Utah’s 529 plan. What happened when I wasn’t looking?

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eosin
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Joined: Tue Jun 09, 2020 12:33 am

Utah’s 529 plan. What happened when I wasn’t looking?

Post by eosin » Mon Jun 22, 2020 1:04 pm

It’s been a few years since I opened 529 accounts for our kids. We are in a state where there is no in state tax advantage, so at the time I opened the accounts I choose Utah’s plan. At the time, it was one of the highest ranked plans.

Fast forward a few years. I’ve paid more attention to our retirement accounts and other life issues. I notice now that Utah has fallen in the rankings. Our home state is now very highly ranked.

I don’t care about short-term variability and don’t want to chase a few points difference between plans. However, I was wondering if you all periodically compare your plan to others. Does there come a point when you would consider moving the 529 to a different state’s plan? Can you roll a balance from one state’s plan to another without tax implications?

Thanks!

wfrobinette
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Re: Utah’s 529 plan. What happened when I wasn’t looking?

Post by wfrobinette » Mon Jun 22, 2020 1:17 pm

eosin wrote:
Mon Jun 22, 2020 1:04 pm
It’s been a few years since I opened 529 accounts for our kids. We are in a state where there is no in state tax advantage, so at the time I opened the accounts I choose Utah’s plan. At the time, it was one of the highest ranked plans.

Fast forward a few years. I’ve paid more attention to our retirement accounts and other life issues. I notice now that Utah has fallen in the rankings. Our home state is now very highly ranked.

I don’t care about short-term variability and don’t want to chase a few points difference between plans. However, I was wondering if you all periodically compare your plan to others. Does there come a point when you would consider moving the 529 to a different state’s plan? Can you roll a balance from one state’s plan to another without tax implications?

Thanks!
I would roll only if the funds were considerably more expensive. NO tax consequences that I am aware of and I've rolled twice.

caklim00
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Re: Utah’s 529 plan. What happened when I wasn’t looking?

Post by caklim00 » Mon Jun 22, 2020 1:19 pm

Value and Small has lagged. Utah is either DFA (SCV tilted) or Vanguard. If Utah had exceeded others something would be really fishy...

sycamore
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Re: Utah’s 529 plan. What happened when I wasn’t looking?

Post by sycamore » Mon Jun 22, 2020 1:46 pm

"What happened when I wasn’t looking?" Other 529s improved their game.

Though Utah is still rated among the top, at least by morningstar -- https://www.morningstar.com/insights/20 ... 29-ratings. Curious which rankings are you looking at?

FWIW, I use the Vanguard/Nevada 529 plan. Its fees were not the lowest when I opened an account, and the fees are still not the lowest but they're low enough for me.

sycamore
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Re: Utah’s 529 plan. What happened when I wasn’t looking?

Post by sycamore » Mon Jun 22, 2020 2:06 pm

Thanks to the post, I checked the fees I was paying for an "age-based moderate" fund (expected enrollment of 2024) at Vanguard/Nevada 529 (https://personal.vanguard.com/pdf/529progdesc.pdf)
and compared it to the Utah my529 plan (https://advisor.my529.org/wp-content/up ... iption.pdf)
and Virginia (https://www.virginia529.com/resources/performance/2024/, not sure where the program description is).

Both the Nevada and Virginia are 30% stock, Virginia is 40%.
The Nevada plan has the lowest fees, then Utah, then Virginia. So for my fund choices, I get a different ranking than what Morningstar came up with. Suggest you do your own comparison of fees and not depend completely on third-party rankings.

vasaver
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Location: Virginia

Re: Utah’s 529 plan. What happened when I wasn’t looking?

Post by vasaver » Mon Jun 22, 2020 2:34 pm

sycamore wrote:
Mon Jun 22, 2020 2:06 pm
Thanks to the post, I checked the fees I was paying for an "age-based moderate" fund (expected enrollment of 2024) at Vanguard/Nevada 529 (https://personal.vanguard.com/pdf/529progdesc.pdf)
and compared it to the Utah my529 plan (https://advisor.my529.org/wp-content/up ... iption.pdf)
and Virginia (https://www.virginia529.com/resources/performance/2024/, not sure where the program description is).

Both the Nevada and Virginia are 30% stock, Virginia is 40%.
The Nevada plan has the lowest fees, then Utah, then Virginia. So for my fund choices, I get a different ranking than what Morningstar came up with. Suggest you do your own comparison of fees and not depend completely on third-party rankings.
You might want to consider the passive funds in the Virginia plan, they should have lower fees than the age based one you selected to compare : The Aggressive (80/20) Moderate (60/40) and Conservative (20/80) have 0.13% fees and are based on the Vanguard Life Strategy Funds.

https://www.virginia529.com/resources/p ... /moderate/

sycamore
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Re: Utah’s 529 plan. What happened when I wasn’t looking?

