Massachusetts Kids Highly Recommend Utah 529 Plan
February 18th, 2008
Research regarding saving for my almost 4 year old daughter’s education can be classified as slim to none. Ashamed to say it, but I pledge to catch up!
What drove the new interest is a good article from Money Magazine about Utah’s topnotch 529.
My daughter, Lara, will thank me in 14 years if I make a move now.
Using all my knowledge from my Finance degree from Bryant College, as well as years of reading about personal finance,
I have been enlightened with one main rule of thumb.
The less expenses you pay while investing, the greater chance of growth.
Utah has such low annual expenses that it may make more sense to forego any state tax incentives and invest out of the Commonwealth.
The highest annual expenses for Utah’s plans are .38%!
Massachusetts 529 plans run .5 to 1.09%.
Your next question is about the tax incentives that you would give up by going “out-of-state”? Say you invest $10000 in a MA 529 where you can deduct contributions on your state tax returns. If your state tax rate is 5% (ours is 5.3%, but Money Magazine did the math for me at 5%), your net tax savings after 28% federal taxes is $373.44.
If a plan charges .4% less than the one in MA, the lower fees will eventually outweigh the tax savings in 10 years.
This example shows that over time the reduced fees go a long way. Since nobody really starts investing the year or 2 prior to college starting (except me at this rate), it just makes “cents”!
Categories: Market Conditions, Preferred Business
This entry was posted on Monday, February 18th, 2008 at 11:49 pm and is filed under Market Conditions, Preferred Business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
Your article was helpful to me in pointing out Utah’s low fees for 529 plans, but MA doesn’t allow you to deduct contributions on your state tax returns.