Maryland 529 Options

[WranglerBowman]

I've been looking at Maryland 529 college savings plans and plan to go with the Maryland College Investment Plan, unless there are better options.  I believe tuition costs will come down in the future and I like that this plan has a lot more flexibility in how you can use the money.  I was going to front load the plan with $2,500 per year for the first 8 years and just let it ride after that and was planning to invest all of it into the T. Rowe Price - Equity Portfolio which is 100% stock funds as listed below:

Equity Index 500 Fund - 30.7%
Blue Chip Growth Fund - 10.2%
Value Fund - 10.2%
Mid-Cap Growth Fund - 4.0%
Mid-Cap Value Fund - 4.0%
Small-Cap Stock Fund - 7.3%
Overseas Stock Fund - 8.1%
International Stock Fund - 8.1%
International Growth and Income Fund - 8.1%
Emerging Markets Stock Fund - 4.3%
Real Assets Fund - 5.0%

Let me know your thoughts and what others have done in the past and what they liked/didn't like.  I don't consider myself a savvy investor but trying to make good choices early for this new kid.

[greenjb]

The downside of the Maryland 529 Account is that it has really high fees -- .80 in my target-date account. The upside is that if you're a Maryland resident, you can take a state income tax deduction on the first $2500 you contribute to each account. I have a spouse and two kids, so we have four accounts at get a $575 annual deduction. But others in this forum would tell you you'd do better foregoing the deduction going with a plan like NY's or NV's which offer much lower-cost Vanguard funds. They may be write. I'm on the fence about whether or not MD's is worth it. But be sure to look at the expense ratios for the funds you're planning to use.

[WranglerBowman]

Thanks.  I should have noted that the fund fee structure is 0.67 for Underlying Fund Expenses, 0.13 Annualized Program Fee, and a $10 Annual Account Fee.  The expenses aren't the greatest but the tax write offs are worth it.   

[greenjb]

You can get the best of both worlds -- tax deduction and low Vanguard fees (.16 percent). I called Vanguard about the NY plan, you can rollover a MD 529 once every 12 months per beneficiary. I called Maryland's 529 line and they do not "recapture" the state tax deduction once you've taken it. (Details here: http://www.savingforcollege.com/529_plan_details/?page=plan_details&plan_id=72 "Rollovers are not subject to recapture."). So for the very small inconvenience of filling out some additional NY paperwork, you can take a MD tax deduction of up to $575 per year (if you have two kids like I do) and still get rock-bottom Vanguard rates.

[johnny847]

You can get the best of both worlds -- tax deduction and low Vanguard fees (.16 percent). I called Vanguard about the NY plan, you can rollover a MD 529 once every 12 months per beneficiary. I called Maryland's 529 line and they do not "recapture" the state tax deduction once you've taken it. (Details here: http://www.savingforcollege.com/529_plan_details/?page=plan_details&plan_id=72 "Rollovers are not subject to recapture."). So for the very small inconvenience of filling out some additional NY paperwork, you can take a MD tax deduction of up to $575 per year (if you have two kids like I do) and still get rock-bottom Vanguard rates.

+1. I was going to post this.

Also, Maryland let's you carry forward your deductions for 10 years. So for example if you contributed $10k this year, you could take your $2500 deduction this year and the next three years.
Why would you want to do that? To frontload your contributions of course! In the absence of a crystal ball the best day to invest is yesterday. The second best is today.

[WranglerBowman]

You can get the best of both worlds -- tax deduction and low Vanguard fees (.16 percent). I called Vanguard about the NY plan, you can rollover a MD 529 once every 12 months per beneficiary. I called Maryland's 529 line and they do not "recapture" the state tax deduction once you've taken it. (Details here: http://www.savingforcollege.com/529_plan_details/?page=plan_details&plan_id=72 "Rollovers are not subject to recapture."). So for the very small inconvenience of filling out some additional NY paperwork, you can take a MD tax deduction of up to $575 per year (if you have two kids like I do) and still get rock-bottom Vanguard rates.

+1. I was going to post this.

