Choosing between 529 plans

[vmayer99]

So, my daughter's yet to be born but I want to set her up with a 529 plan. I live in the state of Georgia which apparently gives tax deductions up to $2000 per year per plan. However, my husband and I only plan to be here for the 2 or 3 years that it takes him to finish school. The plan is the Path2College 529 plan which uses managed funds (I generally prefer unmanaged index funds). Morningstar gives a bronze rating to this plan.

On the other hand, there are plans like Vanguard's which use index funds and which Morningstar gives a gold rating to. My temptation is to choose this or another like it since I figure we'd only collect maybe $1000-1500 total on our tax deductions over the years if we went with the Path2College Georgia plan.

The most likely scenario is that we'll end up in California when we leave Georgia, and there are apparently no tax deductions there for these plans.

[disneysteve]

You could open the GA plan now to take advantage of the tax deduction and then, after you move, roll over the account into a better 529 plan. I would agree with choosing one of the plans administered by Vanguard. Personally, I'm in the NY plan (even though we live in NJ).

[snafu]

I'd check and double check the 'Path to College' plan to verify it can be transferred and used in another state if you chose it because of the tax deduction. How does it compare for fees, management expense, transfer fee etc. It sounds like commission for salesman.

Like DS, I think Vanguard's platform offers excellent service for extremely low MER and fees but check that you can change states and allocation. We ultimately used a 'custodial' account for DSs accounts because of the limited range of post secondary education allowed in the early years of 529 plans. The big unknown are the changes the government might chose to make by 2033.

[vmayer99]

Thanks for the responses.

Yes, Georgia does "recapture" the tax deduction if you try to roll over the account into one that's out of state. Otherwise, I think I'd go this route.

snafu, can you explain what you mean by "the limited range of post secondary education allowed in the early years of 529 plans"? I'm not familiar.

Definitely a good point about laws changing between now and 2033.

[disneysteve]

Yes, Georgia does "recapture" the tax deduction if you try to roll over the account into one that's out of state.

In that case, you do have the option of opening a GA account, funding it for as long as you're there, and then opening a 2nd plan when you move. You aren't limited to owning only one 529 account.

The simplest route, of course, is to just pick a good plan now and forget about the deduction.

[vmayer99]

In that case, you do have the option of opening a GA account, funding it for as long as you're there, and then opening a 2nd plan when you move. You aren't limited to owning only one 529 account.

The simplest route, of course, is to just pick a good plan now and forget about the deduction.

Oh yeah, good point. Thanks.

[snafu]

Our DSs completed their Masters program in May 2014 so I looked at initial 529 programs. Those program details included a long list of qualifiers and restrictions. I was trying to imagine if my munchkin with powerful lungs would want to study in a foreign language or our tot who liked to take everything apart would demand to go to a technical school. The whole process gave me nightmares. Adding to my distress was pressure from granddad about education for his 1st great grandson

The government changed the 529 details several times, the University became accredited on it's own as opposed to being a 'secondary' campus of a larger institution and the Community College which was nearly walking distance has now become a full fledged, 4 year, degree granting institution. Of course DSs completed their education at the other end of the country.