State Tax Deductions and Choosing a 529 Plan

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2 Responses

  1. Sounds like you’re going into this with eyes wide open. I’d probably opt for that tax break myself, but yeah, might not be worth the hassle of dealing with all that just for the slight tax break.

    I personally have my 529 with New York. My state doesn’t offer a tax deduction, and in my research, I found NY to be the one that best suited my needs. I don’t have kids, so the 529 is in my name and I’ve been putting in a tiny amount into it each year just to learn the ropes of 529 plans. Figured it was worth learning about now before I actually needed it.

    NY is nice because they also use Vanguard funds and the fees are 0.16%, which is about as low as you can get in the 529 world.

    I’ve got all of it in the “aggressive growth portfolio” which is 70% total market and 30% international, which is a pretty solid allocation in my book I think.

    • Joe Freedom says:

      Thanks FP. It was a close call, and if I did not have so much invested in the NV plan at this point I might have reached a different conclusion. It may be a bit of convenient rationalization, but I really do think that the bulk of the state tax value could very quickly be eroded by the distortion in my target portfolio allocation (that would under-weight international equity in favor of fixed income over the next 5-7 years). But otherwise we appear to think alike! Both the NY and NV plans are technically administered by a group named Ascensus, so I expect that there are a host of similarities. I’m still 100% in the Aggressive Growth portfolio as well, running at a 0.17% expense ratio. One item of interest: my Vanguard Aggressive Growth portfolio moved from a 70/30 domestic/international allocation to a 60/40 allocation just a couple of years ago. I thought that was an interesting move, but I was ok with it. I target a 70/30 allocation for our broad equity portfolio, but I’m ok tilting a bit more toward international over the next couple of years in light of current valuations. My plan is to wait another year or two for international equities to recover a bit more and for bond valuations to fall as interest rates rise, then begin moving chunks over to fixed income in anticipation of our first matriculation (sell high, buy low, right?). I’m sure everything will go exactly according to my plan. 🙂

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