Also, Maryland let's you carry forward your deductions for 10 years. So for example if you contributed $10k this year, you could take your $2500 deduction this year and the next three years.
Why would you want to do that? To frontload your contributions of course! In the absence of a crystal ball the best day to invest is yesterday. The second best is today.

This sounds pretty good and def something I'd take the time to do considering the fees would be considerably less.  In looking at the NY plan in the bottom there's "*Up to $10,000 is deductible annually from New York State taxable income for married couples filing jointly; single taxpayers can deduct up to $5,000 annually. May be subject to recapture in certain circumstances such as rollovers to another state's 529 plan or nonqualified withdrawals."  I don't see anything about Maryland recapturing tax deductions on their 529 website and I know Greenjb said they won't but I'm still skeptical.  I'll have to do a little more digging...  Do you completely rollover your MD 529 to the NY 529 or just leave a $1 in the MD529 plan so the account is still open and you can continue to make contributions? 

[SuperSecretName]

When you roll over, the MD account will stay open.  You'll transfer the full balance.

You will want to re-set up the automatic contribution of 25/month to avoid fees (they cancel it on rollover).

I did mine with Vanguard - they prefill forms for you, so all you have to do is sign and mail.  Very easy.

[johnny847]

You can get the best of both worlds -- tax deduction and low Vanguard fees (.16 percent). I called Vanguard about the NY plan, you can rollover a MD 529 once every 12 months per beneficiary. I called Maryland's 529 line and they do not "recapture" the state tax deduction once you've taken it. (Details here: http://www.savingforcollege.com/529_plan_details/?page=plan_details&plan_id=72 "Rollovers are not subject to recapture."). So for the very small inconvenience of filling out some additional NY paperwork, you can take a MD tax deduction of up to $575 per year (if you have two kids like I do) and still get rock-bottom Vanguard rates.

+1. I was going to post this.

Also, Maryland let's you carry forward your deductions for 10 years. So for example if you contributed $10k this year, you could take your $2500 deduction this year and the next three years.
Why would you want to do that? To frontload your contributions of course! In the absence of a crystal ball the best day to invest is yesterday. The second best is today.

This sounds pretty good and def something I'd take the time to do considering the fees would be considerably less.  In looking at the NY plan in the bottom there's "*Up to $10,000 is deductible annually from New York State taxable income for married couples filing jointly; single taxpayers can deduct up to $5,000 annually. May be subject to recapture in certain circumstances such as rollovers to another state's 529 plan or nonqualified withdrawals."  I don't see anything about Maryland recapturing tax deductions on their 529 website and I know Greenjb said they won't but I'm still skeptical.  I'll have to do a little more digging...  Do you completely rollover your MD 529 to the NY 529 or just leave a $1 in the MD529 plan so the account is still open and you can continue to make contributions?

Trying to prove a negative sucks =P.
There are sites such as this one that say MD doesn't have a recapture provision. Of course this is not from an official Maryland source. However, I doubt that any official source would advertise the lack of this provision.

[greenjb]

I called T. Rowe Prince, which runs MD's 529, and they confirmed MD does not recapture. If you want, you can leave your annual deduction in the MD account for one year -- that's what I do -- before rolling it over to NY. You're only allowed to do one rollover per account, per year. And if you leave you MD donation sitting for a year A) your account will remain open and active, which you want, and B) the state would have no reason to recapture anything -- the contribution against which you've just taken a state tax deduction is sitting right there.

[WranglerBowman]

You guys are awesome!  Planning to open the Maryland 529 College Investment Plan today and then I'll rollover to New York's 529 in the start of 2018 and keep rolling it over annually after that.  Thanks.

[greenjb]

Good luck! I was really psyched to research and discover this. Nothing better (or more remunerative) that financial hacking.

[Scandium]

There are fees for rolling over though, of $75:
http://maryland529.com/Portals/0/Files/MPCT_Disclosure_Statement.pdf?ver=2015-11-30-163955-917

With one account the tax deduction is only worth a maximum of $143.75. So at best it'll save you $69 on taxes. And minus what you loose by investing at ER of 0.8 vs 0.16 in NY.. As an annual exercise I decided the hassle wasn't worth it. But maybe if I could dump in $10k and carry it forward I'd consider it.

