Va. College America 529 Plan - Any Insights?

[grumpy]

Our first grandchild is due in a few weeks. I have had, for many years, a small ($7K) 529 plan with my son as beneficiary in the Maryland plan. We now live in Virginia and I want to roll that over to one of the Va. plans and change the beneficiary to the grandchild as soon as she gets a social security number. In researching the Va. plans the College America plan thru American Funds looks like the best option for me. However, that plan is only available thru a financial adviser. Being a do-it-yourself investor, I don't have an adviser and don't feel I need one.

Does anyone here have any experience with that plan? The expense ratios look to be modest, though not as low as the other Va. plan which features Vanguard index funds and is sold directly. I'm wondering where the adviser gets his cut on the College America plan. Is there any way to get that plan without paying fees to an adviser?

I intend to call American Funds on Monday and get more info than is available on their web site. DW has an inherited IRA with American funds which has done quite well.

Any insights appreciated.

[Nords]

Quote:

Originally Posted by grumpy Any insights appreciated.

This is a very basic question, but does it have to be Virginia? Is there a tax deduction or some other value to you?

We had to start up a 529 last year to launder the gains on education bonds for our college-age daughter, and we went with Fidelity's New Hampshire MM just because it was one of the cheaper plans. It also integrated well with our other Fidelity accounts if we decide to move other funds to a 529. Best of all, Fidelity has linked their 529s to a website billpay system that goes straight from them to the college by EFT.

[friar1610]

Somewhat similar to Nords' experience...When our first grandchild came along we were living in MD which had T. Rowe Price as the 529 provider. Not a bad company but expenses are a little high and MD had an annoying annual maintenance fee. I can't remember what the benefit was on state income tax, but I don't recall that it was anything really great. We ended up with the Iowa plan which was with Vanguard and was low-cost. When #2 came along we did the same. When we moved to VT (and #3 was born), we changed to the VHEIP (VT Higher Education Investment Plan) which is with TIAA-CREF. We made all new contributions for all 3 grandkids to VHEIP and moved the Iowa funds over to VT over a period of a few years so we could maximize the tax credit we get from VT. All three plans are now fully invested in VHEIP and we will make new contributions there.

The bottom line is that if it's not advantageous to use your state's plan (because of tax advantages or some other reason) you can pick any state's plan, albeit without tax advantages in your home state. (A lot of states - not surprisingly - use the "home team" as their providers: T. Rowe Price in MD, Fidelity in MA, etc.)

[grumpy]

Yes, Virginia provides up to a $4000 state tax credit for contributions to its 529 plans. That value, along with the high ratings the Va. plans receive on several 529 sites leads to my decision to utilize a Va. plan.

[BTravlin]

Quote:

Originally Posted by grumpy Yes, Virginia provides up to a $4000 state tax credit for contributions to its 529 plans. That value, along with the high ratings the Va. plans receive on several 529 sites leads to my decision to utilize a Va. plan.

That $4,000 credit is sweet. Indiana only offers $1,000.

[LOL!]

Virginia has a self-directed 529 plan: VEST, so you do not need to use a financial advisor to get the state tax benefit. I'm really, really curious why you believe the American funds plan is the best option for you and why you did not choose the Virginia option that uses Vanguard index funds.

[grumpy]

Quote:

Originally Posted by LOL! Virginia has a self-directed 529 plan: VEST, so you do not need to use a financial advisor to get the state tax benefit. I'm really, really curious why you believe the American funds plan is the best option for you and why you did not choose the Virginia option that uses Vanguard index funds.

As they say in the NFL: "after further review..." I discovered that the American Funds offered in the College America plan not only are "load" funds but also carry expense ratios in the 1.25% range! Needless to say, I have changed course and opened a VEST account on-line using the Vanguard funds.