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529 Advice for California Resident

Posted: Thu Dec 26, 2019 6:33 pm
by cchan05
Hi Bogleheads, my wife and I would like to open a 529 by the end of the year, and have narrowed it down to the following options: CA, NV, UT, VA and IL. These plans came to our attention because they've had high ratings on Morningstar and/or highly recommended on forums like Bogleheads.

As CA residents, we don't get any state tax deductions, so here are our current considerations.

# California
- Just got the coveted Morningstar Gold rating for 529 plans in 2019 because they implemented a better glide path
- In the event that CA passes a law that allows for deductions for 529 contributions (an attempt was made earlier this year), we'll already have funds in place

# Nevada
- Can be opened on the Vanguard website. We're already Vanguard users, so it will be nice to have a consolidated dashboard
- But, Morningstar stripped their Gold rating because they "haven’t kept pace with the cheapest plans"

# Utah
- Lots of Bogleheads seem to use / like this one

# Illinois
- They seem to have upped their game in 2017, they come highly recommended in some talks we've been to

Don't know much about the Virginia plan.

Any advice? Thanks in advance!

Re: 529 Advice for California Resident

Posted: Thu Dec 26, 2019 11:13 pm
by pkcrafter
Here is some information that may help.

https://www.savingforcollege.com/articl ... -529-plans


Paul

Re: 529 Advice for California Resident

Posted: Fri Dec 27, 2019 1:42 am
by ellink
The link about the CA 529 is interesting but the OP is asking for help in comparing several plans. I'm also interested.

Re: 529 Advice for California Resident

Posted: Fri Dec 27, 2019 10:47 am
by pkcrafter
ellink wrote: Fri Dec 27, 2019 1:42 am The link about the CA 529 is interesting but the OP is asking for help in comparing several plans. I'm also interested.
There is a lot of information on the Saving for College site, but now the site is mucked up with adverts, including Vanguard!

https://www.savingforcollege.com/intro- ... -available


Paul

Re: 529 Advice for California Resident

Posted: Fri Dec 27, 2019 12:05 pm
by SurfCityBill
I've been invested in the CA Scholarshare Plan for over 20 years and into the distribution phase of the plan. It's changed management firms a few times and is currently run by TIAA/CREF. Despite the fact that CA allows no state tax deduction for investors, I have found the program to be very good. It has always been easy to make deposits, track progress, view and change options, and make withdrawals.

Re: 529 Advice for California Resident

Posted: Fri Dec 27, 2019 2:04 pm
by cchan05
SurfCityBill wrote: Fri Dec 27, 2019 12:05 pm I've been invested in the CA Scholarshare Plan for over 20 years and into the distribution phase of the plan. It's changed management firms a few times and is currently run by TIAA/CREF. Despite the fact that CA allows no state tax deduction for investors, I have found the program to be very good. It has always been easy to make deposits, track progress, view and change options, and make withdrawals.
Thanks SurfCityBill! So we decided to go with Vanguard / Nevada for the UI, specifically the Aggressive Growth Age-based Plan. Expense ratio is 0.15% which was on the low end of their offerings.

Re: 529 Advice for California Resident

Posted: Fri Dec 27, 2019 2:11 pm
by Spirit Rider
Last time I looked the CA ScholarShare plan had the lowest expense ratios of any nationwide 529 plan.

If the convenience of NV plan appeals to you, that may be a valid reason to consider NV.

At one time the Utah was among the lowest price plans, but it is no more. There is very little reason to with Utah for a new plan as a CA resident.

Like in many other areas, state 529 plans with Vanguard as the administrator or with Vanguard funds are no longer the low cost leaders.

Re: 529 Advice for California Resident

Posted: Fri Dec 27, 2019 4:37 pm
by jdouge
I live in CA and use the Utah options because of its low ER funds (lots of Vanguard options!) and customizable AA.

Started in the Ohio version of the 529. That was fine, but eventually decided to move for the above reasons.