[SuperSecretName]

There are fees for rolling over though, of $75:
http://maryland529.com/Portals/0/Files/MPCT_Disclosure_Statement.pdf?ver=2015-11-30-163955-917

With one account the tax deduction is only worth a maximum of $143.75. So at best it'll save you $69 on taxes. And minus what you loose by investing at ER of 0.8 vs 0.16 in NY.. As an annual exercise I decided the hassle wasn't worth it. But maybe if I could dump in $10k and carry it forward I'd consider it.

Looks like it is for if you are in the prepaid trust plan (you buy semesters), not if you are in the standard Investment Plan.

[greenjb]

Yes, that's for the Prepaid College Trust. The rep I talked to said there's no rollover fee for the College Savings Plan. I'm about to do it, though, so we'll see.

[WranglerBowman]

Greenjb, make sure you follow up when you do your rollover.

[Scandium]

Yes please let us know how it goes. I might be interested in doing another lump sum contribution and transfer to NY if it's easy

Sent from my Nexus 5X using Tapatalk

[greenjb]

I promise I'll file a follow up report -- it's gonna take me a couple weeks to save this year's contributions, though.

[WranglerBowman]

My in-laws would also like to contribute to the Maryland 529 account and I asked if they could deduct it from their taxes, and they said their tax accountant told them no...does anyone know if this is true?  It seems odd that grandparents wouldn't be able to get a tax deduction for contributing to a grand child's 529.

I asked them if they wanted to make the check out to us, so we can claim the tax deduction.

[sabertooth3]

My in-laws would also like to contribute to the Maryland 529 account and I asked if they could deduct it from their taxes, and they said their tax accountant told them no...does anyone know if this is true?  It seems odd that grandparents wouldn't be able to get a tax deduction for contributing to a grand child's 529.

I asked them if they wanted to make the check out to us, so we can claim the tax deduction.

The tax deduction is reserved for MD residents; are they MD residents? If not, then they can't claim the deduction. If they are residents, then they can claim the deduction since MD accepts contributions from third-parties.

Source- http://maryland529.com/basics-of-529-college-savings-plans/tax-advantages-of-529-plans
MD

[QueenAlice]

This is great information, thanks everyone for sharing! Posting so I can find this easily in the future. Also very interested to hear how the rollover goes, greenjb.

[johnny847]

My in-laws would also like to contribute to the Maryland 529 account and I asked if they could deduct it from their taxes, and they said their tax accountant told them no...does anyone know if this is true?  It seems odd that grandparents wouldn't be able to get a tax deduction for contributing to a grand child's 529.

I asked them if they wanted to make the check out to us, so we can claim the tax deduction.

The tax deduction is reserved for MD residents; are they MD residents? If not, then they can't claim the deduction. If they are residents, then they can claim the deduction since MD accepts contributions from third-parties.

Source- http://maryland529.com/basics-of-529-college-savings-plans/tax-advantages-of-529-plans
MD

There's at least one state (I think it was PA) that lets you deduct contributions to any state's 529

[WranglerBowman]

My in-laws would also like to contribute to the Maryland 529 account and I asked if they could deduct it from their taxes, and they said their tax accountant told them no...does anyone know if this is true?  It seems odd that grandparents wouldn't be able to get a tax deduction for contributing to a grand child's 529.

I asked them if they wanted to make the check out to us, so we can claim the tax deduction.

The tax deduction is reserved for MD residents; are they MD residents? If not, then they can't claim the deduction. If they are residents, then they can claim the deduction since MD accepts contributions from third-parties.

Source- http://maryland529.com/basics-of-529-college-savings-plans/tax-advantages-of-529-plans
MD

Thanks Saber.  Didn't remember seeing "contributor" when I looked before.  The in-laws are MD residents, so it sounds like their tax guy lead them astray.

