Help with 529 plan in MD (T. Rowe Price)

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Topic Author
alx
Posts: 124
Joined: Sun Mar 17, 2019 4:52 pm

Help with 529 plan in MD (T. Rowe Price)

Post by alx »

Maryland offers a variety of investment portfolios managed by T. Rowe Price listed here: https://maryland529.com/Portals/0/Files ... nt_kit.pdf

Currently, we are investing 100% in Global Equity Market Index Portfolio but maybe it's time to revisit this choice.

What should be my framework for making a decision?

Our kid is in 6th grade now. Should I start adding bonds? What would be a rule of thumb? I see that target date portfolios for 2028 (assuming they target enrollment date and assuming that's when my kid goes to college), range between 50/50 to 60/40. Maybe I should go 60/40? If investing in bonds which bond portfolio would you recommend?

Should I pick something with lower ER? Like Equity Index 500 portfolio? The Global Equity Marked Index Portfolio is composed of

Code: Select all

| Equity Index 500 Fund—I Class                  | 56.00% |
| International Equity Index Fund—Investor Class | 30.00% |
| Mid-Cap Index Fund—I Class                     |  7.00% |
| Small-Cap Index Fund—I Class                   |  7.00% |
which is good for diversity (including international) but it costs more than the Equity Index 500 would cost.
The 0.09% difference for $60K (each of us has roughly $30K, currently) is $54/year, not a huge amount but still something...

Here are the ERs from the above doc for convenience:

Code: Select all

|----------------------------------------+----------------------+-------------+-----------+------------------|
| Investment Options                     | Estimated Underlying | Program Fee | State Fee |     Total Annual |
|                                        |        Fund Expenses |             |           | Asset-Based Fees |
|----------------------------------------+----------------------+-------------+-----------+------------------|
| Portfolio 2042                         |                0.59% |       0.05% |     0.05% |            0.69% |
| Portfolio 20395                        |                0.57% |       0.05% |     0.05% |            0.67% |
| Portfolio 20365                        |                0.57% |       0.05% |     0.05% |            0.67% |
| Portfolio 20335                        |                0.55% |       0.05% |     0.05% |            0.65% |
| Portfolio 2030                         |                0.54% |       0.05% |     0.05% |            0.64% |
| Portfolio 2027                         |                0.52% |       0.05% |     0.05% |            0.62% |
| Portfolio 2024                         |                0.41% |       0.05% |     0.05% |            0.51% |
| Portfolio for Education Today          |                0.28% |       0.05% |     0.05% |            0.38% |
| Equity Index 500 Portfolio             |                0.05% |       0.05% |     0.05% |            0.15% |
| Equity Portfolio                       |                0.57% |       0.05% |     0.05% |            0.67% |
| Extended Equity Market Index Portfolio |                0.15% |       0.05% |     0.05% |            0.25% |
| Global Equity Market Index Portfolio   |                0.14% |       0.05% |     0.05% |            0.24% |
| Balanced Portfolio                     |                0.53% |       0.05% |     0.05% |            0.63% |
| Bond and Income Portfolio              |                0.47% |       0.05% |     0.05% |            0.57% |
| Inflation Focused Bond Portfolio       |                0.11% |       0.05% |     0.05% |            0.21% |
| U.S. Bond Index Portfolio              |                0.11% |       0.05% |     0.05% |            0.21% |
| U.S. Treasury Money Market Portfolio   |                0.23% |       0.05% |     0.05% |            0.33% |
|----------------------------------------+----------------------+-------------+-----------+------------------|
Is there anything else I might be missing?
Last edited by alx on Mon Jan 17, 2022 7:12 pm, edited 1 time in total.
Topic Author
alx
Posts: 124
Joined: Sun Mar 17, 2019 4:52 pm

Re: Help with 529 plan in MD (T. Rowe Price)

Post by alx »

If bonds are to be added, would people recommend "Inflation Focused Bond Portfolio" or "U.S. Bond Index Portfolio"?
Jablean
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Joined: Sat Jun 02, 2018 2:38 pm

Re: Help with 529 plan in MD (T. Rowe Price)

