the Scholar's Choice which is only available to financial advisors. I can't see why I would go with the financial advisor one since there are lots of fees and loads with it (3.5% load); I like the advisor but not enough to give them 3.5% of my kid's college investments. I am just afraid I might have missed something and the advisor would catch on the tax implications, and any other benefits or pitfalls since I know very little about 529 (I'm learning as much as I can). Any advise would be much appreciated!

ahnathan
Posts: 59
Joined: Wed Oct 17, 2018 2:10 pm

Re: Starting a 529 for my adopted children

Post by ahnathan » Sat Nov 24, 2018 11:14 pm

3.5% is obscene. I can’t imagine what service they could possibly provide that would be worth that?

I don’t know anything about Colorado’s 529, but make sure there is a state tax deduction. If there isn’t, you can choose any states 529 and there are several considered to be the best.

I would treat it like any other tax advantaged space and invest in low cost index funds or etfs.

Topic Author
Tayskiing
Posts: 48
Joined: Tue Oct 06, 2015 7:47 pm

Re: Starting a 529 for my adopted children

Post by Tayskiing » Sat Nov 24, 2018 11:28 pm

I know... 3.5% is the front load. I think with all the additional fees it comes out to 1.08% (0.73% est underlying fund expenses, CollegeInvest Admin Fee 0.1%, Annual Distribution Fee 0.25%) for their Portfolio One - 80/20 (Age Based 0-3yrs old).

Once I live in CO, I get state tax benefits -dollar to dollar tax benefits. Since I will be retiring there, I think CO may be best place for the 529.

momvesting
Posts: 104
Joined: Tue Apr 12, 2016 9:18 pm

Re: Starting a 529 for my adopted children

Post by momvesting » Sat Nov 24, 2018 11:33 pm

Don't be so hung up on a Colorado plan right now if you do not live there. It is fairly easy to close and rollover 529 plans. I have done it from Ohio's old Putnam account back in the day to Utah's plan, which I am in currently. It was fairly seamless. For now, just go with whatever plan serves your needs right now.

sawdust60
Posts: 258
Joined: Tue Jul 17, 2018 12:06 pm

Re: Starting a 529 for my adopted children

Post by sawdust60 » Sat Nov 24, 2018 11:37 pm

Retiring with young children -- would a Roth work for you and provide additional flexibility?

Topic Author
Tayskiing
Posts: 48
Joined: Tue Oct 06, 2015 7:47 pm

Re: Starting a 529 for my adopted children

Post by Tayskiing » Sat Nov 24, 2018 11:56 pm

We already max our ROTH IRA's. We are only putting a nominal amount - plan on only having about $50k per child when they go to college.

As for Colorado, we figure since we are retiring there and California doesn't give us any benefits right now, CO would be best choice.

billfromct
Posts: 1033
Joined: Tue Dec 03, 2013 9:05 am

Re: Starting a 529 for my adopted children

Post by billfromct » Sun Nov 25, 2018 9:49 am

It looks like CA does not offer a state tax deduction for 529 contributions, but CO allows unlimited tax deductions for 529 contributions.

Can you wait until you move to CO to make set up the CO 529 plans so you can take advantage of the CO tax deduction? I'm sure you will have some sort of income (investment, retirement, etc) after you move to CO, so the CO tax deduction should be of value.

It appears the CO Direct 529 plan can be invested in Vanguard funds.

I'm from New England with no actual CA or CO tax experience, so I'm just making some general suggestions.

bill

Topic Author
Tayskiing
Posts: 48
Joined: Tue Oct 06, 2015 7:47 pm

Re: Starting a 529 for my adopted children

Post by Tayskiing » Sun Nov 25, 2018 11:30 pm

I don't think it'll be good to wait since I'm not getting a state tax break anyway. I will get the deductions once I get to CO. I will have retirement pension income in CO. Probably get a hobby that pays there as well so will have taxable income.

I like that CO Direct 529 is with Vanguard. The expense ratio on it is 0.33% which is one of the lowest for a 529.

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