[WranglerBowman]

If friends of family contribute directly to the College Investment Plan account I set up they can deduct what they've contributed to the account correct?  In-laws said their tax accountant told them that friends and family combined contributions could only deduct a portion not to exceed $2,500 total per beneficiary...  I said that didn't make any sense to me but I'd look into it.  On T. Rowe's website it says "Maryland College Investment Plan - If you are the account holder or a contributor, you may deduct up to $2,500 of contributions each year from your Maryland State income per beneficiary", which isn't completely clear but I still think each individual who contributes to a 529 can deduct up to $2,500 per year, per beneficiary.  Is that what others have assumed?

[beege]

If friends of family contribute directly to the College Investment Plan account I set up they can deduct what they've contributed to the account correct?  In-laws said their tax accountant told them that friends and family combined contributions could only deduct a portion not to exceed $2,500 total per beneficiary...  I said that didn't make any sense to me but I'd look into it.  On T. Rowe's website it says "Maryland College Investment Plan - If you are the account holder or a contributor, you may deduct up to $2,500 of contributions each year from your Maryland State income per beneficiary", which isn't completely clear but I still think each individual who contributes to a 529 can deduct up to $2,500 per year, per beneficiary.  Is that what others have assumed?

I'm not a tax expert by any means but this is what my tax software spit out:

If you contribute to the Maryland College Investment Plan or the Maryland Broker-Dealer College Investment Plan, you are eligible for a subtraction from income. You may claim a Maryland-only subtraction of up to $2,500 per account holder per beneficiary. For more details see Administrative Release 32. https://www.freetaxusa.com/taxes2015/formdownload?form=md_ar32.pdf

It sounds like though you have others contributing to your account. Unfortunately it would seem no one can take the deduction in that case (they would need to setup their own 529 accounts, with you as the beneficiary and contribute to those in order to take the deduction) - plz excuse the formatting (copied out of the PDF):

What if a parent holds an account for a child, but the grandparents make the payments?
Only the account holder may take the subtraction
modification for the amounts the account holder
contributes. The grandparents may not take the
subtraction because they are not the account
holder. The parent also cannot take the subtraction
because the parent did not make the payment. The
account holder is the person that controls the
account and has the right to direct distribution payments or change beneficiary. The account
holder also has the right (subject to some
restrictions) to receive a refund or distribution from
an account.

[beege]

What I really came to post about on this thread though was an analysis off fees of Maryland's offering to get the state tax deduction (T-Rowe Price) vs Vanguard without the tax deduction. I started to do some math and thought it was a ripoff. It sounds like some other people have come to the same conclusion. Anyways here's some numbers. Please poke holes in them if you can. I'm trying to help out my brother in law who resides in Maryland as he wants to setup funds for his nephew and niece.

I don't have the details of his income or how much he wants to contribute so I just used some 50K income and a 5K contribution to get some baseline numbers:

I also assumed a 9 year investment period (one kid is 9) and a 15 year period (the other is 3) assuming they go to college at 18 years old.

From the T-Rowe Price funds it seems like Portfolio 2024 (0.82% expense ratio ~60/40 stock bond split adjusted down over time) is the best choice for the 9 year old. And Portfolio 2030 (0.81% expense ratio, ~92.5/7.5 stock bond split adjusted down over time) is the best for the 3 year old. I'll also note that the lowest cost pure bond fund is the U.S. Treasury Money Market Portfolio (at 0.38%) and equities fund is the Global Equity Market Portfolio (0.46%) meaning that for T-Rowe Price, if I can convince my BIL to do his own asset allocation every year, he can save some $.

Using Vanguard's 529 deduction calculator (https://vanguard.wealthmsi.com/stdc.php), I first plugged in how much Maryland's 529 deduction would net someone with 50K of taxable income. The result is $89/year (over 2 years @2500 deduction a year). So by using T-Rowe's investments you'll save $89*2 = $172 if you invest $5000 with 50K of taxable income.

Running through the scenarios yields the following:

Note 1: as I am focusing on fees, I do not grow the account balance - no contributions, no interest - it remains constant for this exercise). I also handle each kid as an isolated test for simplicity
Note 2: After reading the fine print on the expense ratio, I found it is capped at .80% so I can treat Portfolio 2024 and Portfolio 2030 equally.

