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Which 529 to use: Nevada, Utah, or Michigan?

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  • Which 529 to use: Nevada, Utah, or Michigan?

    I'm currently finishing up training in Michigan and have started a small 529 for my first child. I will be moving to Pennsylvania and staying there for (hopefully) the rest of my career. Pennsylvania is great in that they will give you a deduction if you contribute to ANY 529. So at this point I'm deciding which 529 to go with. After a little research, I've limited it down to 3 options:

    1) Nevada: I like that they have Vanguard options and I can see all of the money on the same page as where I keep our other accounts (Roth, Spouse Roth, i401k, brokerage--> all with Vanguard).

    2) Utah: WCI seems to love them and I can see why...although he gets additional benefit given he is a Utah resident. Access to DFA seems very appealing (especially SCV as he does), but I also know they have slightly higher ER, although not dramatically higher.

    3) Michigan: I currently used the global equity option (75% domesting, 20% international, 5% Emerging market; 0.13% ER) which is hardly a slouch. It was a no-brainer to go with them while I was in-state, but now the situation isn't so clear. I don't believe they have recapture tax.

    So... all three seem like great options and I'm sure in the end whichever I choose wouldn't matter THAT much, but I would love to get the opinion (and rationale) of some smarter minds than me. Currently leaning a little towards Nevada so I can see all accounts in one place.

  • #2
    I use NV for the plusses you mention.


    • #3
      I used Virginia when we lived there for the tax credit (or deduction, can’t remember which).

      We now use Utah, but Nevada and New York are supposed to be good too.


      • #4
        I'm torn between using Illinois (where I get a very minor tax benefit) and Nevada/Utah, so this is an interesting thread.


        • #5

          I’m torn between using Illinois (where I get a very minor tax benefit) and Nevada/Utah, so this is an interesting thread.
          Click to expand...

          there's another thread about getting the tax benefit in home state and then transferring to another state to get the other advantages.



          • #6
            I use NV, though this choice was made when Illinois had such a bad plan in terms of choices and ER that didn't compensate for the tax deduction.  Depending upon your comfort with creating a 529 asset allocation, NV is a good choice imo, though there a some pre-set vanguard portfolios that also look good.


            • #7
              MI is quite good but CA is better than all listed if you're seeking a simple 3 fund option and willing to DIY. Lowest expense ratios.


              • #8
                Don't forget Fidelity plans (AZ, DE, MA and NH). Aggressive Growth Index (0.12%) and Moderate Growth Index (0.13%).



                • #9

                  I’m torn between using Illinois (where I get a very minor tax benefit) and Nevada/Utah, so this is an interesting thread.
                  Click to expand…

                  there’s another thread about getting the tax benefit in home state and then transferring to another state to get the other advantages.

                  Click to expand...

                  Unfortunately, Illinois is a recapture state.


                  Edit:  For most people, the Illinois state tax benefit is quite good.  It's a $10,000 deduction ($20,000 for married couples).  However, the way that it interacts with the Illinois tax credit for taxes paid in other states really diminishes the benefit in my particular circumstance--it's worth a couple hundred bucks to me, maybe $400 max. And since I'm thinking of front-loading, which Illinois doesn't give credit for (if you do more than a $20,000 contribution in year 1, you don't get a deduction for any excess contribution in year 2 like you do in some states), the benefit is diminished even further.  So I'm thinking I'll just go with whatever the cheapest option is for an S&P 500 index.


                  • #10
                    I use Utah and have liked my experience thus far for my three kids.  Has really good (low cost index fund) options through Vanguard.

                    For the record, I am a North Carolina resident. So, also out of state.


                    • #11
                      There are now many great 529 plans and Nevada, Utah, California, and New York are among the best. Don't overthink this. The differences are small.


                      • #12
                        My short answer to this thread's question is:  Nevada.

                        My long answer... if it might help anyone... is this:  It depends on where you live.  I am a MS resident, and my plan is to put money into a "Guaranteed Option" fund with the MS state plan because it has no associated fees, and I'm not concerned with yield on it because I will move the money.  According to the MS 529 website, the deposited funds have to stay in the account 10 days before you can withdraw them.  I called the State office, and they confirmed there is no minimum time the funds have to stay in the MS account to get the state tax break.  The day I make the contribution into the MS account, I am going to open a Nevada 529 and print/mail the Nevada 529 direct rollover form (you have to snail mail) to the MS Treasury office.  With having to wait on snail mail and then filing time at the MS Treasury office, I am probably looking at a week or two.   You get one annual 529 rollover free from any penalty or federal tax.  MS also is not a “recapture” tax state, so any tax break I get on 529 money is not reclaimed if I roll out of state.  I called and confirmed this.  It is also in writing in their 529 packet.  I am probably going to use the aggressive growth portfolio in the Nevada 529 plan (ER 0.16) or the total stock plan (ER 0.18).  There is also a small cap option (ER 0.22) that is tempting.  All MS 529 fund options are way too expensive (ER >0.6).  As ENT Doc noted... California is cheaper, but TIAA manages their plan.  I prefer dealing with Vanguard.  Totally a personal preference.  I plan to follow these steps once annually until we feel like we have saved enough for our daughter's college fund.

                        *I am relatively new to the forums, and I am not sure if it is ok to link another thread... so I will just mention that Adrian provided a nice link in the "529 Rollover Question" thread linking a comparison of states and whether or not they have recapture taxes.  I started that thread last November because I was curious if anyone was doing a planned rollover to take advantage of state tax breaks and cheaper out-of-state fund options.


                        • #13
                          We live in Washington State and use the Utah 529 plan. When I opened one for our first daughter shortly after she was born 15 years ago it was the clear winner in the crowd, particularly given there was no tax advantage to any other plan in our situation. It seems there are a variety of other quality plans now that did not exist back then, including Nevada, but I have seen no compelling reason to make a change.


                          • #14
                            I personally like Nevada's 529 (Vanguard).  They have age-based options, which are fairly cheap (16 bp or so).  Set it and forget it.