Menu

Best Choice for a 529 Plan for an Arkansas Resident?

Home General Investing Best Choice for a 529 Plan for an Arkansas Resident?

  • Avatar kappasig298 
    Participant
    Status: Dentist
    Posts: 6
    Joined: 07/11/2019

    I am requesting some advice on choosing the best 529 plan for an Arkansas resident.  I am married and plan on contributing roughly $6000 each year to a 529 plan.  Arkansas allows a tax deduction for married couples of $10000 if using the Arkansas 529 plan or a $6000 deduction for any other state 529 plan.  Since I don’t plan on maxing out the deduction, would I be better off choosing the Nevada Vanguard plan with the lower expense ratios?  The Arkansas expense ratio is 0.53% while Nevada’s is 0.15%.  I currently use Vanguard for my Roth IRA and taxable brokerage accounts so that is why I would choose the Nevada Vanguard plan over other Fidelity state plans with a 0.13% expense ratio.  Finally, Arkansas allows K-12 tuition to be a qualified withdrawal, and I do plan on using the money for that in about 2 years.  Would that be a problem if I am using the Nevada Vanguard plan? I can’t seem to find any information on that. Am I missing anything obvious that should make me choose the Arkansas 529 plan or a different 529 plan altogether?  Thank you for any help!

    #229445 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 7748
    Joined: 01/09/2016
    1. Under TCJA 2017, withdrawals of up to $10k/yr from any state’s plan qualifies for K – 12.
    2. The expense ratio is not a factor in this situation, impo. Both Vanguard and Fidelity are fine custiodians.
    3. The convenience factor, otoh, is what I would consider. You may decide to contribute up to $10k/yr in the future. I would rather have it all in one plan than juggle 2, but that’s just me.
    4. If you are contributing for use in 2 years, you definitely don’t want to invest the $$. Keep anything you’ll need in the next 5 years liquid unless you can afford to pay OOP if the market is down in a year you need to make a withdrawal.

    How to stack education savings

    Welcome to the forum!

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #229456 Reply
    Avatar ZZZ 
    Participant
    Status: Spouse
    Posts: 542
    Joined: 06/18/2018

    I’d worry less about the expense ratio and figure out how to get the max tax break from contributing 10k/yr instead of only 6k.

    #229458 Reply
    ENT Doc ENT Doc 
    Participant
    Status: Physician
    Posts: 3300
    Joined: 01/14/2017
    The Arkansas expense ratio is 0.53% while Nevada’s is 0.15%

    Click to expand…

    I’m not sure where you’re seeing NV’s total ER being 0.15%.  You may be looking at Vanguard’s 0.15%, which is not the total ER you will pay.

    Since you are not going to max out on the deduction of $10,000 I would target the lowest cost 529 that suits your needs.  My suggestion is to look at the following states, in this order:

    CA, MI, MA/AZ/DE/NH, NY

    For example, CA’s US stock fund has a TOTAL ER of 0.08%.

    #229459 Reply
    Liked by spiritrider
    Avatar jhwkr542 
    Participant
    Status: Physician
    Posts: 1210
    Joined: 02/15/2016

    While looking for it, I couldn’t find where Arkansas allows a deduction for contributions to other states’ plans. Source?

    #229465 Reply
    Liked by childay
    Avatar ajm184 
    Participant
    Status: Other Professional
    Posts: 567
    Joined: 07/14/2017

    The ‘best’ choice depends upon what fulfills your needs.  The difference in plan fees (ER and other plan expenses) is about $30/year (per 10k) between Arkansas and Nevada.  If the contribution amount you are contemplating is 6k/year and you plan on withdrawing for education expenses relatively quickly (2 years), as jfox alluded, keeping the funds liquid should be the primary objective.  A 529 works better as a longer term educational savings tool.

    A Nevada plan is good (imo) if one is comfortable using the options to create a custom asset allocation.  The Arkansas plan is alright (overall plan expenses too high imo) if you looking for age-based options to use.

    If you live in NWA, the public schools can offer a viable educational alternative to private schooling imo for K – 12.  A couple public charter schools are ranked in the top 100 HS within the US.

    #229471 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 3946
    Joined: 01/08/2016
    Arkansas allows a tax deduction for married couples of $10000 if using the Arkansas 529 plan or a $6000 deduction for any other state 529 plan.

    Click to expand…

    did you read about the arkansas 529 first?

    https://www.arkansas529.org/home/features–benefits/tax-benefits.html

    #229476 Reply
    Avatar Elliott 
    Participant
    Status: Physician
    Posts: 6
    Joined: 01/13/2016

    I’m an Arkansas resident and contribute 10k to Arkansas’s 529 annually.

    Where did you see that you could get a 6k tax deduction for using an out of state plan. This is the first I have heard of this.

