529 Maryland vs Arizona

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NuBogleHead
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529 Maryland vs Arizona

Post by NuBogleHead »

My child is 1yr old, which means this 529 is for ~15-18 yrs from now. I live in Maryland and can't decide whether I should invest in the MD 529 or the Arizona one. Thoughts?

I'm interested in the S&P500 fund, and for Maryland 529 its ER is 0.16% plus the benefit of getting an MD tax deduction if I use it, or the S&P500 through Arizona Fidelity, which means no tax deduction and an ER of 0.11%. Thoughts on which one I should go for? I've also read that I can put the funds into one 529 and then transfer it over to another 529. Thoughts on what's the optimal choice? If the dollar amount matters, let's say we would be depositing $20k a year for 5 yrs and then stop.
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anon_investor
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Re: 529 Maryland vs Arizona

Post by anon_investor »

NuBogleHead wrote: Sun Jun 13, 2021 10:06 pm My child is 1yr old, which means this 529 is for ~15-18 yrs from now. I live in Maryland and can't decide whether I should invest in the MD 529 or the Arizona one. Thoughts?

I'm interested in the S&P500 fund, and for Maryland 529 its ER is 0.16% plus the benefit of getting an MD tax deduction if I use it, or the S&P500 through Arizona Fidelity, which means no tax deduction and an ER of 0.11%. Thoughts on which one I should go for? I've also read that I can put the funds into one 529 and then transfer it over to another 529. Thoughts on what's the optimal choice? If the dollar amount matters, let's say we would be depositing $20k a year for 5 yrs and then stop.
I would not pass up a state income tax deduction. You could have 2 accounts, one to capture the maximum deduction and the rest for the lower ER.
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NuBogleHead
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Re: 529 Maryland vs Arizona

Post by NuBogleHead »

anon_investor wrote: Sun Jun 13, 2021 10:11 pm
NuBogleHead wrote: Sun Jun 13, 2021 10:06 pm My child is 1yr old, which means this 529 is for ~15-18 yrs from now. I live in Maryland and can't decide whether I should invest in the MD 529 or the Arizona one. Thoughts?

I'm interested in the S&P500 fund, and for Maryland 529 its ER is 0.16% plus the benefit of getting an MD tax deduction if I use it, or the S&P500 through Arizona Fidelity, which means no tax deduction and an ER of 0.11%. Thoughts on which one I should go for? I've also read that I can put the funds into one 529 and then transfer it over to another 529. Thoughts on what's the optimal choice? If the dollar amount matters, let's say we would be depositing $20k a year for 5 yrs and then stop.
I would not pass up a state income tax deduction. You could have 2 accounts, one to capture the maximum deduction and the rest for the lower ER.
Hmm. Good idea. I might do this. Thoughts on taking the deduction and then transferring it over 12 months later from MD to AZ?
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anon_investor
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Re: 529 Maryland vs Arizona

Post by anon_investor »

NuBogleHead wrote: Sun Jun 13, 2021 10:35 pm
anon_investor wrote: Sun Jun 13, 2021 10:11 pm
NuBogleHead wrote: Sun Jun 13, 2021 10:06 pm My child is 1yr old, which means this 529 is for ~15-18 yrs from now. I live in Maryland and can't decide whether I should invest in the MD 529 or the Arizona one. Thoughts?

I'm interested in the S&P500 fund, and for Maryland 529 its ER is 0.16% plus the benefit of getting an MD tax deduction if I use it, or the S&P500 through Arizona Fidelity, which means no tax deduction and an ER of 0.11%. Thoughts on which one I should go for? I've also read that I can put the funds into one 529 and then transfer it over to another 529. Thoughts on what's the optimal choice? If the dollar amount matters, let's say we would be depositing $20k a year for 5 yrs and then stop.
I would not pass up a state income tax deduction. You could have 2 accounts, one to capture the maximum deduction and the rest for the lower ER.
Hmm. Good idea. I might do this. Thoughts on taking the deduction and then transferring it over 12 months later from MD to AZ?
Does MD have a clawback? Some states have a clawback of the deduction if you try to rollover. I know VA does, hence I still have a VA 529 plan even though I have moved to another state.

