NC 529 plan What do you think? (credit, how much, purchase)

[aphorista]

Hi All,

I have been contributing to this plan for several years. Needless to say, I think if I had been putting my money in my mattress, I would have more than in my account. I know that the economy has been bad but my tsp performance over the past year has been great! Has anyone changed plans to another state's plan? Your thoughts or experience would really be appreciated.

[xylemphloem]

Huh, that's interesting, I was just saying the other day how happy I am with how our 529 plan has been doing this year. Which fund are you in? We're in the Vanguard V Fund Aggressive Track (Fund 1) and it's up 5% for the year. I'm sure there are things that might have done better in the same period of time, but that's certainly better than a CD (or my mattress).

[don6170]

Originally Posted by aphorista

Hi All,

I have been contributing to this plan for several years. Needless to say, I think if I had been putting my money in my mattress, I would have more than in my account. I know that the economy has been bad but my tsp performance over the past year has been great! Has anyone changed plans to another state's plan? Your thoughts or experience would really be appreciated.

I am in the withdrawal phase now, but have been happy with the plan. It is not so much the plan, but how you have your contributions invested - same as with any investment portfolio.

You have been deducting the contributions on your state income tax form haven't you? If you want to switch, here is a link to Clark's 529 guide = Clark's 529 Guide | www.clarkhoward.com

[Waterboy526]

I don't have the NC 529 plan (we make too much for the tax deduction). I have mine through USAA, which uses the Nevada plan. I've lost money over the last few months (only had it for about 6 months now), but I'm sure things will be much better for me over the next 16 years than if I just put it under my matress every month.

[saucystargazer]

I had a 529 plan that I used when I went to college several years ago and it only ended up paying like 45 dollars a credit hour. My parents purchased it in the early 90's though when college wasn't ungodly amounts so they thought they were getting a deal. It was pretty much worthless. I had scholarships worth more. My parents agree they wish they had known better and invested it somewhere else. I image there are better 529's out there, but you have to do your research and look really hard for them.

[SaucyAussie]

Originally Posted by Waterboy526

I don't have the NC 529 plan (we make too much for the tax deduction). I have mine through USAA, which uses the Nevada plan. I've lost money over the last few months (only had it for about 6 months now), but I'm sure things will be much better for me over the next 16 years than if I just put it under my matress every month.

I didn't think there was an income limit on the NC 529 plan. What is the max you can make to take the deduction?

[Waterboy526]

Originally Posted by SaucyAussie

I didn't think there was an income limit on the NC 529 plan. What is the max you can make to take the deduction?

You know what, you're exactly right. When we set it up earlier this year I purposely went away from the NC plan because in 2012 the tax deduction was set to expire for joint filiers that make over $100k. I just researched it and found out that they have now continued the tax deduction regardless of income. NC 529 Plan Income Tax Deduction Continues : North Carolina Estate Planning Blog.

Either way, the Nevada plan has done much better than the NC plan since inception, so I'm not upset at the $200-$300 a year that I can get back in taxes if I think I can get more than that in gains. Time will tell.

Thanks for bringing that to my attention though.

[don6170]

Originally Posted by saucystargazer

I had a 529 plan that I used when I went to college several years ago and it only ended up paying like 45 dollars a credit hour. My parents purchased it in the early 90's though when college wasn't ungodly amounts so they thought they were getting a deal. It was pretty much worthless. I had scholarships worth more. My parents agree they wish they had known better and invested it somewhere else. I image there are better 529's out there, but you have to do your research and look really hard for them.

Not sure I understand this - you don't purchase a 529 plan. It is a "bucket" to hold investments, just like an IRA. The amount that it "pays out" is based on how much you contribute and performance of your investments. The advantage to a 529 plan is that all earnings are tax free if used for educational purposes. There are other options such as a Coverdale, but a 529 is usually the best way to save for college.

[don6170]

Originally Posted by Waterboy526

Either way, the Nevada plan has done much better than the NC plan since inception, so I'm not upset at the $200-$300 a year that I can get back in taxes if I think I can get more than that in gains. Time will tell.

From what I saw, Nevada uses Vanguard funds as does the NC plan. Do they offer different funds than the NC plan? With the state income tax deduction, you are getting ~5% gain on your money right off the bat. I would think the performance of Vanguard funds in each plan would be roughly similar, so it seems it would be very hard for the NC plan not to be a better option (for NC residents taking the tax deduction).