    #229490 Reply
    ddswifey ddswifey 
    Participant
    Status: Spouse
    Posts: 56
    Joined: 04/17/2019

    AR here too and we are doing 10k per year for max deduction. And I agree with ajm184—-if you are NWA, public schools here are wonderful.   And we’ve done both.    Public –> private–> back to public.    It is a personal choice for sure but we are super happy since going back to public—- just that much more money invested =)

    I'm here to learn

    #229499 Reply
    Avatar kappasig298 
    Participant
    Status: Dentist
    Posts: 6
    Joined: 07/11/2019
    Earnest refinancing bonus

     

     

    #230253 Reply
    Avatar kappasig298 
    Participant
    Status: Dentist
    Posts: 6
    Joined: 07/11/2019

    I’m an Arkansas resident and contribute 10k to Arkansas’s 529 annually.

    Where did you see that you could get a 6k tax deduction for using an out of state plan. This is the first I have heard of this.

    Click to expand…

    Thanks everyone for the responses.

    I found the information about the out of state plans tax deductions on Page 7 of the plan disclosure pdf file linked below.  It is in the box Tax Benefits and Considerations.

    https://cdn.unite529.com/jcdn/files/ARD/pdfs/plandisclosure.pdf

     

    #230255 Reply
    Avatar kappasig298 
    Participant
    Status: Dentist
    Posts: 6
    Joined: 07/11/2019

    The ‘best’ choice depends upon what fulfills your needs.  The difference in plan fees (ER and other plan expenses) is about $30/year (per 10k) between Arkansas and Nevada.  If the contribution amount you are contemplating is 6k/year and you plan on withdrawing for education expenses relatively quickly (2 years), as jfox alluded, keeping the funds liquid should be the primary objective.  A 529 works better as a longer term educational savings tool.

    A Nevada plan is good (imo) if one is comfortable using the options to create a custom asset allocation.  The Arkansas plan is alright (overall plan expenses too high imo) if you looking for age-based options to use.

    If you live in NWA, the public schools can offer a viable educational alternative to private schooling imo for K – 12.  A couple public charter schools are ranked in the top 100 HS within the US.

    Click to expand…

    I actually live in Northeast Arkansas and the school I am talking about is a Catholic K-6 school that I actually attended myself when I was younger.  Public schools in the area are great and my son will attend those starting in 7th grade.  But I loved the experience I had at that school and want my son to share in that as well.

    The yearly tuition for the school is roughly 5000 per year.  I figured if I was going to be spending this money regardless, I would utilize the Arkansas tax break.  I still have my own student loan debt to pay down, so that is why I don’t plan on maxing it out to 10,000 for the maximum deduction.

    I couldn’t find the total plan fees for Nevada online.  Is there somewhere they are listed?  I only see Vanguard’s expense ratios on Vanguard’s website.

    Thank you for your response!

    #230261 Reply
    Avatar jhwkr542 
    Participant
    Status: Physician
    Posts: 1210
    Joined: 02/15/2016

    Nevada 529=vanguard 529

    #230268 Reply
    Avatar kappasig298 
    Participant
    Status: Dentist
    Posts: 6
    Joined: 07/11/2019

    Nevada 529=vanguard 529

    Click to expand…

    Gotcha.  So on their webpage I see that the majority of expense ratios are 0.15% with no other fees listed.  A previous poster stated that Nevada’s total ER would be higher.  I don’t see where that is listed anywhere on either Vanguard’s or Nevada’s webpage.  Thanks!

    https://investor.vanguard.com/529-plan/low-cost

    #230269 Reply
    Avatar kappasig298 
    Participant
    Status: Dentist
    Posts: 6
    Joined: 07/11/2019
    The Arkansas expense ratio is 0.53% while Nevada’s is 0.15% 

    Click to expand…

    I’m not sure where you’re seeing NV’s total ER being 0.15%.  You may be looking at Vanguard’s 0.15%, which is not the total ER you will pay.

    Since you are not going to max out on the deduction of $10,000 I would target the lowest cost 529 that suits your needs.  My suggestion is to look at the following states, in this order:

    CA, MI, MA/AZ/DE/NH, NY

    For example, CA’s US stock fund has a TOTAL ER of 0.08%.

    Click to expand…

    Can you list the source of where Nevada’s total ER would be higher than Vanguard’s?  I don’t see any other fees listed anywhere on Vanguard’s or Nevada’s website.  If the expense ratio of 0.15% vs 0.08% is accurate, then the ease of using Vanguard to keep all of my accounts together is worth that cost.  But if Nevada adds on additional costs, I will pick something else.  Thanks!

    #230272 Reply

Reply To: Best Choice for a 529 Plan for an Arkansas Resident?

In case of a glitch or error, please save your text elsewhere, clear browser cache, close browser, open browser and refresh the page.

Notifications Mark all as read  |  Clear