529 with a bank?

[Akizora]

Hi Folks,

I'm sure a lot of people read the recent boot camp article on 529s. I have a 529 plan with my own state, but I max out the tax benefit, and I still want to contribute more.   I'm thinking about opening another account.  I was thinking of going with my bank (which happens to be USAA). But I can't find any info on WCI about 529s through one's bank.  Does anyone have any thought or recommendations regarding opening a 529 with my bank versus picking another state to invest with?  Thanks for any info anyone can provide.

[cgossage]

All 529 plans are with an institution.  For instance, your current plan isn't with your own state, but is with an institution that is sponsored by the state.  You can open a 529 plan with any state-sponsored institution but you won't necessarily get the tax benefits (if any) from using a state sponsored plan.  If looking for another plan, I wouldn't recommend the USAA plan just because its with your bank.  There are several good options out there with lower fees, but you may have better options through your state.  What state do you live in?

[spiritrider]

A general WCI rule of thumb; banks are for banking and mutual index funds are for investing.

I do not have any specific knowledge of USAA's 529, but would generally recommend one of the states with Fidelity or Vanguard low cost index fund portfolios.

P.S. I just checked out the Nevada USAA 529 plan, run, Run, RUN as fast and as far away as you can. Its expense ratios vary from 0.51% to 0.99% with a state of Nevada 0.13% administrative fee on top of that.

[Dreamgiver]

Why not just put more into the same 529 account you have? You can put more than what you get a tax credit for and the max contribution amount does not change whether you have 1 or 10 plans.

[bean1970]

USAA 529 is one of the most costly plans out there (which is one of the Nevada plans). USAA is a great bank, but they are detrimental from a fee aspect for investing......  technically speaking, all 529s are state -sponsored plans...the states USE the various financial institutions to administer the plans. Some states have more than one option to pick from. Others have one. The state would have the right to change plan administrators ...so you could open a Utah plan which uses Vanguard to administer its plan, but then the state of Utah could decide to use TIAA at any time. I doubt that would happen, but it is possible theoretically, but you are picking the STATE plan technically (and then defaulted to the institution or choice of institutions to pick from).  If you are fixated on using Nevada, they offer Vanguard, State Street for direct and Putnam for advisor sold (recommend not to use advisor sold plans due to fees).

[Hank]

If your state's plan is good, put more in there.  If you're looking for another state's plan for the money over and above your state tax benefit, take a look at Utah and New York.

I like USAA for insurance and I use them for banking.  Their investment products tend to be so-so.