Post by Jablean »

6th grade I wouldn't be doing bonds yet. Even "aggressive" in a 529 is usually not the same as in the rest of the financial world.
Ostentatious
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Joined: Fri Aug 15, 2014 6:34 pm

Re: Help with 529 plan in MD (T. Rowe Price)

Post by Ostentatious »

I participate in the MD plan for my children, one just started college in the fall. I just selected the plan based on the year the child entered college and so far they have done very well. However, the fees are high compared to others like the one managed by Vanguard. So, I’m planning to move most of the accounts. I will still keep the accounts open and contribute for the tax deduction but I will be moving the the funds once every year or so.
Topic Author
alx
Posts: 124
Joined: Sun Mar 17, 2019 4:52 pm

Re: Help with 529 plan in MD (T. Rowe Price)

Post by alx »

Ostentatious wrote: Mon Jan 17, 2022 7:04 pm So, I’m planning to move most of the accounts. I will still keep the accounts open and contribute for the tax deduction but I will be moving the the funds once every year or so.
Thanks for the comment. I just read the docs and searched bogleheads for more discussions on this. For example this thread:
viewtopic.php?t=229339

I'm with Fidelity and it looks like Fidelity has a few options be rolling over to:
https://www.fidelity.com/529-plans/investment-options

For MD, outbound rollovers are not subject to state income tax recapture:
https://www.savingforcollege.com/articl ... ther-state

I don't understand this though:
Rollover 529 plan funds must be moved to the new 529 plan within 60 days, or the distribution will be considered non-qualified. The earnings portion of a non-qualified 529 plan distribution is subject to income tax and a 10% penalty, plus recapture of state tax benefits.
within 60 days of what event? the creation of the new 529 plan? Does this mean you can't reuse the target 529 plan without getting into non-qualification?

In other words, what are the exact steps to do all of this?
Ostentatious
Posts: 338
Joined: Fri Aug 15, 2014 6:34 pm

Re: Help with 529 plan in MD (T. Rowe Price)

Post by Ostentatious »

alx wrote: Mon Jan 17, 2022 9:59 pm
Ostentatious wrote: Mon Jan 17, 2022 7:04 pm
I don't understand this though:
Rollover 529 plan funds must be moved to the new 529 plan within 60 days, or the distribution will be considered non-qualified. The earnings portion of a non-qualified 529 plan distribution is subject to income tax and a 10% penalty, plus recapture of state tax benefits.
within 60 days of what event? the creation of the new 529 plan? Does this mean you can't reuse the target 529 plan without getting into non-qualification?

In other words, what are the exact steps to do all of this?
I think this is talking about within 60 days of receiving the rollover money. That is, if you’re not doing institution to institution rollover.
Topic Author
alx
Posts: 124
Joined: Sun Mar 17, 2019 4:52 pm

Re: Help with 529 plan in MD (T. Rowe Price)

Post by alx »

Ostentatious wrote: Mon Jan 17, 2022 11:11 pm I think this is talking about within 60 days of receiving the rollover money. That is, if you’re not doing institution to institution rollover.
Yes, you're right. I just confirmed that with Fidelity. If the rollover is done between institutions there's nothing to worry about. Alternatively, If I was in the middle, receiving a check from T. Rowe Price, I'd need to make sure it's deposited to Fidelity before the 60 days pass.

From what I was told, the rollover request is either done by filling a rollover form with Fidelity or it can be initiated with T. Row Price so they send a check to Fidelity (I haven't confirmed with T. Row Price if they can do that).
Topic Author
alx
Posts: 124
Joined: Sun Mar 17, 2019 4:52 pm

Re: Help with 529 plan in MD (T. Rowe Price)

Post by alx »

Jablean wrote: Mon Jan 17, 2022 6:36 pm 6th grade I wouldn't be doing bonds yet. Even "aggressive" in a 529 is usually not the same as in the rest of the financial world.
Did you mean doing 100% bonds? I wasn't implying that. I meant introducing a certain percent bonds. As I mentioned above, all maturity-date plans have that, it seems reasonable.

Or maybe I'm misunderstanding what you meant?
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