in CA, what is the best way to save for kids college, in detail?

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doublehelix
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in CA, what is the best way to save for kids college, in detail?

Post by doublehelix » Wed Jul 17, 2019 1:23 pm

What state;s 529 plan is best for living in CA? Is there a good one that is managed by Vanguard that I could use for simplicity sake?

Or is there a better program to use?

ROTH IRA is off the table, as that is being used for retirement saving.

Thank you for any help!

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unclescrooge
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Re: in CA, what is the best way to save for kids college, in detail?

Post by unclescrooge » Wed Jul 17, 2019 1:36 pm

CA has no tax benefit, so we use the Nebraska plan because it integrates with my brokerage account. Not that we contribute much. Maybe $1000/year.

We expect to pay for college out of cash flow.

Kids are still young, but being trained to understand that our expectations are they carry their own burden in life. Just because we have means doesn't mean they get to mooch off is indefinitely.

I would be disappointed if they didn't get full rides. I will be using the future value of money spreadsheet to explain the cost of college when they are a bit older.

grokzilla
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Re: in CA, what is the best way to save for kids college, in detail?

Post by grokzilla » Wed Jul 17, 2019 1:45 pm

Many moons ago when we first made the same consideration in CA, the Illinois Bright Start 529 was the bee's knees according to Money Magazine and many others -- they used Vanguard funds, etc. So, we went with that one. We still have some funds for one child in that program, but haven't paid much attention to it of late and there have been some changes over the last few years. Still seems totally fine, but there may be better options today.

That said, it still might be worth investigating.

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doublehelix
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Re: in CA, what is the best way to save for kids college, in detail?

Post by doublehelix » Wed Jul 17, 2019 1:46 pm

So in CA, it wouldn't have any tax benefit between different States' 529 plans? So if Vanguard offers the Nevada one, that would be a fine choice, given that it would be easy to track with my other Vanguard accounts?

Another option, if there is no CA tax benefit, would it be just as good to open an additional taxable account, and use that for specific saving for kids college?

Thank you!

abcd12345
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Re: in CA, what is the best way to save for kids college, in detail?

Post by abcd12345 » Wed Jul 17, 2019 1:50 pm

I am in similar boat. So far, I have been comparing between Ohio and Nevada. Nevada is with Vanguard which makes it easy to manage. Ideally I would like to have VTSAX with lowest fees. I need to go over fees and expense ratio.

MiddleOfTheRoad
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Re: in CA, what is the best way to save for kids college, in detail?

Post by MiddleOfTheRoad » Wed Jul 17, 2019 1:51 pm

We use the Vanguard Nevada plan, Growth portfolio. Shooting to cover half of the cost for attending UC. Planning to cash flow the other half from salary (most likely) or taxable.

Grt2bOutdoors
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Re: in CA, what is the best way to save for kids college, in detail?

Post by Grt2bOutdoors » Wed Jul 17, 2019 1:51 pm

You could, but why pass up on the tax free growth of a 529 plan? You will pay some taxes on a taxable account.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: in CA, what is the best way to save for kids college, in detail?

Post by Grt2bOutdoors » Wed Jul 17, 2019 1:51 pm

abcd12345 wrote:
Wed Jul 17, 2019 1:50 pm
I am in similar boat. So far, I have been comparing between Ohio and Nevada. Nevada is with Vanguard which makes it easy to manage. Ideally I would like to have VTSAX with lowest fees. I need to go over fees and expense ratio.
Nys529Direct Plan.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

abcd12345
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Re: in CA, what is the best way to save for kids college, in detail?

Post by abcd12345 » Wed Jul 17, 2019 1:53 pm

doublehelix wrote:
Wed Jul 17, 2019 1:46 pm
So in CA, it wouldn't have any tax benefit between different States' 529 plans? So if Vanguard offers the Nevada one, that would be a fine choice, given that it would be easy to track with my other Vanguard accounts?

Another option, if there is no CA tax benefit, would it be just as good to open an additional taxable account, and use that for specific saving for kids college?

Thank you!
In Taxable account, we have to pay taxes for all the gains. In 529, money grows tax free.

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doublehelix
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Re: in CA, what is the best way to save for kids college, in detail?

Post by doublehelix » Wed Jul 17, 2019 2:01 pm

^^ OK, that makes sense, thank you.

I don't have much $ each year to invest. Is a Coverdell ESA better than a 529 for me?

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Re: in CA, what is the best way to save for kids college, in detail?

Post by jbranx » Wed Jul 17, 2019 2:17 pm

{Topic is now in Personal Finance}

Grt2bOutdoors
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Re: in CA, what is the best way to save for kids college, in detail?

Post by Grt2bOutdoors » Wed Jul 17, 2019 3:35 pm

doublehelix wrote:
Wed Jul 17, 2019 2:01 pm
^^ OK, that makes sense, thank you.

I don't have much $ each year to invest. Is a Coverdell ESA better than a 529 for me?
You can open a 529 plan for $0 - yes, you read that right. The New York State 529 Direct Plan has no minimum amount required to open, and no minimum amount to make additional deposits. Try that with the Vanguard 529 Plan which requires $3K to open it.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

xenochrony
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Re: in CA, what is the best way to save for kids college, in detail?

