Anonymous
Post 05/23/2014 22:19     Subject: DC 529 plan vs out of state options
In doing more research, it appears that you only have to wait 2 years after you establish your account and then you can roll it all over without penalty. (I thought it was 2 years after each contribution.) You can then continue contributing to DC and do an annual rollover to another state, also without penalty.
Anonymous
Post 05/23/2014 22:15     Subject: Re:DC 529 plan vs out of state options
not sure, you may be right. I was asking because I didn't know.
Anonymous
Post 05/23/2014 22:13     Subject: DC 529 plan vs out of state options
I thought maybe you had to wait until the end of the tax year. If you don't, then end of May 2016 it is!
Anonymous
Post 05/23/2014 20:38     Subject: Re:DC 529 plan vs out of state options
why would you withdraw in January 2017 and not June 2016? (assuming you establish the fund in the near future).
Anonymous
Post 05/23/2014 11:50     Subject: DC 529 plan vs out of state options
OP here, thanks all! It sounds like the best thing for me to do is the following, since my child is still a toddler:

Put in up to $8,000/year into the DC plan's State Street S&P 500 fund to get the tax benefits (I am married). Then 2 years after putting the $ in, roll it over into another state's fund (likely NY for me, given the low expense ratios). So if I make $8,000 in contributions in 2014, then in January of 2017 I would move that $ plus any interest it accrues over to NY.

Question though--is there any easy way to find out how much interest the $8,000 in 2014 contributions accrued and thus the full amount eligible for roll-over to NY in Jan. of 2017, while not having to pay off the tax benefit I received for the tax year 2014?

Thank you all!
Anonymous
Post 05/21/2014 15:41     Subject: Re:DC 529 plan vs out of state options
http://www.dccollegesavings.com/About-FAQ.aspx#TaxDedFed

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
Post 05/21/2014 13:01     Subject: Re:DC 529 plan vs out of state options
Anonymous wrote:I believe you can put multiple years worth of contributions in the 529 plan and "carryforward" the deduction for up to 5 years. i.e. you can put in 2 years worth of contributions in 2014, take the tax deduction for 2 years and remove the funds in 2016 when they vest and transfer them into another 529 plan if you're not happy with the DC plan performance and fees. that way you can get the best of both worlds--tax deduction and higher returns in latter years.


Special Benefits for D.C. Taxpayers
Deduct up to $4,000 in Plan contributions from their federal adjusted gross income each year on their D.C. tax return (up to $8,000 for married couples filing jointly if both own accounts).
Carry forward as a D.C. income tax deduction any amounts greater than $4,000 contributed to one or more accounts in any tax year. You may carry forward the deduction for up to five years.



Where did you read that you can transfer after 2 years to another plan (and not be forced to pay back the dc tax deduction that you got?)?
Anonymous
Post 05/21/2014 10:56     Subject: Re:DC 529 plan vs out of state options
I believe you can put multiple years worth of contributions in the 529 plan and "carryforward" the deduction for up to 5 years. i.e. you can put in 2 years worth of contributions in 2014, take the tax deduction for 2 years and remove the funds in 2016 when they vest and transfer them into another 529 plan if you're not happy with the DC plan performance and fees. that way you can get the best of both worlds--tax deduction and higher returns in latter years.


Special Benefits for D.C. Taxpayers
Deduct up to $4,000 in Plan contributions from their federal adjusted gross income each year on their D.C. tax return (up to $8,000 for married couples filing jointly if both own accounts).
Carry forward as a D.C. income tax deduction any amounts greater than $4,000 contributed to one or more accounts in any tax year. You may carry forward the deduction for up to five years.

Anonymous
Post 05/20/2014 16:09     Subject: DC 529 plan vs out of state options
Don't use the calvert age designated plans. Use state street which is a solid s&p index fund with yearly expense of .5%. Invest up to $8000 per year (total - spread among different if you wish) per married couple. You need to open 1 account per married person.

We have 3 kids. I automatically invest $200 per month per kid for 2 kids in state street. My husband invests $350 per month for our third kid for a total of $9000 per year that we deduct $8000 off our taxes and get a return of something like $800 per year alone. (I wanted to make sure we invested enough per person to get full deduction.)

Then i auto invest $1000 for month in 529 account at Utah plan which has lower fees for my oldest child. It will transferred to younger kids as necessary.