T-Rowe Price Portfolio 2024/Portfolio 2030 total cost over time (assuming $5000 initial investment, $10/yr account fee, $89*2 tax benefit and .80% expense ratio):

Years	Year Contribution	Account Balance	T-Rowe Maintence Cost	T-Rowe Tax Benefit	T-Rowe Expense Ratio Cost	Year Cost For T-Rowe	Cumulate Cost T-Rowe
1	5000	5000	10	-89	40	-39	-39
2	0	5000	10	-89	40	-39	-78
3	0	5000	10	0	40	50	-28
4	0	5000	10	0	40	50	22
5	0	5000	10	0	40	50	72
6	0	5000	10	0	40	50	122
7	0	5000	10	0	40	50	172
8	0	5000	10	0	40	50	222
9	0	5000	10	0	40	50	272
10	0	5000	10	0	40	50	322
11	0	5000	10	0	40	50	372
12	0	5000	10	0	40	50	422
13	0	5000	10	0	40	50	472
14	0	5000	10	0	40	50	522
15	0	5000	10	0	40	50	572

Now let's run the same numbers with Vanguard. Vanguard's automatic portfolios aren't exactly the same so I chose the closest ones (note: Vanguard's are a bit more aggressive). I chose the Vanguard Growth Portfolio for the 9 year old (75/25 stock bond split, .17% expense ratio) and the Vanguard Aggressive Growth (100% stocks, .17% expense ratio) for the 3 year old. Vanguard's fee schedule does not have a yearly account fee (other than the expense ratio), but we can't deduct the contributions since we wouldn't be contributing to the Maryland College Fund or whatever.

The calculation is more straightfoward in Vanguard's case. It is simply: .0017 (expense ratio) * balance * the number of years. But I'll break it down anyways to match the T-Rowe Price examples:

Vanguard Growth Portfolio / Vanguard Aggressive Growth Portfolio (assuming $5000 initial investment, $0 account fee, no tax benefit, .17% expense ratio):

Years	Year Contribution	Account Balance Year Cost For Vanguard	Cumulative Cost Vanguard
1	5000	5000	8.5	8.5
2	0	5000	8.5	17
3	0	5000	8.5	25.5
4	0	5000	8.5	34
5	0	5000	8.5	42.5
6	0	5000	8.5	51
7	0	5000	8.5	59.5
8	0	5000	8.5	68
9	0	5000	8.5	76.5
10	0	5000	8.5	85
11	0	5000	8.5	93.5
12	0	5000	8.5	102
13	0	5000	8.5	110.5
14	0	5000	8.5	119
15	0	5000	8.5	127.5

In this scenario, after 9 years (in time for the 9-year) old Vanguard saves $272-$76.5=$195.5 over T-Rowe! And in 15 years (in time for the 3 year old) Vanguard costs $572-$127.5 = $444.5 less than T-Rowe!

So the big question is what if we contribute $2500 every year and also get rid of the account fee (through payroll deduction). Is T-Rowe worth it then? What is the crossover point?

T-Rowe Price Portfolio 2024/Portfolio 2030 total cost over time (assuming $2500 investment/yr, $0/yr account fee, $89 tax benefit/yr and .80% expense ratio):

Years	Year Contribution	Account Balance	T-Rowe Maintence Cost	T-Rowe Tax Benefit	T-Rowe Expense Ratio Cost	Year Cost For T-Rowe	Cumulate Cost T-Rowe
1	2500	2500	0	-89	20	-69	-69
2	2500	5000	0	-89	40	-49	-118
3	2500	7500	0	-89	60	-29	-147
4	2500	10000	0	-89	80	-9	-156
5	2500	12500	0	-89	100	11	-145
6	2500	15000	0	-89	120	31	-114
7	2500	17500	0	-89	140	51	-63
8	2500	20000	0	-89	160	71	8
9	2500	22500	0	-89	180	91	99
10	2500	25000	0	-89	200	111	210
11	2500	27500	0	-89	220	131	341
12	2500	30000	0	-89	240	151	492
13	2500	32500	0	-89	260	171	663
14	2500	35000	0	-89	280	191	854
15	2500	37500	0	-89	300	211	1065