Post by xenochrony » Wed Jul 17, 2019 4:13 pm

I live in CA and have been using Utah state's 529 plan for both of my kids. The underlying securities are Vanguard, so the intrinsic ERs are very low, Utah's added on fee is some of the lowest available in the USA, they offer a lot of choices to suit one's needs (e.g. age-based, fixed, conserv, aggressive, etc), with the option to change along the way. Been very happy with it over the past 7 years. Cant recall the minimum buy in but I think it was very low.

My plan is to fund 50% of kids college using a combination of 529 and cash flow. The other 50% is on them. Skin in the game as they say.

:happy

LFKB
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Re: in CA, what is the best way to save for kids college, in detail?

Post by LFKB » Wed Jul 17, 2019 4:15 pm

We have a 1 year old and live in CA. We put about $50k in upfront and then put $1k per month in. We use the Nevada plan because it integrates with the Vanguard website and has low cost Vanguard fund options.

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unclescrooge
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Re: in CA, what is the best way to save for kids college, in detail?

Post by unclescrooge » Wed Jul 17, 2019 4:18 pm

abcd12345 wrote:
Wed Jul 17, 2019 1:53 pm
doublehelix wrote:
Wed Jul 17, 2019 1:46 pm
So in CA, it wouldn't have any tax benefit between different States' 529 plans? So if Vanguard offers the Nevada one, that would be a fine choice, given that it would be easy to track with my other Vanguard accounts?

Another option, if there is no CA tax benefit, would it be just as good to open an additional taxable account, and use that for specific saving for kids college?

Thank you!
In Taxable account, we have to pay taxes for all the gains. In 529, money grows tax free.
The problem is if you don't use them for college, you pay regular income tax on the gains. Plus a 10% penalty in some cases.

decapod10
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Re: in CA, what is the best way to save for kids college, in detail?

Post by decapod10 » Wed Jul 17, 2019 4:20 pm

Maybe the other obvious option would be California. The fees are quite low, lower than Utah, but less flexibility.

RetiredCSProf
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Re: in CA, what is the best way to save for kids college, in detail?

Post by RetiredCSProf » Wed Jul 17, 2019 6:02 pm

doublehelix wrote:
Wed Jul 17, 2019 2:01 pm

I don't have much $ each year to invest. Is a Coverdell ESA better than a 529 for me?
I am in CA and have a Vanguard 529 (I think it is Nevada) for my son, as well as a Coverdell ESA with Janus Henderson. Previously, the advantage of the Coverdell was that it could be used for a private high school, whereas 529 could be used only for college. The 529 is now more flexible, can be used in K-12 private schools. OTOH, the Coverdell ESA needs to be used by the time the student turns 30 (or pay a penalty in the form of interest on earnings). The 529 has no age limit and can be "re-designated" to be used by grandchildren.

mighty72
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Re: in CA, what is the best way to save for kids college, in detail?

Post by mighty72 » Wed Jul 17, 2019 6:11 pm

The CA 529 plan has one of the lowest fees in the country. Please take a look before investing elsewhere. As there are no immediate tax benefits, I would look at cost.

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unclescrooge
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Re: in CA, what is the best way to save for kids college, in detail?

Post by unclescrooge » Wed Jul 17, 2019 6:33 pm

Grt2bOutdoors wrote:
Wed Jul 17, 2019 1:51 pm
You could, but why pass up on the tax free growth of a 529 plan? You will pay some taxes on a taxable account.
True, but what if you didn't need to sell your investments?
We save about 50k/yr towards retirement.
We can just stop contributions for 4-6 years and cashflow college costs for 2 kids.

infotrader
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Re: in CA, what is the best way to save for kids college, in detail?

Post by infotrader » Wed Jul 17, 2019 6:34 pm

I live in CA, and paid all college expenses of my kids from my taxable portfolio.
That was 10 years ago. It served my purpose very well.
I found 529 difficult to understand, and I did not like to show to the school that I had money earmarked for education when applied for aid.
Last edited by infotrader on Wed Jul 17, 2019 6:37 pm, edited 2 times in total.

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unclescrooge
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Re: in CA, what is the best way to save for kids college, in detail?

Post by unclescrooge » Wed Jul 17, 2019 6:34 pm

mighty72 wrote:
Wed Jul 17, 2019 6:11 pm
The CA 529 plan has one of the lowest fees in the country. Please take a look before investing elsewhere. As there are no immediate tax benefits, I would look at cost.
Saving 10bps a year for 10 years shouldn't trump ease of use.

decapod10
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Re: in CA, what is the best way to save for kids college, in detail?

Post by decapod10 » Wed Jul 17, 2019 7:01 pm

infotrader wrote:
Wed Jul 17, 2019 6:34 pm
I live in CA, and paid all college expenses of my kids from my taxable portfolio.
That was 10 years ago. It served my purpose very well.
I found 529 difficult to understand, and I did not like to show to the school that I had money earmarked for education when applied for aid.
I believe that a 529 is just considered a normal parental asset (assuming you are the owner and your child is the beneficiary), similar to a checking account, savings account, or brokerage account. In theory, it should not make a difference if the money is in a taxable account or a 529, but in practice I don't know.

I think UTMAs have a bigger effect since they are the student's asset.

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