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  • Another 529 post

    I live in Washington state and receive no tax benefit contributing to the state's 529. I've read through the WCI 529 posts and feel another state would be the best option. I was leaning toward Utah (versus MI, Illinois, NY, CA) until reading the 529 posts on the forum (most positive on UT, but not all). Wondering if any recent changes since WCI's most recent update of 529s? Just looking for lowest cost (ER) TSM index fund. Wasn't aware of the Vanguard 529 or Fidelity 529 so looking into those as have other accounts (rIRA, Taxable...etc), so going to explore those as well, sounds like head to head ERs lower with state funds though. Any advice would be much appreciated!

  • #2
    The Top 529 Education Savings Plans of 2021 | Morningstar

    Morningstar does an annual rating.

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    • #3
      "head to head ERs lower with state funds."

      You seem to be mistaken or confused. All 529s are state-sponsored. Nevada uses Vanguard. New Hampshire uses Fidelity. Both are state programs. There's a handful of excellent 529 plans. If you don't get a state tax deduction just pick one and go with it. The top plan today won't be the top plan in 5 years given subtle shifts, but for everything ERs are trending down. I chose Utah 6 years ago. Other plans have gotten better, and it's not the plan I would choose today, but I'm also not changing plans. Differences are small and in the big picture not worth switching for me personally. There's probably 5 or so "top" plans (of which Utah remains one).

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      • #4
        Originally posted by DCdoc View Post
        "head to head ERs lower with state funds."

        You seem to be mistaken or confused. All 529s are state-sponsored. Nevada uses Vanguard. New Hampshire uses Fidelity. Both are state programs. There's a handful of excellent 529 plans. If you don't get a state tax deduction just pick one and go with it. The top plan today won't be the top plan in 5 years given subtle shifts, but for everything ERs are trending down. I chose Utah 6 years ago. Other plans have gotten better, and it's not the plan I would choose today, but I'm also not changing plans. Differences are small and in the big picture not worth switching for me personally. There's probably 5 or so "top" plans (of which Utah remains one).
        Thanks for clarification, but yeah was not well written on my part. I meant the 529s signing up through the VG of Fidelity platform instead of through state specific online platform. Which won't matter either way as I'm likely to do Utah at this point. Appreciate the info! Next step reading through the UT fund info.

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        • #5
          Originally posted by jz- View Post
          Just like their mutual fund ratings Morningstar 529 ratings have a very strong return recency bias. Just like consumer reports, you should ignore their overall rating and dig into the specifics.

          Morningstar, Consumer Reports and other similar rating do excellent research and they give the illusion of mathematical precision. However make no mistake about it, they are fundamentally subjective ratings, because the weighting of their models are highly subjective.

          Not to mention, their ratings are heavily biased by active mutual funds. E.g. Fidelity has expensive active mutual funds offerings in their 529 plans, but the index funds have some of the lowest cost ERs.

          The last time I looked, the nationwide plans with the lowest cost passive investments in order were CA ScholarShare, NY and Fidelity (AZ, CT, DE, MA and NH) 529 plans.

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          • #6
            We live in a no income tax state as well and have 529s with Nevada, Utah, and New York. The interface is best with Utah, and I like their access to DFA funds. Nevada, accessed through the Vanguard website, has a poor interface.

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            • #7
              I am way out of date, but I used NYSaves as an out of state plan because it had good Vanguard options.

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              • #8
                spiritrider,
                Just like their mutual fund ratings Morningstar 529 ratings have a very strong return recency bias.
                No. Morningstar 529 research does NOT include performance.
                The committee values low cost index funds, state oversight, a progressive or stepped glide path, and multi-firm options. They like a choice of tracks-aggressive, moderate, or conservative to meet different risk-tolerant customers.

                The committee does NOT assess state tax benefits nor past performance.

                their ratings are heavily biased by active mutual funds
                Not true.

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                • #9
                  We lived in WA. The out of state plan we used at the time over the years was moved to another financial institution. So you don't have control over these plans so I think people put way too much thought into this (as long as you are avoiding financial advisor sold state plans).. The states run them and decide what financial institution they use and that can change over the life of the account.

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                  • #10
                    I started 529 on vanguard a couple months ago. I have other accounts with them, so it just seemed easier this way. Interface a little wonky, but hey no big deal.
                    I do not live in Nevada, but do live in a state that doesn't give me a tax break for 529 counts.

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                    • #11
                      Originally posted by Larry Ragman View Post
                      I am way out of date, but I used NYSaves as an out of state plan because it had good Vanguard options.
                      This is what I use each year after maximizing my tax benefit for my state (IN, 5K gets you 1K state income tax credit). ER currently 0.12 (all options) in NY plan vs 0.16 for IN equity funds (and higher for other options).

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                      • #12
                        We used Utah with all vanguard funds. Was one of the best at the time. We stayed in age based funds and were happy With the program.

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                        • #13
                          We also had no state tax incentive and could pick wherever, ended up doing the NH 529 based on ratings and it was in fidelity.

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                          • #14
                            My state gives me a deduction no matter which 529 I use. We used Nevada because we already had Vanguard accounts at that time. The interface is a bit wonky yes, but for something I look at maybe 2 times a year I don't think it matters. I think on the top few 529s you are mostly splitting hairs. Just pick one and use it.

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