Also why AZ? I think there is a CA plan with an even lower ER.
Pessimist55
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Re: 529 Maryland vs Arizona

Post by Pessimist55 »

Find out how long MD requires you to maintain the funds w them for the deduction then roll it to CA scholarshare plan. They have the lowest fees for the sp500 529 equivalent plan. I'd recommend doing it next May for the promo.
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NuBogleHead
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Re: 529 Maryland vs Arizona

Post by NuBogleHead »

Pessimist55 wrote: Sun Jun 13, 2021 11:15 pm Find out how long MD requires you to maintain the funds w them for the deduction then roll it to CA scholarshare plan. They have the lowest fees for the sp500 529 equivalent plan. I'd recommend doing it next May for the promo.
Thanks. What do you mean by 'next May for the promo'? Thanks for the info!
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nps
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Re: 529 Maryland vs Arizona

Post by nps »

Maryland does not recapture state tax benefits when transferring to an out of state 529 plan. It also allows contributions that exceed the annual maximum deduction ($2500 per child per taxpayer) to be carried forward into the following 10 tax years. So you could make a $20k contribution and deduct it over four years assuming one child and two parents.
Outer Marker
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Re: 529 Maryland vs Arizona

Post by Outer Marker »

Stay with the MD plan and take the tax deduction. You're lucky - T Rowe price recently dropped the prices on the index fund options. They were really onerous before last year.
mbres60
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Re: 529 Maryland vs Arizona

Post by mbres60 »

Take the MD tax deduction and then transfer to another state. Leave a little in the MD plan to keep it open for future contributions. That is what we are going to do. Whenever I have called MD 529 plan they say there is no minimum amount of time needed to keep the funds in the account before transferring while still getting the tax deduction.
Outer Marker
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Re: 529 Maryland vs Arizona

Post by Outer Marker »

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keystone
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Re: 529 Maryland vs Arizona

Post by keystone »

Outer Marker wrote: Mon Jun 14, 2021 7:05 am Stay with the MD plan and take the tax deduction. You're lucky - T Rowe price recently dropped the prices on the index fund options. They were really onerous before last year.
Wow, I did not know that. When I started my 529 in 2014, the T. Rowe Price fees were bad and I ended up skipping the state tax deduction in favor of a lower cost plan (Nevada). With the reduced fees now, I would not make that same decision today.

I see fees of 0.16% for the Equity Index 500 Portfolio and 0.22% for the U.S. Bond Enhanced Index Portfolio. That's good enough IMO.
mrsgoldilocks
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Re: 529 Maryland vs Arizona

Post by mrsgoldilocks »

Great post!! Same here in MD, have been contributing to MD 529 due to the tax advantage for state tax deduction. I have fully contribute ($2,500 per parent) since our son is born 4 years ago. Grandparents also contributing to our 529 to take advantage of the state deduction. I always wonder how to roll over and if there is any pull back on the state deduction.

If anyone has actually rolled over from MD 529 to another 529 plan and then still continue contributing to their MD 529 to take advantage of the tax deduction, can you share your experience? is it really no penalty for the previous state tax deduction?

When I look into opening another 529 plan, it usually has an option to "roll" outside 529 contribution over, but once that roll over is completed, and the new account is opened, can we initiate another rollover say a year later?? That's the part I'm a bit confused.
mbres60
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Re: 529 Maryland vs Arizona

Post by mbres60 »

mrsgoldilocks wrote: Mon Jun 14, 2021 9:05 am Great post!! Same here in MD, have been contributing to MD 529 due to the tax advantage for state tax deduction. I have fully contribute ($2,500 per parent) since our son is born 4 years ago. Grandparents also contributing to our 529 to take advantage of the state deduction. I always wonder how to roll over and if there is any pull back on the state deduction.

If anyone has actually rolled over from MD 529 to another 529 plan and then still continue contributing to their MD 529 to take advantage of the tax deduction, can you share your experience? is it really no penalty for the previous state tax deduction?