Re: 529 Advice for California Resident

Posted: Fri Dec 27, 2019 7:20 pm
by FB01
jdouge wrote: Fri Dec 27, 2019 4:37 pm I live in CA and use the Utah options because of its low ER funds (lots of Vanguard options!) and customizable AA.

Started in the Ohio version of the 529. That was fine, but eventually decided to move for the above reasons.
I am also in the same boat. Am CA resident and investing in Ohio. I have using Vanguard 500 Index fund offered by Ohio and expense ratio is 0.18%. What sort of ER funds does Utah offers. Can you please let me know so that I can also switch?

Thanks,

Re: 529 Advice for California Resident

Posted: Fri Dec 27, 2019 7:42 pm
by Spirit Rider
jdouge wrote: Fri Dec 27, 2019 4:37 pm I live in CA and use the Utah options because of its low ER funds (lots of Vanguard options!) and customizable AA.
The CA ScholarShare plan offers single fund investment options to achieve the same thing at lower costs. Vanguard has not been the only index road to Dublin for quite some time now.

The Utah my529 plan customizable option adds a 0.18% admin asset fee to the underlying expense ratios. The result is that your total Utah my529 annual asset based fee is likely to be approximately twice the CA ScholarShare annual asset based fee of a similar asset ratio.

Re: 529 Advice for California Resident

Posted: Fri Dec 27, 2019 7:42 pm
by Spirit Rider
jdouge wrote: Fri Dec 27, 2019 4:37 pm I live in CA and use the Utah options because of its low ER funds (lots of Vanguard options!) and customizable AA.
The CA ScholarShare plan offers single fund investment options to achieve the same thing at lower costs. Vanguard has not been the only index road to Dublin for quite some time now. Sometimes blind loyalty is counter-productive.

The Utah my529 plan customizable option adds a 0.18% admin asset fee to the underlying expense ratios. The result is that your total Utah my529 annual asset based fee is likely to be approximately twice the CA ScholarShare annual asset based fee of a similar asset ratio.

Re: 529 Advice for California Resident

Posted: Fri Dec 27, 2019 7:48 pm
by FB01
Spirit Rider wrote: Fri Dec 27, 2019 7:42 pm
jdouge wrote: Fri Dec 27, 2019 4:37 pm I live in CA and use the Utah options because of its low ER funds (lots of Vanguard options!) and customizable AA.
The CA ScholarShare plan offers single fund investment options to achieve the same thing at lower costs. Vanguard has not been the only index road to Dublin for quite some time now. Sometimes blind loyalty is counter-productive.

The Utah my529 plan customizable option adds a 0.18% admin asset fee to the underlying expense ratios. The result is that your total Utah my529 annual asset based fee is likely to be approximately twice the CA ScholarShare annual asset based fee of a similar asset ratio.
Which website you are talking about? is this the one https://www.scholarshare529.com?

THanks,

Re: 529 Advice for California Resident

Posted: Fri Dec 27, 2019 8:21 pm
by Gleevec
Spirit Rider wrote: Fri Dec 27, 2019 7:42 pm
jdouge wrote: Fri Dec 27, 2019 4:37 pm I live in CA and use the Utah options because of its low ER funds (lots of Vanguard options!) and customizable AA.
The CA ScholarShare plan offers single fund investment options to achieve the same thing at lower costs. Vanguard has not been the only index road to Dublin for quite some time now. Sometimes blind loyalty is counter-productive.