Vanguard Growth Portfolio / Vanguard Aggressive Growth Portfolio (assuming $2500 investment/yr, $0/yr account fee, no tax benefit, .17% expense ratio):

Years	Year Contribution	Account Balance	Year Cost For Vanguard	Cumulative Cost Vanguard
1	2500	2500	4.25	4.25
2	2500	5000	8.5	12.75
3	2500	7500	12.75	25.5
4	2500	10000	17	42.5
5	2500	12500	21.25	63.75
6	2500	15000	25.5	89.25
7	2500	17500	29.75	119
8	2500	20000	34	153
9	2500	22500	38.25	191.25
10	2500	25000	42.5	233.75
11	2500	27500	46.75	280.5
12	2500	30000	51	331.5
13	2500	32500	55.25	386.75
14	2500	35000	59.5	446.25
15	2500	37500	63.75	510

After just 5 years, the expense ratio begins to exceed the tax benefit of the T-Rowe account and after 11 years, Vanguard the cumulative cost of using Vanguard is less than T-Rowe.

Next I'd like to try some other scenarios. What if you do your own asset allocation in the T-Rowe Price account? What if you do it in the Vanguard account? The answer for the Vanguard one is easy: don't. The expense ratios are actually the same or higher if you want to do your own asset allocation. I wouldn't bother. But for the T-Rowe price case, it can make a difference. In my next post I'll walk us through using a mix of "Global Equity Market Portfolio" (mix of global and US stocks) and "Inflation Focused Bond Portfolio" (short term bonds essentially) and rebalance every year as we adjust our risk down (more work but it should save money). The question is will it save enough money to be worth it?

[johnny847]

What I really came to post about on this thread though was an analysis off fees of Maryland's offering to get the state tax deduction (T-Rowe Price) vs Vanguard without the tax deduction. I started to do some math and thought it was a ripoff. It sounds like some other people have come to the same conclusion. Anyways here's some numbers. Please poke holes in them if you can. I'm trying to help out my brother in law who resides in Maryland as he wants to setup funds for his nephew and niece.

There's no need for any of this:

You can get the best of both worlds -- tax deduction and low Vanguard fees (.16 percent). I called Vanguard about the NY plan, you can rollover a MD 529 once every 12 months per beneficiary. I called Maryland's 529 line and they do not "recapture" the state tax deduction once you've taken it. (Details here: http://www.savingforcollege.com/529_plan_details/?page=plan_details&plan_id=72 "Rollovers are not subject to recapture."). So for the very small inconvenience of filling out some additional NY paperwork, you can take a MD tax deduction of up to $575 per year (if you have two kids like I do) and still get rock-bottom Vanguard rates.

+1. I was going to post this.

Also, Maryland let's you carry forward your deductions for 10 years. So for example if you contributed $10k this year, you could take your $2500 deduction this year and the next three years.
Why would you want to do that? To frontload your contributions of course! In the absence of a crystal ball the best day to invest is yesterday. The second best is today.

[beege]

There's no need for any of this:

You can get the best of both worlds -- tax deduction and low Vanguard fees (.16 percent). I called Vanguard about the NY plan, you can rollover a MD 529 once every 12 months per beneficiary. I called Maryland's 529 line and they do not "recapture" the state tax deduction once you've taken it. (Details here: http://www.savingforcollege.com/529_plan_details/?page=plan_details&plan_id=72 "Rollovers are not subject to recapture."). So for the very small inconvenience of filling out some additional NY paperwork, you can take a MD tax deduction of up to $575 per year (if you have two kids like I do) and still get rock-bottom Vanguard rates.

+1. I was going to post this.

Also, Maryland let's you carry forward your deductions for 10 years. So for example if you contributed $10k this year, you could take your $2500 deduction this year and the next three years.
Why would you want to do that? To frontload your contributions of course! In the absence of a crystal ball the best day to invest is yesterday. The second best is today.

I get what you're saying. I looked at the fee schedule and I do not see a roll over fee. But, my brother in law doesn't have a lump sum saved up though and is going to contribute monthly. Then again, since I'm helping him already, I guess I could help him roll over to Vanguard once a year or so.

