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Good vs. Bad 529

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  • Good vs. Bad 529

    I have both a Wisconsin 529 and Utah 529 for each of my kids. In my home state of Wisconsin $3,380 of 529 contribution is deductible on state taxes. In my tax bracket that calculates out to $163 net tax savings per the Vanguard calculator. The best funds in that WI plan have a 0.45% net expense ratio and the Class A shares are listed of having a maximum 3.5% sales charge. I feel like I'm barely breaking even on the "tax savings". Would I be better off completely skipping my WI home state plan and just contributing to the Utah my529 with much lower expense ratios? I have about $51K in that WI plan, should I just consider rolling it out to the Utah plan and paying back the taxes I owe?

  • #2
    Originally posted by BryanMD View Post
    I have both a Wisconsin 529 and Utah 529 for each of my kids. In my home state of Wisconsin $3,380 of 529 contribution is deductible on state taxes. In my tax bracket that calculates out to $163 net tax savings per the Vanguard calculator. The best funds in that WI plan have a 0.45% net expense ratio and the Class A shares are listed of having a maximum 3.5% sales charge. I feel like I'm barely breaking even on the "tax savings". Would I be better off completely skipping my WI home state plan and just contributing to the Utah my529 with much lower expense ratios? I have about $51K in that WI plan, should I just consider rolling it out to the Utah plan and paying back the taxes I owe?
    This isn't really an answer to your question, but there are states with plans even better than Utah. You may consider one of those as well

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    • #3
      Just go with the Vanguard 529 and call it a day.

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      • #4
        Do you have a financial advisor attached to the WI 529? The fees I looked up are lower than what you quoted:

        https://www.edvest.com/research/fees.shtml

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        • #5
          Do you need to use the state plan to get the tax break?

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          • #6
            I would say that you're better off investing elsewhere, even NOT Utah. CA 529 ERs are 0.08% for total stock market, for example.

            Difference in ERs you are talking about is about 0.25%, greater for if you're comparing to CA or other lower states than Utah (which is given too much praise IMO).

            0.25% x Account Balance = $163
            Account Balance = $65,200

            This is about $46k for a CA comparison. The trouble is, while you've benefited for a few years getting a paltry $163 the chronic effects of having your money trapped in high ER funds kills of this advantage because EVERY YEAR you're paying more in ERs to your home state. Just make the change now and don't look back.

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            • #7
              Originally posted by zlandar View Post
              Do you have a financial advisor attached to the WI 529? The fees I looked up are lower than what you quoted:

              https://www.edvest.com/research/fees.shtml
              Wisconsin has 2 different 529 plans, Edvest and Tomorrow’s Scholar. My former financial advisor has us originally in the Edvest but when the Tomorrow’s Scholar came out he had us switch because it was “a better plan”.

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              • #8
                I have recently fired my financial advisor and moved most all of my accounts to Fidelity. Would the simplicity of using the Fidelity UNIQUE 529 be reasonable? Or is the California plan substantially better.

                I was planning to be somewhat aggressive in the plans with 100% equity in Total Stock Market with some extra small cap value.

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                • #9
                  Originally posted by BryanMD View Post
                  I have recently fired my financial advisor and moved most all of my accounts to Fidelity. Would the simplicity of using the Fidelity UNIQUE 529 be reasonable? Or is the California plan substantially better.

                  I was planning to be somewhat aggressive in the plans with 100% equity in Total Stock Market with some extra small cap value.
                  Those Fidelity ones (5 states I believe) are also good. Go with what you're comfortable with. Read the plan documents, fund choices and ERs. But all are likely better than what you have.

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                  • #10
                    Last time I check the three (3) lowest cost nationwide 529 plans were in order CA, NY and Fidelity (AZ, CT, DE, MA, NH). They are all within a handful of bps for the ERs.

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                    • #11
                      Originally posted by BryanMD View Post

                      Wisconsin has 2 different 529 plans, Edvest and Tomorrow’s Scholar. My former financial advisor has us originally in the Edvest but when the Tomorrow’s Scholar came out he had us switch because it was “a better plan”.
                      Better to charge you fees with lol.

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                      • #12
                        I don't know much about this, but one podcast I listen to recommends the Utah plan because it is age based & uses Dimensional Funds. I don't know exactly how up to date I am, but I heard it within the past month.
                        $1 saved = >$1 earned. ✓

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                        • #13
                          Originally posted by Cubicle View Post
                          I don't know much about this, but one podcast I listen to recommends the Utah plan because it is age based & uses Dimensional Funds. I don't know exactly how up to date I am, but I heard it within the past month.
                          Many states have age based options and use low cost index funds.

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                          • #14
                            I ended up deciding to go with the Fidelity 529 (UNIQUE New Hampshire Plan). Mostly I did it for convenience. All of my other accounts are with Fidelity now and their interface is pretty user friendly. I was able to get into total market index and total international market index funds for a net ER of about 0.11%. Michigan and California could do the same for about half that, but the single log on to all my accounts was worth it. I appreciate the advice as always.

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