the dc 529 plan -- transfer funds out?

[Anonymous]

I live in DC and contribute 4K for each kid into a DC 529 plan to get the tax write up. But doesn't this plan kind of suck? Is it really bad or is it just me? I think I saw someone mention transferring the money elsewhere after you get the tax write off. What plan should I put the money to and is this truly the best way to go?

[Anonymous]

Don't quote me, but I believe the money has to be in the DC coffers for 2 years before it can be transferred out. Va. and Utah have well regarded options.

[Anonymous]

But get it out. We are high earners and even for us the DC tax credit wasn't worth the long-term cost in much higher fees than a Vanguard 529.

[Anonymous]

Be aware that DC has a no-risk stable value fund earning a net of 2.85%. (3.0% minus .15% investment fee). Many age-based funds transition to no-risk money-market type funds or low-risk bond/MM funds that earn less than 1% when the student is a teenager. For example Vanguard 529 Income portfolio is 75% bonds/25% short term reserves, and has a .19% expense ratio. Its 1 year avg annual return was .13%, 3 year 0.54%, 5 year 2.31%. If you are looking for safe returns as college approaches, consider DC. Each account has a $15 annual fee for DC residents, $30 for non-residents.

[Anonymous]

Anonymous wrote:Be aware that DC has a no-risk stable value fund earning a net of 2.85%. (3.0% minus .15% investment fee). Many age-based funds transition to no-risk money-market type funds or low-risk bond/MM funds that earn less than 1% when the student is a teenager. For example Vanguard 529 Income portfolio is 75% bonds/25% short term reserves, and has a .19% expense ratio. Its 1 year avg annual return was .13%, 3 year 0.54%, 5 year 2.31%. If you are looking for safe returns as college approaches, consider DC. Each account has a $15 annual fee for DC residents, $30 for non-residents.

Is this an option on the 529 page?

[Anonymous]

Yes, it is.
As far as transferring funds out, how do you do that? You keep track of when you put each bit in and move it 2 years later?

My oldest is in second. I was thinking of doing 70 percent S and P 500 and 30 percent stable value. Currently in age based but fees are too high!

[Anonymous]

Hi - resurrecting this thread. Can someone answer PP question?

I understand that you cannot move funds until you've had your money in the DC 529 for two years *after you have established* your accounts. But what about subsequent years?

I.e., I open an account in 2016. In 2018, I can move my funds out.

But I add another 4K in 2017. Does that money also need to stay in the account for two years -- or, because my account is already past that two-year mark -- can I get the tax benefit but move the funds out earlier than two years hence?

[Anonymous]

Anonymous wrote:Hi - resurrecting this thread. Can someone answer PP question?

I understand that you cannot move funds until you've had your money in the DC 529 for two years *after you have established* your accounts. But what about subsequent years?

I.e., I open an account in 2016. In 2018, I can move my funds out.

But I add another 4K in 2017. Does that money also need to stay in the account for two years -- or, because my account is already past that two-year mark -- can I get the tax benefit but move the funds out earlier than two years hence?

Where did you find this out? I haven't seen anything about a two year rule

[Anonymous]

Anonymous wrote:Don't quote me, but I believe the money has to be in the DC coffers for 2 years before it can be transferred out. Va. and Utah have well regarded options.

It can be used for high education expenses within two years though. So it can be transferred out but has to be transfered for tuition payment

[Anonymous]

Two-year rule is here:
http://www.dccollegesavings.com/About-FAQ.aspx#TaxEarlyWithdrawal

Are there any DC income tax consequences for early withdrawals?

Any DC tax deduction taken shall be subject to recapture in the following scenarios:

a withdrawal or rollover is taken within two years of the establishment of the account for any reasons other than the payment of qualified higher-education expenses;
withdrawals taken due to death or disability of, or scholarship to, a designated beneficiary (except that only the amount of the scholarship is exempt from recapture);
the funds are transferred to another account under the plan.

[Anonymous]

So -- if you want to maximize the DC tax benefit -- can you just add 4K or 8K and then move it out -- after you've established your account for two years? That is what it seems from this language (not that each contribution needs to stay in the account for two years)

[Anonymous]

Anonymous wrote:So -- if you want to maximize the DC tax benefit -- can you just add 4K or 8K and then move it out -- after you've established your account for two years? That is what it seems from this language (not that each contribution needs to stay in the account for two years)

That seems to be the case. Could someone tell me if that's correct? So that means I could transfer out my $8K pretty much at the start of every new tax year assuming Ive had the account for more than 2 years?

[Anonymous]

YES please someone must know the answer to this (I know I can just call them but this is more fun hahaha)

[Anonymous]

FWIW, I transferred some money out and I don't believe I received anything for a tax filing. Not sure how long all of the money had been in there - some of it was definitely 2 years, but I'm not sure if all of it was.

[Anonymous]

As I read the IRS Publication on education expenses it seems as though you can't rollover more than once per 12 months if it is for the same beneficiary. So if both parents havea 529 with the same beneficiary, only one can be rolled over per 12 months.

"If the rollover is to another QTP for the same beneficiary, only one rollover is allowed within 12 months of a previous transfer to any QTP for that designated beneficiary."

Anyone have any idea if I am reading this correctly?