To determine how much to save I used this tool which is great for multiple kids going to a variety of schools. Uses real data. Much better than the "simple" ones other sites tout.

https://financialprofessional.hartfordinvestor.com/planco/content/college/calc/calc529.html
Anonymous
Post 05/20/2014 13:37     Subject: Re:DC 529 plan vs out of state options
I think that you can have the tax deduction for multiple years if you continue to contribute or if you put in multiple years worth of contributions in at the outset. But still, you could lose money with the Calvert plans. (From the CGDEV blog linked to earlier--it's an old blog though, I think Utah is now the darling in terms of low fees.) I think the State Street plan fees are about .51%, but that may not work for every investor depending on their risk tolerance and age of child.

For a typical investment option (a fund for kids aged 6--10, like mine), Calvert and the DC government extract 1.30% of the saver's money, plus a $15 account maintenance fee, each year. Nationally, according to this list, the cheapest state plan open to non-residents is Ohio's which charges 0.24% for a similar portfolio, one that is managed by---you guessed it---Vanguard. Meanwhile, I occupy the DC goverment's top income tax bracket, whose rate is 8.5%. So my local government is offering me this deal: save 8.5% once by putting up to $4,000 into our plan; then pay about 1%/year extra until your kids go to college. Not such a good deal. This spreadsheet compares Calvert/DC and Vanguard/Ohio more carefully by simulating a case in which I put in $4,000/year and the market goes up 5%/year. After 18 years, Vanguard/Ohio earns $42,697 while Calvert/DC earns just $33,424, for a difference of $9,273. At the current tuition inflation rate, this will let me buy my younger son lunch at the campus cafeteria during at least one parental visit.

Seriously, this is not chump change. Now, if I invested through Vanguard/Ohio, I'd lose that 8.5% DC tax deduction. We can factor in this loss by reducing the Vanguard/Ohio gain figure above by 8.5%, from $42,697 to $39,068. This still exceeds the Calvert/DC gain by $5,644. In other words, despite the DC tax incentive, I would lose money by investing through Calvert/DC. Calvert/DC's high expenses not only consume the entire DC tax break; they also dip into my pocket.


Anonymous
Post 05/20/2014 13:31     Subject: DC 529 plan vs out of state options
Anonymous wrote:With about a 10% tax you are avoiding, it makes financial sense to do the DC 529 as the difference in fees is less than 1%. If you have money above the $8000 then you should put it in the NY plan.


But it's years and years of compounding interest that you will lose in DC, vs. a one-year gain in the form of lower income taxes.
Anonymous
Post 05/20/2014 12:45     Subject: DC 529 plan vs out of state options
With about a 10% tax you are avoiding, it makes financial sense to do the DC 529 as the difference in fees is less than 1%. If you have money above the $8000 then you should put it in the NY plan.
Anonymous
Post 05/20/2014 12:08     Subject: Re:DC 529 plan vs out of state options
the state street S&P 500 index fund in the DC 529 has the lowest fees (but if it's your only savings, you may want to diversify your risk). the calvert plans have much higher costs. This blog below has a post where the author analyzed some of the DC options and how investing in a Vanguard Ohio plan would change your investment outcomes. It's unfortunate that these fees aren't disclosed more transparently on the 529 website before parents check the box. i had to dig through the site to find them.

http://www.cgdev.org/blog/when-socially-responsible-investing-isnt
Anonymous
Post 05/16/2014 12:00     Subject: DC 529 plan vs out of state options
There was a similar thread a months ago on the same topic - someone had a method for getting the DC deduction and transferring the money out to a lower fee state's plan. Don't remember the details (didn't apply, as we are in VA), but it might be worth a search to get the deduction and the other states lower fees.
Anonymous
Post 05/16/2014 11:05     Subject: DC 529 plan vs out of state options
I'm setting up a 529 plan for my 2.5 year old daughter. We are DC residents. Married residents can get a state tax deduction for up to $8,000 of contributions. I'm trying to decide whether this is worth it. The fees seem higher than other states; most states don't have any account maintenance fees (DC is $15 annually for residents), and the Calvert Funds in the DC portfolio seem to have higher management fees. I am thinking of instead going with New York, which has a .17% fee that is all inclusive, and has Vanguard options, but I would give up the tax deduction. Wondering whether anyone who has BTDT has views on the DC plan and whether it's worth the tax deduction. (I'm pretty sure we pay the highest marginal tax rate in DC, so the deduction could theoretically be substantial, but I just don't think it's worth having funds that don't do as well and cost more.) TIA!