529 plan for vagabond household- why is Vanguard pushing the NV plan?

[Paul der Krake]

So I'm seriously considering opening a 529 and use it to partially fund a life of scholarly leisure in ER (sushi school in Tokyo? archeology in Egypt?), and maybe a kid's college education.

A couple factors come to mind:

1) I will be relocating to WA soon, and WA has announced a new 529 plan. There is no income tax in WA anyway, but who knows, maybe they will have lower expenses than the competition. Or maybe they'll do a contribution match. One can dream. It may be worth waiting a couple of months to see what plan they come up with.

2) There is a decent chance that I will live in NY at some point in the next 10 years. The NY 529 plan has rock bottom expenses, but they not only recapture tax on contributions should I decide to roll it over to another state, but the gains would also be subject to state income tax. WTFBBQ. Basically this boils down to: "can I assume that NY won't ruin their plan and is committed to remaining one of the most competitive options". I have no idea on how to answer this.

3) Vanguard seems to be pushing the NV plan pretty hard, and only mention the other states that they administer in passing. I can't figure out why. Right now NY has lower expenses than NV! Have they looked very closely at all the factors (including ease of moving money in/out) and decided NV was the best bang for investors' buck, or do they have an ulterior motive?

[seattlecyclone]

I've been looking into 529 plans for our baby. Haven't picked one yet.

As far as I know, the Nevada plan is the only one where you manage your account through Vanguard's website. Other plans may invest in Vanguard funds, but I don't think they're really "administered" by Vanguard in the sense that you would be interacting directly with Vanguard when you need to do something with your money.

Since we have no state income tax here in Washington I've always assumed the best thing was to just pick whichever state's plan offers the lowest fees. The best I found so far is California, but it's not really that much better than the Vanguard/Nevada plan and there's some value in having one fewer institution to deal with.

[Paul der Krake]

According to their map here:
https://personal.vanguard.com/us/whatweoffer/college/finda529Popup.jsf

There are a handful of states that are administered by Vanguard, and more that have Vanguard funds. Maybe some have a specially-branded website? Honestly I don't care too much about having another login because a 529 is mostly set and forget.

The CA plan looks promising, but I have no direct experience with TIAA.

[DavidAnnArbor]

So I'm seriously considering opening a 529 and use it to partially fund a life of scholarly leisure in ER (sushi school in Tokyo? archeology in Egypt?)

Oh I had no idea that a 529 plan could be used for future personal education, I thought it had to be used for a child or grandchild.

[Paul der Krake]

So I'm seriously considering opening a 529 and use it to partially fund a life of scholarly leisure in ER (sushi school in Tokyo? archeology in Egypt?)

Oh I had no idea that a 529 plan could be used for future personal education, I thought it had to be used for a child or grandchild.

Indeed it can. In fact you can make the beneficiary jump up and down your (very) extended family tree. Are you worried about your half-brother's step son's spouse and would like to send her to community college? No problem.

If you select "foreign country" in lieu of a state in this form, you can see all the institutions abroad currently recognized by the US DoE. Unfortunately travel to/from the school like plane tickets isn't an eligible expense, but tuition and whatever each school considers reasonable housing expenses can be reimbursed.

I personally love the idea of continuing education on non-professional fields (archeology? art history? astronomy? marine biology? all the above, yes please) in retirement. Using a 529 is a great way to subsidize it. And if for some reason I overshoot and can't manage to selfishly spend it all on my hobbies or my own children, I'm sure I can find a deserving kid somewhere in my family tree.

[brooklynguy]

2) There is a decent chance that I will live in NY at some point in the next 10 years. The NY 529 plan has rock bottom expenses, but they not only recapture tax on contributions should I decide to roll it over to another state, but the gains would also be subject to state income tax. WTFBBQ. Basically this boils down to: "can I assume that NY won't ruin their plan and is committed to remaining one of the most competitive options". I have no idea on how to answer this.

Unless and until you become a NY taxpayer, there is probably no compelling reason to utilize NY's 529 plan given that there are other states with competitive plans.  But if and when you do become a NY taxpayer in a position to benefit from state tax deductions on 529 plan contributions, I think it would be worth taking the bird in the hand.

[greenjb]

I called Vanguard and they said the difference between NV and NY is twofold:

1) NY has fractionally lower ER (like .01 or something minute). But you can't track a NY 529 through you Vanguard account. You have to go to NY website: NYsaves.org.

2) NV has slightly higher fees and I believe a $3,000 minimum if you're going to roll an existing account over. But you will be able to see it in your Vanguard account.

I'm about to roll over my MD 529 accounts, but I'm honestly torn between NY and NV. I think I'll do NY, but it is annoying that they're so aggressive about preventing 529 account holders from moving their money.

[Paul der Krake]

Thanks for calling and reporting back greenjb.

I am starting to think that brooklynguy is right. Whatever slight reduction in expense ratio NY offers isn't worth being stuck in their plan. Unless one is a NY resident, that is.

I do find it surprising that Vanguard doesn't offer admiral funds in their NV 529. They have repeatedly cut the program's expense though- so that may be coming in the future. Either way a 529 is going to hold maybe 100-150k at most. It's not worth fretting about getting the best of the best for those amounts.

[Vagabond76]

Here is a fee study of all 529 plans:  http://www.savingforcollege.com/529_fee_study/index.php

I started with GA's plan (administered by TIAA-CREF) when we lived there and got the tax deduction.  We had long since left the state, so a few years ago I moved the accounts to CA (also administered by TIAA-CREF).  I wasn't unhappy with GA's plans, but CA offered a lot more choices and has slightly lower fees for comparable funds.  CA's fee's are lower than the NV plan administered by Vanguard.