Vanguard 529 Plan?

[Anonymous]

I keep my savings & investments with Vanguard and am thinking about opening up 529 accounts for kids' college. I'm just getting started on my research, but it seems that Vanguard offers 529s for many states, but not Maryland (where I live).

I guess I could open a 529 through another state via Vanguard, which would keep life simple in terms of institutions I'm dealing with, but I would then lose out on the MD tax benefit.

Has anyone in MD decided to get a 529 from another state? Anyone using Vanguard for a 529? I would appreciate any insight you can share with me on the pros/cons.

[Anonymous]

We decided to forgo the tax benefits of the DC plan in favor of a Vanguard plan because it had lower costs and higher returns. We probably could have done even better by putting the money in the DC plan, keeping it there for two years, and then moving it to Vanguard, but that seemed like a hassle. (Tax recapture laws vary from state to state, so this may not be an option in MD.)

[Anonymous]

T Rowe Price manages the MD plan and they are good. I have probably 10 different accounts with financial services companies (Vanguard, Fidelity, Citibank, Raymond James, Cap One, Neuberger & Berman, Janus, etc.) and it really isn't that big a deal. The 529s are likely to be handled differently anyway since they are set up somewhat differently.

[Anonymous]

Anonymous wrote:We decided to forgo the tax benefits of the DC plan in favor of a Vanguard plan because it had lower costs and higher returns. We probably could have done even better by putting the money in the DC plan, keeping it there for two years, and then moving it to Vanguard, but that seemed like a hassle. (Tax recapture laws vary from state to state, so this may not be an option in MD.)

For us, the initial year's tax savings didn't out weigh the long years of higher fees. We went with Vanguard.

[Anonymous]

Im surprised more people dont go with the private 529 prepaid plan that includes 300 sum universities. An average state plan would have what...15 to choose from?

[Anonymous]

Anonymous wrote:Im surprised more people dont go with the private 529 prepaid plan that includes 300 sum universities. An average state plan would have what...15 to choose from?

I was under the impression that you could use any state 529 plan to pay for any college expenses, not just a limited local set. Is that not right?

[Anonymous]

That is right though there are often tax advantages to using an in state plan, for example you can deduct a certain amount if you invest in the MD plan from your MD taxes but not if you invest in other states. Whether it is worth it, depends on your tax situation, fees etc. We live in MD and have Iowa as our primary plan, run by Vanguard.

[Anonymous]

Anonymous wrote:Im surprised more people dont go with the private 529 prepaid plan that includes 300 sum universities. An average state plan would have what...15 to choose from?

We have the MD T Rowe Price plan and it's basically a tax free (on the earnings) savings plan that can be used for any qualified educational expenses. In fact that's between you and the IRS - T Rowe Price just issues us the check in the amount we ask and we get a 1099-Q from them, and a form from the college covering the qualified expenses, both of which are also provided to the IRS.

[Anonymous]

We chose the Vanguard Nevada plan (also considered Vanguard Utah) over the DC 529 plan. I think this was a very good decision, giving the DC plan's poor returns and higher fees. MD's T. Rowe Price plan, however, is likely significantly better than the DC plan. With the tax benefit, I think it would be a much closer question whether you should go with MD or Vanguard.

[Anonymous]

We chose Nevada Vanguard of the Maryland 529. If you contribute the maximum $2500/year to the MD 529 you can save about $150 in taxes (and your partner can do the same), but the costs of the MD 529 are significantly higher than the Nevada 529. So if you have a low balance, MD is cheaper than NV, but once your balance is high enough, NV wins. Also, we want to leave the state in a few years.

[Anonymous]

Thanks for all the answers. For those with Vanguard plans, how do you choose which state to use? Is Nevada better than the others for some reason?

[Anonymous]

Anonymous wrote:We decided to forgo the tax benefits of the DC plan in favor of a Vanguard plan because it had lower costs and higher returns. We probably could have done even better by putting the money in the DC plan, keeping it there for two years, and then moving it to Vanguard, but that seemed like a hassle. (Tax recapture laws vary from state to state, so this may not be an option in MD.)

+1

[Anonymous]

pp here, I didn't have to pick a state. If you apply online it's the vanguard upromise plan, which may be affiliated with a state, but I don't remember.

[Anonymous]

3/6/19 19:00 here. I think it needs to be acknowledged that there are two types of 529 plans. One being prepaying tuition and the other general investing in the market. So yes if you are investing in the market as a whole, I can see where it might not matter which state you pick. If you pick a prepaid plan, then I believe state does matter where you can only get the prepaid benefit off the public university from the state you choose. That was the basis about where my comment was coming from, in that you can use the prepaid private plan from somewhere around 300 schools where a normal state plan might have 15 or so to choose from. On the other side, investing straight in the market adds much more risk to a college savings account where prepaying for school, you would get about a 4% risk free rate of return. In my book that sounds a lot better for the purposes of paying for college.

[Anonymous]

Look at the different Vanguard plans' underlying fund options. Also check out some articles about best 529 plans. I think Vanguard Nevada and Vanguard Utah are consistently rated at the top.