Post by sycamore » Mon Jun 22, 2020 3:04 pm

vasaver wrote:
Mon Jun 22, 2020 2:34 pm
sycamore wrote:
Mon Jun 22, 2020 2:06 pm
Thanks to the post, I checked the fees I was paying for an "age-based moderate" fund (expected enrollment of 2024) at Vanguard/Nevada 529 (https://personal.vanguard.com/pdf/529progdesc.pdf)
and compared it to the Utah my529 plan (https://advisor.my529.org/wp-content/up ... iption.pdf)
and Virginia (https://www.virginia529.com/resources/performance/2024/, not sure where the program description is).

Both the Nevada and Virginia are 30% stock, Virginia is 40%.
The Nevada plan has the lowest fees, then Utah, then Virginia. So for my fund choices, I get a different ranking than what Morningstar came up with. Suggest you do your own comparison of fees and not depend completely on third-party rankings.
You might want to consider the passive funds in the Virginia plan, they should have lower fees than the age based one you selected to compare : The Aggressive (80/20) Moderate (60/40) and Conservative (20/80) have 0.13% fees and are based on the Vanguard Life Strategy Funds.

https://www.virginia529.com/resources/p ... /moderate/
Thanks vasaver - those passive funds look to be available only for a static allocation, unfortunately. At one time I was using a static allocation but eventually decided to switch to age-based, and that's what my apples-to-apples comparison is on.

Virginia at .13% versus Nevada at .15% is still close enough for me.

vasaver
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Location: Virginia

Re: Utah’s 529 plan. What happened when I wasn’t looking?

Post by vasaver » Mon Jun 22, 2020 9:07 pm

sycamore wrote:
Mon Jun 22, 2020 3:04 pm
vasaver wrote:
Mon Jun 22, 2020 2:34 pm
sycamore wrote:
Mon Jun 22, 2020 2:06 pm
Thanks to the post, I checked the fees I was paying for an "age-based moderate" fund (expected enrollment of 2024) at Vanguard/Nevada 529 (https://personal.vanguard.com/pdf/529progdesc.pdf)
and compared it to the Utah my529 plan (https://advisor.my529.org/wp-content/up ... iption.pdf)
and Virginia (https://www.virginia529.com/resources/performance/2024/, not sure where the program description is).

Both the Nevada and Virginia are 30% stock, Virginia is 40%.
The Nevada plan has the lowest fees, then Utah, then Virginia. So for my fund choices, I get a different ranking than what Morningstar came up with. Suggest you do your own comparison of fees and not depend completely on third-party rankings.
You might want to consider the passive funds in the Virginia plan, they should have lower fees than the age based one you selected to compare : The Aggressive (80/20) Moderate (60/40) and Conservative (20/80) have 0.13% fees and are based on the Vanguard Life Strategy Funds.

https://www.virginia529.com/resources/p ... /moderate/
Thanks vasaver - those passive funds look to be available only for a static allocation, unfortunately. At one time I was using a static allocation but eventually decided to switch to age-based, and that's what my apples-to-apples comparison is on.

Virginia at .13% versus Nevada at .15% is still close enough for me.
No problem - The Virginia glide path funds could be improved. We roll our own glide path with Virginia 529 index funds (and even happen to use the solid age based Utah 529 plan as well). Lots of great choices out there.

rkhusky
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Re: Utah’s 529 plan. What happened when I wasn’t looking?

Post by rkhusky » Mon Jun 22, 2020 9:21 pm

eosin wrote:
Mon Jun 22, 2020 1:04 pm
Can you roll a balance from one state’s plan to another without tax implications?
If there’s a state tax break, there can be implications, in that most states will claw back the tax break if you move the money to a different state.

vasaver
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Joined: Fri Oct 19, 2012 2:15 pm
Location: Virginia

Re: Utah’s 529 plan. What happened when I wasn’t looking?

Post by vasaver » Mon Jun 22, 2020 9:26 pm

rkhusky wrote:
Mon Jun 22, 2020 9:21 pm
eosin wrote:
Mon Jun 22, 2020 1:04 pm
Can you roll a balance from one state’s plan to another without tax implications?
If there’s a state tax break, there can be implications, in that most states will claw back the tax break if you move the money to a different state.
Are the claw backs usually automated at the time of distribution? Or complex penalties/interest calculations left up to the tax payer to self report?
Last edited by vasaver on Mon Jun 22, 2020 11:26 pm, edited 1 time in total.

Spirit Rider
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Re: Utah’s 529 plan. What happened when I wasn’t looking?

Post by Spirit Rider » Mon Jun 22, 2020 10:57 pm

It isn't that Utah's 529 plan has increased total fees, it is that other state's plans have decreased total fees. In Utah and Nevada it is the state's own trustee fees that are higher than in other states. I don't have any specific knowledge, but maybe as 529 plan's AUM have increased, some states might view trustee fees as a revenue source.