When I look into opening another 529 plan, it usually has an option to "roll" outside 529 contribution over, but once that roll over is completed, and the new account is opened, can we initiate another rollover say a year later?? That's the part I'm a bit confused.
About a year or two ago I remember reading on here that someone rolled their MD 529 to NY plan. I don't know how it works if you do it year after year. I would suggest contacting the plan you would roll it into and ask how it works. We set up plans for our grandkids last year in MD. Laziness has stopped me from setting up the NY plan. I might look into the two funds someone up above mentioned. Expense ratios are MUCH less than doing the age based fund. I have age based but don't like the amount of Intl in it. Problem is I want a set it and forget it because in a few years I plan on transferring ownership to my kids and they are not financially savvy about this stuff.
manatee2005
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Re: 529 Maryland vs Arizona

Post by manatee2005 »

NuBogleHead wrote: Sun Jun 13, 2021 10:06 pm My child is 1yr old, which means this 529 is for ~15-18 yrs from now. I live in Maryland and can't decide whether I should invest in the MD 529 or the Arizona one. Thoughts?

I'm interested in the S&P500 fund, and for Maryland 529 its ER is 0.16% plus the benefit of getting an MD tax deduction if I use it, or the S&P500 through Arizona Fidelity, which means no tax deduction and an ER of 0.11%. Thoughts on which one I should go for? I've also read that I can put the funds into one 529 and then transfer it over to another 529. Thoughts on what's the optimal choice? If the dollar amount matters, let's say we would be depositing $20k a year for 5 yrs and then stop.
I thought the title was a NCAA bracket question.
Pessimist55
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Re: 529 Maryland vs Arizona

Post by Pessimist55 »

NuBogleHead wrote: Mon Jun 14, 2021 1:18 am
Pessimist55 wrote: Sun Jun 13, 2021 11:15 pm Find out how long MD requires you to maintain the funds w them for the deduction then roll it to CA scholarshare plan. They have the lowest fees for the sp500 529 equivalent plan. I'd recommend doing it next May for the promo.
Thanks. What do you mean by 'next May for the promo'? Thanks for the info!
States have promos in May when you open new accounts. Coincides w '5' in 529. Small money. But money is money imo.
mrsgoldilocks
Posts: 59
Joined: Mon Jun 07, 2021 9:15 pm

Re: 529 Maryland vs Arizona

Post by mrsgoldilocks »

mbres60 wrote: Mon Jun 14, 2021 4:48 pm
mrsgoldilocks wrote: Mon Jun 14, 2021 9:05 am Great post!! Same here in MD, have been contributing to MD 529 due to the tax advantage for state tax deduction. I have fully contribute ($2,500 per parent) since our son is born 4 years ago. Grandparents also contributing to our 529 to take advantage of the state deduction. I always wonder how to roll over and if there is any pull back on the state deduction.

If anyone has actually rolled over from MD 529 to another 529 plan and then still continue contributing to their MD 529 to take advantage of the tax deduction, can you share your experience? is it really no penalty for the previous state tax deduction?

When I look into opening another 529 plan, it usually has an option to "roll" outside 529 contribution over, but once that roll over is completed, and the new account is opened, can we initiate another rollover say a year later?? That's the part I'm a bit confused.
About a year or two ago I remember reading on here that someone rolled their MD 529 to NY plan. I don't know how it works if you do it year after year. I would suggest contacting the plan you would roll it into and ask how it works. We set up plans for our grandkids last year in MD. Laziness has stopped me from setting up the NY plan. I might look into the two funds someone up above mentioned. Expense ratios are MUCH less than doing the age based fund. I have age based but don't like the amount of Intl in it. Problem is I want a set it and forget it because in a few years I plan on transferring ownership to my kids and they are not financially savvy about this stuff.
Thanks for your reply. Yes, I have a year by year rollout in mind so I just wonder if someone has that experience. I asked vanguard for it, and the representatives seemed to be very confused and kept emphasized that it's rollover. And he couldn't understand why there is a regular annual rollover.

I'm in the Portfolio 2036 with .58% expense ratio. Maybe, I will just do Equity Index 500 Portfolio at .16%. which is .. not at all the bad.
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