In the interests of science I did a bit more analysis of T-Rowe price account anyways. Basically, unless you plan on manual asset allocation (or otherwise rolling over the funds), the T-Rowe account is not worth using. Period. With the funds in the high-fee (.80%) auto-asset allocation funds, even at the maximum contribution of 2500/yr (and tax deduction) it loses in the 9 year period (by $55) and the 15 year period (by $1200) to Vanguard's .17% funds. And in the case where you manually do the asset allocation yourself (and thus benefit from the lower expense ratios of those funds for ~5 minutes of work a year), T-Rowe becomes favorable over Vanguard by about $300 in the 9 year period but still lost to Vanguard in the 15 year period.

So although us Mustachians can make this work for ourselves with rollovers (or possibly manual asset allocation in some circumstances) it still pisses me off that here we have another thing (just like 401Ks) where excessive management fees drain people who are otherwise trying to do the right thing. For those people who don't do the math, Maryland taxpayers are essentially just subsidizing T-Rowe price without getting any real benefit... grrr.

[greenjb]

I totally agree -- it's unethical for the state of Maryland to make a big show of "helping" people save for their kids' college education and then turn around at let T.Rowe rip them off with unconscionable fund fees. But my hacked-together solution really does work well if you're willing to put in about an hour of work every year. My wife and I just contributed $2500 to each of our kids' Maryland 529 accounts (thus ensuring the maximum $575 state tax deduction); then I opened New York state Vanguard funds for both my kids and rolled over all but $500 from the Maryland funds to the New York funds -- no fees at all, whole thing went off without a hitch, and the Vanguard 529 team could not be more helpful or professional. I left $500 in each Maryland account just to keep them open and active and serve as pass-through accounts so I can nab that tax deduction every year while letting the money grow in low-fee Vanguard funds. It's really simple to set up, and I recommend it to anyone.

[johnny847]

I totally agree -- it's unethical for the state of Maryland to make a big show of "helping" people save for their kids' college education and then turn around at let T.Rowe rip them off with unconscionable fund fees. But my hacked-together solution really does work well if you're willing to put in about an hour of work every year. My wife and I just contributed $2500 to each of our kids' Maryland 529 accounts (thus ensuring the maximum $575 state tax deduction); then I opened New York state Vanguard funds for both my kids and rolled over all but $500 from the Maryland funds to the New York funds -- no fees at all, whole thing went off without a hitch, and the Vanguard 529 team could not be more helpful or professional. I left $500 in each Maryland account just to keep them open and active and serve as pass-through accounts so I can nab that tax deduction every year while letting the money grow in low-fee Vanguard funds. It's really simple to set up, and I recommend it to anyone.

Why not front load it? That would further reduce the time required.

Also, Maryland let's you carry forward your deductions for 10 years. So for example if you contributed $10k this year, you could take your $2500 deduction this year and the next three years.
Why would you want to do that? To frontload your contributions of course! In the absence of a crystal ball the best day to invest is yesterday. The second best is today.

[Scandium]

I totally agree -- it's unethical for the state of Maryland to make a big show of "helping" people save for their kids' college education and then turn around at let T.Rowe rip them off with unconscionable fund fees. But my hacked-together solution really does work well if you're willing to put in about an hour of work every year. My wife and I just contributed $2500 to each of our kids' Maryland 529 accounts (thus ensuring the maximum $575 state tax deduction); then I opened New York state Vanguard funds for both my kids and rolled over all but $500 from the Maryland funds to the New York funds -- no fees at all, whole thing went off without a hitch, and the Vanguard 529 team could not be more helpful or professional. I left $500 in each Maryland account just to keep them open and active and serve as pass-through accounts so I can nab that tax deduction every year while letting the money grow in low-fee Vanguard funds. It's really simple to set up, and I recommend it to anyone.

Interesting, because the MD documents I've looked at I swore it said a roll-over fee of $50-75 or so. Makes this more interesting of that's not the case

[davedave]

In the info above, it says there is a $2500 MD tax deduction, but then the example of the family with 2 kids says a maximum $575 state tax deduction.  Where is the $575 figure coming from?   I am expecting to be able to deduct $2500 per child.