LeftCoastIV
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Re: Utah’s 529 plan. What happened when I wasn’t looking?

Post by LeftCoastIV » Tue Jun 23, 2020 12:43 am

This thread caused me to re-check our Utah 529 plan fees. Total expense ratio, including fund fees and administrative fee, is around 0.17%. In other words, $170 in fees on a $100k balance each year.

If I could cut that in half, $85 in savings a year isn’t that consequential in the big picture.

The Utah plan has been easy to work with. Simple website and no issues with auto contribution changes.

neverpanic
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Re: Utah’s 529 plan. What happened when I wasn’t looking?

Post by neverpanic » Tue Jun 23, 2020 12:49 am

eosin wrote:
Mon Jun 22, 2020 1:04 pm
Can you roll a balance from one state’s plan to another without tax implications?
As you received no tax advantage to begin with, common sense says "no", but since when has taxation been rooted in common sense?

I don't know how complicated the rollover process would be, but you can set up 529s in whatever states you would like. You can leave the existing ones in place, while searching for greener pastures elsewhere.
I am not a financial professional or guru. I'm a schmuck who got lucky 10 times. Such is the life of the trader.

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White Coat Investor
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Re: Utah’s 529 plan. What happened when I wasn’t looking?

Post by White Coat Investor » Tue Jun 23, 2020 12:54 am

eosin wrote:
Mon Jun 22, 2020 1:04 pm
It’s been a few years since I opened 529 accounts for our kids. We are in a state where there is no in state tax advantage, so at the time I opened the accounts I choose Utah’s plan. At the time, it was one of the highest ranked plans.

Fast forward a few years. I’ve paid more attention to our retirement accounts and other life issues. I notice now that Utah has fallen in the rankings. Our home state is now very highly ranked.

I don’t care about short-term variability and don’t want to chase a few points difference between plans. However, I was wondering if you all periodically compare your plan to others. Does there come a point when you would consider moving the 529 to a different state’s plan? Can you roll a balance from one state’s plan to another without tax implications?

Thanks!
There's nothing wrong with Utah. Other plans have simply improved to be more similar to them. There are now two handfuls of great options instead of one handful. I'm leaving my money in the Utah plan. Of course, I also get a state tax break...
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

rkhusky
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Re: Utah’s 529 plan. What happened when I wasn’t looking?

Post by rkhusky » Tue Jun 23, 2020 7:25 am

vasaver wrote:
Mon Jun 22, 2020 9:26 pm
rkhusky wrote:
Mon Jun 22, 2020 9:21 pm
eosin wrote:
Mon Jun 22, 2020 1:04 pm
Can you roll a balance from one state’s plan to another without tax implications?
If there’s a state tax break, there can be implications, in that most states will claw back the tax break if you move the money to a different state.
Are the claw backs usually automated at the time of distribution? Or complex penalties/interest calculations left up to the tax payer to self report?
I'm not sure of the exact process or whether just the amount of the tax break is clawed back or if earnings on the tax breaks are also clawed back. It's based on the state's rules, so I imagine there could be differences. My 529 plan documentation is not very clear on how the claw back or recapture would happen (seems like the contributions would be added back into my income if I did an outgoing rollover, but I'm not sure), so I would hope the plan administrator would provide instructions on what to do.

edit: Upon looking at my state's tax form, anything other than a qualified withdrawal is added to my state income (and possibly federal income plus penalties). A rollover to another state is considered a qualified rollover, if it is the first outgoing rollover in that 12 month period. As such, it would be added to my state income, but not subject to federal tax or penalties. Our state has a flat tax, so adding the entire amount of a full rollover wouldn't cause us to pay more tax than we received as a deduction (although tax rates have changed over the years). There is some sort of 1099 filed with the IRS for all withdrawals from the 529.

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Go Blue 99
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Re: Utah’s 529 plan. What happened when I wasn’t looking?

Post by Go Blue 99 » Tue Jun 23, 2020 7:40 am

I also opened up a plan with Utah a few years ago. Just doing a quick search, I still see it ranked as a top plan at Morningstar, Simple Dollar, Investopedia, etc. I see no reason to change.

Topic Author
eosin
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Re: Utah’s 529 plan. What happened when I wasn’t looking?

Post by eosin » Mon Jun 29, 2020 3:04 pm

Thank you very much to all who have posted. I feel much better about keeping our accounts with Utah's my529.

I think this is a good reminder to focus on underlying metrics, rather than rankings published by a website.

I'll probably refer to Morningstar in the future, and also check the metrics myself.

Below are some of the sites out there peddling purported rankings of the "best" 529 plans. Oddly, Utah not in the top 5 on any of these.

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

https://www.investopedia.com/the-five-b ... gs-4776535

https://www.bankrate.com/investing/best-529-plans/

Cheers!

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