Author Topic: 529 college savings Minnesota or California?  (Read 1301 times)

clairebonk

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529 college savings Minnesota or California?
« on: March 08, 2017, 03:58:50 PM »
My kids are 2 and 5. Should I open 529 accounts in my state, California, or should their grandparents open up accounts in their home state of Minnesota?

omachi

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Re: 529 college savings Minnesota or California?
« Reply #1 on: March 08, 2017, 05:23:31 PM »
It probably doesn't matter much, as neither state allows tax deduction of contributions. Go for whichever has better investment options. The accounts I've opened are with Vanguard for the low fees, which is technically a Nevada account. The money will spend the same later.

Also, the person who opens the account controls it, including the possibility of reassignment of funds. Assuming you are contributing, you probably want to do so to an account you control. Grandparents may want the same, but multiple accounts can exist for one beneficiary. You just need to trust the beneficiary's SSN to the person opening the account. If you don't trust the grandparents not to steal your children's identities, insist they contribute to an account you control.

catccc

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Re: 529 college savings Minnesota or California?
« Reply #2 on: March 09, 2017, 09:37:01 AM »
I think NY state has lower expense ratios than NV, or they did at the time that we started our kids' 529 plans.  NY also invests with Vanguard.

There are advantages to grandparents opening the account when applying for federal aid, but for simplicity and ease we of administration, we decided to keep them under our ownership.

I believe in CA, there is no tax benefit for contributing to 529s, so just go with whichever is accessible and lowest cost.  Some states provide a tax benefit for contributions to their own state's plan.  I'm lucky to be in PA, where you get a tax benefit for contributions to any state's 529 plan.  (But very unlucky in that I do not get a state tax benefit for retirement contributions, which outweigh our college saving contributions significantly...)