Our account will be active for at least 12 to 16 more years so we’ll probably save over $1,000 once it’s all said and done. However, the account will keep growing and the amount saved will grow as well. We’d save about $60 per year at Vanguard with our current balance.
That doesn’t sound like much, but it adds up once the balance is bigger. Let’s look at the fees.įor the basic funds, Vanguard’s fees are about 0.10% lower. I also prefer Vanguard over TIAA-CREF because I’m a big fan of Vanguard. Why do I want to transfer our 529 plan to Vanguard? The main reason is lower fees. If we can’t afford 4 years, then I’d suggest living at home for a couple of years and attend a college nearby. Of course, there are ways to reduce the expenses. That’s tuition, room & board, books, etc… It already cost $35k/year to attend our alma mater in 2016. I think $250k is probably pretty accurate. The projected cost of sending a kid to the 4 years public in-state degree is $250,000! We’ll do our best and see how it goes. However, I’m sure the college cost will be ridiculous when our kid is 18 in 2029. The current balance should keep growing and we’ll continue to contribute about $4,600/year over the next 12 years. Total Contribution: $41,820 over 6 years.Here is where we are at with our Oregon plan at the end of Q1 2017. We chose the Oregon College Saving Plan because the contribution is deductible (up to $4,660 in 2017.) The Oregon state income tax is pretty high at 9-10%. RB40Jr was born in 2011 and we’ve been saving to his 529 plan since then. We’ve done pretty well with our college savings so far. Personally, I think a good education is worth a lot more than a receiving a bequest upon our passing. We’ll also make clear that he shouldn’t expect any inheritance. It’s not a hardship for us to help out so we’ll try to give him a good head start in life. From what I’ve seen, the cost will continue to increase and I’d really hate to saddle our kid with a monster debt at the start of his career. The average Class of 2016 graduate had over $37,000 in student loan debt. Of course, we went to college in the mid 90s and the price of higher education has exploded since then. RB40 also got some help from her parents so both of us graduated with minimal debt. My parents paid for the majority of my college education and I want to help our kid out in the same way.
Read on… College is getting too expensiveįirst a little background. This post probably will be most interesting for Oregonians, but it might be helpful for parents living elsewhere, too. Why transfer? Basically, because we will pay lower fees and there aren’t any drawbacks. I’ve been planning to transfer our college savings from Oregon to Vanguard and I finally got it done this month. Thus, one could theoretically invest 80% of their contributions into a conservative age-based portfolio, and dial up the potential risk and return by investing the remaining 20% in its Growth Index Portfolio, for example.Let’s talk about our kid’s college saving fund today. Vanguard allows up to five total investment choices. As a general rule of thumb, actively managed funds are much more expensive than index funds. Notably, the age-based options carry a fee of just 0.17% of assets, but those who do their own picking will pay anywhere from 0.17% for low-fee portfolios all the way up to 0.45% for the Morgan Growth Portfolio, which is based on the actively managed Vanguard Morgan Growth Fund. stock exchanges.īy charging higher fees, Vanguard seems to dissuade investors from making their own investment choices. Likewise, for the same price, one can invest in the Total Stock Market portfolio, which invests in virtually every stock listed on U.S. Popular choices include an S&P 500 Portfolio, which tracks the performance of the S&P 500 Index for a small fee of 0.19% annually. Maintaining a balance of $3,000 or more would be advantageous, however, as Vanguard levies an annual fee of $20 on accounts with less than $3,000 in assets.Once open, additional investments can be made in any amount exceeding the minimum investment of just $50. Vanguard's 529 plans generally carry a $3,000 minimum initial investment, although Nevada residents can get started with as little as $1,000, while those who enroll through an employer's automatic plan can get started with a smaller initial investment. Vanguard offers lower fees, but requires higher minimums Before proceeding with a 529 plan from any company, you should check to see if it will negatively impact the tax deductibility of your contributions. This deduction only applies to the Illinois 529 plan therefore, contributions to Vanguard's 529 plan would not qualify. For example, the state of Illinois allows married couples filing jointly to take a state income tax deduction of up to $20,000 for contributions to 529 plans.
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