Choosing a 529 - am I splitting hairs?

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beckwith
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Joined: Mon Mar 30, 2020 9:32 am

Choosing a 529 - am I splitting hairs?

Post by beckwith » Sun Jun 28, 2020 7:50 pm

We are expecting our first child later this year and I'm looking into options for 529 accounts. Wow, there are so many...I live in Massachusetts and though the state tax benefit is not great compared to other plans (and I realize I can only get the state tax benefit if I enroll in my state's plan), overall, the plan seems to be really good, and there is at least some tax benefit. Am I splitting hairs comparing the MA plan to the NY/Vanguard/Utah/Nevada/Illinois/Ohio/etc/etc/etc plan? Any good threads on here that I'm not finding that folks have links to? Any words of wisdom on choosing the "right" option? The MA plan is through fidelity and this is probably the fund that we would use, a target date index fund with a 0.14% ER - https://fundresearch.fidelity.com/mutua ... ppcode=529

Thanks very much.

dukeblue219
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Re: Choosing a 529 - am I splitting hairs?

Post by dukeblue219 » Sun Jun 28, 2020 8:21 pm

Seems like a no brainer to at least max the state tax deduction in a MA 529 then. If you want to go elsewhere behind that amount (and you can have many 529s) then maybe, but why bother? You'll be busy enough - no need to overthink it IMO.

Congrats!

Flyer24
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Re: Choosing a 529 - am I splitting hairs?

Post by Flyer24 » Sun Jun 28, 2020 8:52 pm

Topic moved to Personal Investments.

annu
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Re: Choosing a 529 - am I splitting hairs?

Post by annu » Sun Jun 28, 2020 8:56 pm

We do our state specific, and Nysaves( as it was cheapest and has vanguard funds)

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1789
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Re: Choosing a 529 - am I splitting hairs?

Post by 1789 » Sun Jun 28, 2020 10:34 pm

I agree with others. I would invest in state based plan and not overthink. Indeed this is what we do in Oregon.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

billfromct
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Re: Choosing a 529 - am I splitting hairs?

Post by billfromct » Sun Jun 28, 2020 10:53 pm

You would save about $100 for contributing $2,000 (5% Mass state income tax x $2,000 contribution) per year to the Mass 529 plan.

You would have to have $100,000 in another state's 529 plan with a 10 basis point savings (.10%, ER of .04% vs the Mass plan of .14%) to get that same $100 savings.

If you have accounts with Vanguard, I would go with the Vanguard Nevada plan. If you have accounts with Fidelity, go with the Mass 529 plan.

The convenience of having all your financial accounts (taxable, retirement, 529, etc) with one financial provider may be worth more then saving a couple hundred dollars.

bill

Topic Author
beckwith
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Joined: Mon Mar 30, 2020 9:32 am

Re: Choosing a 529 - am I splitting hairs?

Post by beckwith » Mon Jun 29, 2020 10:14 am

Thanks, everyone! I think given my situation and your thoughts, it makes sense to go with the Massachusetts plan.

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woolie
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Re: Choosing a 529 - am I splitting hairs?

Post by woolie » Mon Jun 29, 2020 9:34 pm

I am a Massachusetts resident and have used the Fidelity 529 for years. Used their target date index funds, set it and forget it. It really adds up over time. Would put a little in with every bonus, tax return, etc. also when they would get birthday money from grandparents we would give them some to spend but squirrel away most of it in the college fund. It has worked out great for us. Oldest son is now halfway through college and it has been a huge relief to not be stressed about funding his schooling or loading him up with debt.
Fidelity also has a Visa card that pays 2% of purchases to a designated 529 (we split it evenly between the two kids). As with any card rewards game, you have to be disciplined about paying the balance off every month to come out ahead. But if you can do that, it’s a nice flow of free money into the accounts every month.
Good luck!

Mode32
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Re: Choosing a 529 - am I splitting hairs?

Post by Mode32 » Tue Jun 30, 2020 10:05 am

beckwith wrote:
Mon Jun 29, 2020 10:14 am
Thanks, everyone! I think given my situation and your thoughts, it makes sense to go with the Massachusetts plan.
+1

I can understand some apprehension because a lot of 529 Plans are not great (high ER's, poor fund choices). In your case, I agree with getting tax break while contributing to the 529, and Fidelity with MA is a good plan.

Good luck and congrats!

Stay safe

cabfranc
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Re: Choosing a 529 - am I splitting hairs?

Post by cabfranc » Tue Jun 30, 2020 10:23 am

You are very lucky that MA has a tax break and relatively low ER. In my state of MD, there is a tax break but the ER is high for age based plans (I think like .7 or .8). Right now we are in the MD plan to get the tax break but I calculated the balance at which the high ER exceeds the savings from the tax break. It's like $40K per each of two kids. At that point I will move to Fidelity and take advantage of low ER age-based funds where we have our other assets.

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BoglesRazor
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Re: Choosing a 529 - am I splitting hairs?

Post by BoglesRazor » Tue Jun 30, 2020 12:44 pm

beckwith wrote:
Sun Jun 28, 2020 7:50 pm
We are expecting our first child later this year and I'm looking into options for 529 accounts. Wow, there are so many...I live in Massachusetts and though the state tax benefit is not great compared to other plans (and I realize I can only get the state tax benefit if I enroll in my state's plan), overall, the plan seems to be really good, and there is at least some tax benefit. Am I splitting hairs comparing the MA plan to the NY/Vanguard/Utah/Nevada/Illinois/Ohio/etc/etc/etc plan? Any good threads on here that I'm not finding that folks have links to? Any words of wisdom on choosing the "right" option? The MA plan is through fidelity and this is probably the fund that we would use, a target date index fund with a 0.14% ER - https://fundresearch.fidelity.com/mutua ... ppcode=529

Thanks very much.
I am also doing research into a 529, but for myself since I have no children yet. However, I realized as I was researching that the state income tax deduction is not as important as the fees and ER since the 529 growth (presumably up to 18 years) will provide a bigger "win" over any state income tax deduction. Thus, I would say do not prioritize the tax deduction over the fund's potential growth. Furthermore, at first, I was leaning towards the NY529 as I am employed there, but I work in PA (which is a state that can take any 529 state tax deduction anywhere), but after some research I'm now leaning towards Florida 529 because the expense ratio of a Vanguard Total Stock Market is only 0.02% vs. 0.13% for NY529.

You may reference here:
FL529:
https://www.savingforcollege.com/529-pl ... nt-options

NY529:
https://www.nysaves.org/home/which-inve ... olios.html

MA529:
https://www.savingforcollege.com/529-pl ... sachusetts

Lastly, if you want to see the full discussion about 529, please see the post I made "Best 529 Investment Plan For Yourself - NY529?"

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