The Utah my529 plan customizable option adds a 0.18% admin asset fee to the underlying expense ratios. The result is that your total Utah my529 annual asset based fee is likely to be approximately twice the CA ScholarShare annual asset based fee of a similar asset ratio.
Exactly, Utah and Nevada are now laggards at 0.2 and 0.15%. California TSM is 0.08% all included, I have not found anyone else close. For a state without a 529 state deduction, California currently has the best 529 plan and it’s not even that close

https://www.bogleheads.org/wiki/529_cost_comparisons

Re: 529 Advice for California Resident

Posted: Wed Sep 16, 2020 10:39 pm
by gurusw
This is what scholarshare529 says (https://www.scholarshare529.com/plan/de ... details-10):
While contributions are not deductible for California income tax purposes, earnings accrue free of state income tax. Any withdrawals used for qualified higher education expenses and outgoing rollovers to other qualified 529 plans and 529A ABLE accounts are also state income tax free.
If I go with VG (Nevada) or Fidelity (New Hampshire) plan, would they also offer the same tax benefits for CA? or would CA tax me on the 529 withdrawals if the plan is from another state?

Re: 529 Advice for California Resident

Posted: Thu Sep 17, 2020 12:40 am
by BernardShakey
SurfCityBill wrote: Fri Dec 27, 2019 12:05 pm I've been invested in the CA Scholarshare Plan for over 20 years and into the distribution phase of the plan. It's changed management firms a few times and is currently run by TIAA/CREF. Despite the fact that CA allows no state tax deduction for investors, I have found the program to be very good. It has always been easy to make deposits, track progress, view and change options, and make withdrawals.
+1 and pretty low fees too.

Re: 529 Advice for California Resident

Posted: Thu Sep 17, 2020 1:27 am
by Bfwolf
gurusw wrote: Wed Sep 16, 2020 10:39 pm This is what scholarshare529 says (https://www.scholarshare529.com/plan/de ... details-10):
While contributions are not deductible for California income tax purposes, earnings accrue free of state income tax. Any withdrawals used for qualified higher education expenses and outgoing rollovers to other qualified 529 plans and 529A ABLE accounts are also state income tax free.
If I go with VG (Nevada) or Fidelity (New Hampshire) plan, would they also offer the same tax benefits for CA? or would CA tax me on the 529 withdrawals if the plan is from another state?
If you're a CA resident, there are no tax advantages to using any particular state's 529.

IMO, all the state's discussed so far have very good 529s (well, I don't know anything about Virginia's). It's splitting hairs deciding between them and is not worth the mental energy. I think that people that have all their assets at Vanguard or Fidelity might prefer NV or NH respectively just for the simplicity.

Re: 529 Advice for California Resident

Posted: Thu Sep 17, 2020 6:37 am
by NS_Bane
Bfwolf wrote: Thu Sep 17, 2020 1:27 am IMO, all the state's discussed so far have very good 529s (well, I don't know anything about Virginia's). It's splitting hairs deciding between them and is not worth the mental energy.
+1.

Re: 529 Advice for California Resident

Posted: Thu Sep 17, 2020 10:10 pm
by gurusw
Bfwolf wrote: Thu Sep 17, 2020 1:27 am
gurusw wrote: Wed Sep 16, 2020 10:39 pm This is what scholarshare529 says (https://www.scholarshare529.com/plan/de ... details-10):
While contributions are not deductible for California income tax purposes, earnings accrue free of state income tax. Any withdrawals used for qualified higher education expenses and outgoing rollovers to other qualified 529 plans and 529A ABLE accounts are also state income tax free.
If I go with VG (Nevada) or Fidelity (New Hampshire) plan, would they also offer the same tax benefits for CA? or would CA tax me on the 529 withdrawals if the plan is from another state?
If you're a CA resident, there are no tax advantages to using any particular state's 529.

IMO, all the state's discussed so far have very good 529s (well, I don't know anything about Virginia's). It's splitting hairs deciding between them and is not worth the mental energy. I think that people that have all their assets at Vanguard or Fidelity might prefer NV or NH respectively just for the simplicity.
Ok, so I guess that means CA would not tax me on any 529 plan (regardless of the state I choose) when I do qualified withdrawal?

Re: 529 Advice for California Resident

Posted: Thu Sep 17, 2020 11:53 pm
by softwaregeek
Tax rules are by state of residence, not state of account.

I am in CA and have a plan in another state where it is deductible and a close relative lives. He can fund to my kid and deduct taxes. I fund to the same account and cannot.