Hey All,
I have a 529 plan for each of my two kids. I was poking around in the investment options yesterday and stumbled across something I thought a bit odd.
I have the option to invest in Vanguard VITSX Total Stock Market Index fund. They say the expense ratio on the prospectus is 0.04%. Which is super good.
But, on the main page they say that the expense ratio is 0.29%.
What the heck.
https://www.collegecounts529.com/performance/vanguard-total-stock-market-index-529-portfolio/so, I found in the teeny tiny print that:
"1 Performance information is current as of the referenced timeframe and is net of the 0.25% program management fee the Plan imposes."
In other words...the 529 management company tacks on another 0.25% to all funds.
So my question is:
1) Do the tax benefits of a 529 plan outweigh this increased cost?? I'm envisioning a break-even point that depends on a) how much the money sits in the plan. and b) how much appreciation occurs over the investment.
2) Are these management fees typical of 529 plans??
I get to deduct the 529 contributions from my state income (but only if use THIS plan). And we also avoid paying federal/state tax on the appreciation if those just are used for college expenses right?
If I established a 529 plan with a non-approved state plan, I think I would lose the state tax write-off, but I might be able to get reduced management fees if I just establish a 529 plan with either fidelity or vanguard directly.