The Best 529 In The Country Gets Even Better

My monthly column at Physician Money Digest discusses the recent changes to the Utah Educational Savings Plan.  I admit I’m a little biased, but I thought it was the best plan in the country BEFORE the recent changes.  Now there are even more options, including 6 DFA funds and 6 new Vanguard funds, and even lower expenses.  I also include a guide for how to decide which 529 to use for your given state.  Read more here:  Best 529 Plan

Enter Your Mail Address

image_pdfimage_print


Comments

The Best 529 In The Country Gets Even Better — 17 Comments

  1. WCI: Could you help me compare the “agressive growth” USAA 529 plan to the same in Utah?

    I am a Texas resident so I get no benefits from the 529. I currently have the 529 for my son and will start one for my daughter after she is born next month.

    I use USAA for the majority of my banking needs.

  2. Beau, you can find out more at savingforcollege.com, but here’s the “Total Asset-Based Expense Ratio” for the two plans:

    USAA: 0.65% – 1.05% + $15 annual maintenance fee
    UESP: 0.160% – 0.224% (or 0.200% – 0.615% for the Static Investment Options) + $15 annual maintenance fee

    Source: http://www.savingforcollege.com/529_plan_details/?page=plan_details&plan_id=92 and http://www.savingforcollege.com/529_plan_details/index.php?page=plan_details&plan_id=52

    • Beau-

      As you know, I also use USAA for a lot of stuff, including several types of insurance, banking, and a home equity loan/mortgage for my investment property. Their investing side isn’t too bad, but it doesn’t compare to a place like Vanguard (or UESP) for that matter. Their 529, however, has one unique feature that makes it very interesting, a matching grant program.

      Here’s their plan document:

      https://content.usaa.com/mcontent/static_assets/Media/529_Plan_Description.pdf?cacheid=3973337886_p

      In order to get the match, you have to be in the military and either a Nevada resident or stationed in Nevada. Your or your spouse must have earned a Purple Heart. The beneficiary must be a child or spouse. If you qualify for all these things, USAA will match up to a total of $1500 of contributions to the 529. It’s isn’t much, and few will be eligible for it, but if you are, it’s $1500 free. You can always put any 529 contributions above and beyond $1500 in the Utah plan.

      Aside from that, it’s a good program, but not as good as Utah’s. They’re invested in USAA funds, which aren’t as good as Vanguard and DFA fund and are more expensive. As a Texas resident, I see little reason for you to use USAA’s 529 over the UESP, aside from a bit of a convenience factor.

      • Appreciate the response. I checked out the saving for college site. Pretty useful. Next month when Emma is born I am going to switch both the kids over to the Utah plan.

  3. A reason a resident of PA may want to contribute to the PA plan that may be overlooked — value of PA 529 is excluded from PA Inheritance Tax, not other states’ plans. So in the case of someone putting large amounts into a plan, it can make a big difference. I had a grandparent put $100K into each grandchild’s PA account, which was not taxable for PA Inheritance Tax (which would be 4.5 percent for lineal descendents if invested in Utah or any other state’s plan.)

    • Inheritance tax is imposed upon death, so if said grandparent bequeathed money in their will to their grandchildren’s 529 plan, but lived past their grandchildren’s formal education years, how would this help?

      • Thanks for sharing that great point Mary. I was unaware of that. I suspect there may be a few other state-specific 529 provisions out there I am unaware of (it’s tough to keep track of 50 plans.) Keep in mind you could probably always invest in Utah’s (or someone else’s) 529, then roll it over to Pennsylvania’s at a later age.

        A couple of other considerations about Pennsylvania is that the tax for transfer to lineal descendants is only 4.5%, so it is quite low. It’s also interesting that there is no exemption for this inheritance tax, so it’s paid on the entire estate (except for some exempt farming real estate and on the amount inherited by the spouse.)

  4. How about the NY direct plan (nysaves.com)? It basically has Vanguard funds, and ERs are a teeny bit lower than UESP.

    • The New York plan is also very good, especially for New York residents. They charge 0.17% overall (close enough to the UESP not to matter, although it was 0.25% until a year ago) plus ERs of 0.03% to 0.11% on Vanguard institutional index funds, which are actually a little lower than the UESP. They also have a much bigger state tax deduction for NY residents ($10K for a married couple instead of ~$3500 for the Utah) plan. The main advantage of the Utah plan over the NY plan is more investment options, especially now with the DFA funds. If I were a New York resident I probably would just use the NY plan, even if I were investing more than $10K a year. But if I were neither in Utah or NY, I would still choose the Utah plan.

  5. Under John Schneider’s financial leadership, the fifth-oldest player on the authentic nike jerseys. On Wednesday, Mora had said he was charging ahead with assessing 2009 and preparing for next season if they get better QB play, but no.

  6. WCI,

    Presumably you use either the customized age-based or customized static options. Would you share what your allocations are? I’m setting up an account and I’m trying to decide how I’m going to set up my customized option.

  7. I know this is an old post, but when it comes to 529 plans, it seems to make sense to contribute up to the limit which your state provides a tax deduction. Then if you wish to contribute more, should I put the money into Utah’s plan to save on expenses?

    Thanks!

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>