529 plan help

[SMUlawUTgrad 81]

Wife and I want to start a college savings plan for the boy. I have a few questions based on limited knowledge from reading the old thread.

 

1). Which state’s plan should I use? Was it Utah?

 

2) How does it work if we’re hoping to have more than one child? Meaning, am I able to add another beneficiary later or do I set up a separate account once he/she comes along? If not, am I able to divide the funds in the future?

 

3) Is there a way to do a monthly draw or will I need to do online transfers or some such?

 

Thanks.

 

 

[Yarbr 123]

1) No idea, mine is in a couple funds, CWIAX & CNPAX.

2) The first child will be the initial beneficiary and you can transfer to another later as needed.

3) I use Edward Jones and they take money out directly bi-monthly.

Edited April 3, 2018 by Yarbr
semi monthly?

[HenryJames 66041]

7 minutes ago, Yarbr said:

1) No idea, mine is in a couple funds, CWIAX & CNPAX.

.84% expense ratio? 

[Yarbr 123]

12 minutes ago, HenryJames said:

.84% expense ratio? 

I honestly don't know.  I googled it and that's what it say, the EJ statements sure as shit don't make it very clear.  It has had good enough returns in the past 10 years where I never thought about it.

[pearlandhorn 3269]

1) Utah - lowest expense ration and very good managed funds.  Also, I haven't encountered this yet since my kid is only 2 years old, but I know that Utah's system for getting money out is pretty painless.

2) You can add a beneficiary to a second kid after you have another.  Each kid gets their own 529 plan associated with their name and SSN.  In 2018, there were some changes that went in to effect that allows parents to take money from a 529 and pay for K-12 grade private schooling.  Take a look at this if you're curious:

https://us.axa.com/goals/saving-for-college/articles/529-plans-contributions-withdrawls.html

3) Utah makes it pretty simple and straightforward.  You can set up monthly draws from your bank account or you can do lump sum amounts every year.  They also allow you to give a code out to family/people who want to give money for your kid's college fund.  You don't have to do anything other than give them the website and the code.  Very good Christmas/birthday gift idea.

[Yarbr 123]

What kind of returns has the Utah fund yielded for you?

[Yarbr 123]

Never mind. I'll have to research what ifs in my case.

Quote

my529 offers 14 investment options – four age-based options, eight static options, and two customized options. Each option utilizes a different investment strategy. Read the Program Description for details.

• Four age-based options automatically reallocate account funds to be weighted less in equity funds and more in fixed-income funds or FDIC-insured accounts as your beneficiary ages and gets closer to college.
• Eight static options do not change asset allocations as your beneficiary ages. The allocation you choose stays the same, unless you request a change.
• Two customized options that you design to fit your needs—age-based or static.
• You can change your investment option twice a year.
• Important notice: Your investment could lose value.

 

[HenryJames 66041]

Vanguard Funds ftw.

[pearlandhorn 3269]

23 minutes ago, Yarbr said:

What kind of returns has the Utah fund yielded for you?

It was around 15% in 2017.

[pearlandhorn 3269]

Expense ratios for Utah are around .04% and decrease to around .03% as your child approaches college age.

[Yarbr 123]

I have to factor my 2017 return was 20% and 25% respectively.

[Gator Dave 14]

Another vote for Utah, that's what I have my kids in. It's been a few years since I did all the detailed research on this stuff, but Utah kept coming up as one of the best even back then. Ever since, I've seen it consistently rated at the top. It uses Vanguard funds.

Edited April 3, 2018 by Gator Dave

[Yarbr 123]

It won't look like that this year...

Edited April 3, 2018 by Yarbr
Comment on my previous post.

[tokamak 6411]

1. Utah is the one you'll see recommended the most. Several others are good, too. We use Nevada's because it also has low expense ratios and it's the one Vanguard has partnered with. If you already have IRAs and shit at Vanguard, you can manage the Nevada one through your account there. Note that we're all assuming that you live in Texas, which has no state income tax, which means it doesn't matter which state's you use. If you live in a state with income tax, it might make more sense to use your own state's program.
2. You can do it either way. We set up a separate account for our 2nd child. However, the rules for transferring funds between beneficiaries (e.g., two siblings) are very straightforward, so plenty of people just use one account for all kids. We chose to do separate accounts because it allows us to mix their investments differently (not a big deal because our kids are only 2 years apart), and I figured it might make keeping things straight slightly easier once they get to college age.
3. I'm sure that varies entirely based on the particular program. Or more specifically, who is administering the program. For ours (Nevada through Vanguard, see above), you can set it up to just draw out of a bank account on a regular schedule.

[Quagmire 2147]

I’m using Iowa , vanguard funds, 18 % return the last 3 yrs

[HenryJames 66041]

Everything has high returns over the last few years. The stock market went up. A lot. 

[irockalltherocks 55]

Utah as well. It's consistently ranked at the top for return and low expenses.

[tokamak 6411]

Another thing to think about is how much control you want/need. I haven't looked at it in a while, but it seems like Utah maybe just has a single portfolio choice, since everyone keeps talking about the return. Others might have more. Nevada, for example, gives you a choice of around 20ish Vanguard portfolios, so the actual return is much more up to you. They do have some age-based ones as well, which are akin to the target-retirement date mutual funds if you just prefer to set it and forget it.

[Dean Gullberry 37]

I use Iowa as well (I live in Iowa so I don't have a choice).  But I am very happy with it and as mentioned above it is Vanguard.  Just checked and expense ratio is .20% for all the funds I checked.

I have to think Utah is in the same ball park.  Here's an article from a couple years back (so a little out dated).  You can hover over the state and it will show what the expense ratio was back then.  I assume they have all come down a bit since then.  Utah was .21% and Nevada was .54% https://www.forbes.com/sites/shreyaagarwal/2016/02/12/529-college-saving-plans-where-are-the-plans-with-lowest-expense-ratios/#68194629432c

I have separate accounts for each kid but it really doesn't matter.  I think you can even pass along to a niece/nephew if your kids end up getting scholarships or not going to college.

Mine is set up to withdraw the 1st of every month.  I throw a little bit into the cash fund every month and when there's a stock market sell off (Brexit) I throw some more into the equity funds but you can only do this once or twice a year IIRC.  Probably not the best idea but it makes me feel like I know what I'm doing...

[millhouse 2604]

Like everyone else said it depends a lot on where you live. If you are in Texas, most people who go out of state went with Utah or Nevada because their fees are so low and they are well managed. If you are in a state that gives a tax break for using their 529, you've got to weigh that with the fees. Sometimes it makes sense to go out of state, even with the tax break.

Contributions are simple, same as transferring money or a direct deposit from each paycheck. We have different 529's for each kid, but depending on age difference, you could do one. Once kid #1 is out of school put it in kid #2's name and start using for them.

Should your kid get scholarship money, you can take an equivalent amount out and pay no taxes.

[midtown 3345]

Pick a state that uses low cost index funds.   Utah, Nevada, ,etc.    Don't for any reason use a 529 associated with a broker like Edward Jones etc.  

[Dbeasy 15047]

Bump. My daughter is setting up 529 accounts for her daughters. However a question has come up. Only one of the married couple owns the account for the child, either wife or husband, but not both. That seems a bit weird. What did most people do for that? I would think that might create some potential issues down the line in either death or divorce situations that occur.

[midtown 3345]

In a divorce it would be handled in the decree.
529s have a successor in case of death