Utah My529 Plan Lowers Fees Again: A Consistent History of Fee Drops

July 25, 2024 By Jonathan Ping Leave a Comment
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

I choose to maintain funds inside the Utah My529 college savings plan for all three of my children. Formerly known as the Utah Educational Savings Plan (UESP), this plan has become my primary, favorite plan after trying out several different ones. (I don’t live in Utah; I live in a state with no special tax benefits for 529 contributions.) The Utah My529 plan feels like it has the highest quality of administrative ease/customer service, the widest options for DIY investors (while still maintaining a solid auto-pilot Target-Date option), and long-term commitment to keeping their fees low. Accordingly, they are consistently top-rated by Morningstar and other ratings systems.

In their July 2024 newsletter, they again announced they were lowering the administrative fee on most of their investment options. Every 529 plan charges an administrative fee on top of the expense ratios of the underlying investments like mutual funds. For example, an asset fee of 0.10% is the same as charging $10 a year for every $10,000 in assets invested.

Although Utah may not be the lowest in every option, they consistently are amongst the lowest and keep going lower. This made me want to look up their history of fee drops. It turns out they have lowered fees in 10 out of the last 12 years, although I couldn’t dig up every historical change date.

  • August 2024: Administrative Asset Fee for Target Enrollment Date and Static investment options lowered from 0.10% to 0.09%.
    Customized investment options lowered from 0.13% to 0.12%.
  • July 2023: Administrative Asset Fee for Target Enrollment Date and Static investment options lowered to 0.10%. Customized investment options lowered to 0.13%. (source)
  • […]
  • October 2020: Administrative Asset Fee for Age-Based and Static investment options lowered from 0.13% to 0.12%.
    Customized investment options lowered from 0.18% to 0.15%.
  • February 2018. Utah Educational Savings Plan (UESP) changed its name to my529, effective February 5, 2018.
  • […]
  • July 2017: Administrative Asset Fee for Age-Based and Static investment options lowered from 0.17% to 0.16%.
  • […]
  • June 2013: UESP fees dropped an average of 10% overall. Administrative asset fee was 0.15% to 0.20%, now lowered to between 0.14% and 0.18% most Age-Based and Static investment options. Customized investment option at 0.20% (make your own glide path).

Note: At some point, they changed from the “Age-Based” label to “Target Enrollment Date” but it’s basically the same idea of a glide path that changes as the student ages, in preparation for their college enrollment date.

Each annual change may only amount to $1 to $20 a year in savings, but I do think it shows an ongoing commitment to passing on savings as their assets under management grow. I believe the Utah plan is now the 3rd-largest direct-sold plan in the nation. This is impressive considering the New York plan at #1 has the benefit of a large in-state tax break (and large population) to help it grow, and the Nevada plan is co-branded with Vanguard. The Utah plan includes mostly low-cost Vanguard investments, but is independent and also includes investment options from other providers like DFA and PIMCO. I enjoy being able to set up my own glide path with a large menu of investment options.

Filed Under: College & Education Tagged With:
Last updated: July 17, 2024
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

529 College Savings Plans: All 50 States Tax Benefit Comparison (Updated 2024)

July 24, 2024 By Jonathan Ping 33 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Updated for 2024. Morningstar is a great resource for research on 529 college savings plans, and they have recently updated their annual deep dive on 529 plans: The 2024 529 Savings Plan Landscape (e-mail required).

When choosing a 529 college savings plan, you can open a 529 plan from any state (not just your own). However, each state can vary widely in what they offer in terms of tax deductions and/or tax credits. So how to do you choose?

  • No state tax? ➡ Just pick the best overall plan.
  • No special tax benefits (deduction or credit)? ➡ Just pick the best overall plan.
  • Home state offers tax parity? (the same tax benefits no matter which state’s plan you pick) ➡ Just pick the best overall plan.
  • Home state requires you to contribute to your home state plan to get the tax perk? ➡ Technically, you should compare the annual tax savings against any potential perks from the best overall plan (lower annual expenses, superior investment options). In most cases, I have found that if a state cares enough to offers a state tax deduction or tax credit, and you are contributing an amount under or around the max limit (ex. under $200 a month), then the in-state plan is most likely good enough and you should stick with it. The main exception is if you plan on funding your plan with a large upfront contribution, where a lower expense ratio would really matter.

If you are in the last situation in which you have to do some math, this Morningstar article also runs the numbers for a theoretical couple filing jointly with a gross annual income of $100,000 that deposits $3,000 a year (or $250 a month) into one beneficiary’s 529 account. The chart is useful to provide a quick idea of your state’s tax benefits at a glance, but I would make sure to run the numbers for your income and your expected annual contribution. This Vanguard state deduction calculator tool may be helpful to double-check your calculations.

Finally, note that some states will also recapture any tax benefits if you perform an outbound 529 rollover, or otherwise do not conform with federal tax laws regarding 529 distributions.

Top plans quick recap. Here are Morningstar’s top Gold and Silver-rated plans as of Summer 2024.

I personally invest in the Utah My529 Plan for my children due to their DIY glide path feature and DFA fund access, but my second choice would be the Vanguard Nevada 529 Plan if you want something that is more “set-and-forget”, especially if you already have other accounts at Vanguard. I wouldn’t spend too much time splitting hairs – taking action and starting an automatic savings plan is the most critical decision.

Opening a plan and making any contribution also starts the 10-year clock on potential future 529-to-Roth IRA rollovers.

Filed Under: College & Education, Investing
Last updated: July 18, 2024
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Actual Net College Tuition Costs Based On Family Income

June 24, 2024 By Jonathan Ping 7 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

As the published prices for college tuition keep rising to astronomical levels ($100k a year?!), fewer and fewer students are actually paying the “sticker” price. As you can see below, the number is down to ~25% for public and ~15% for private 4-year institutions. This can make it very confusing for a family trying to plan for upcoming college costs.

This chart is taken from the Econofact.org article “How Much Does College Really Cost?” by economics professor Phillip Levine is one of the few articles I’ve seen that analyzes the the data based on household income level.

Colleges use a combination of need-based financial aid and “merit” aid to adjust the pricing of their product to balance their desired class composition and revenue requirements. The chart below shows “Typical College Net Prices At 4-Year Institutions by Family Income, Adjusted for Inflation”. This number does not include student loans and work-study funding.

For households under $100,000 a year, the numbers work out to well over 100% of your annual income for 4 years of tuition at both public and private schools. That seems especially daunting given the rising floor of basic costs like housing, transportation, and food.

Even for a family that earns $100,000 a year, paying for 4 years at a public university will average roughly $100,000 total. If you have multiple kids, that’s getting into the zone of another mortgage. A household earning $200,000 or $500,000 would also pay about the same $100,000 for 4 years of public university.

The private universities are where the higher-income households keep paying more as their income rises. A household earning $200,000 a year can expect to pay $200,000+ for 4-years at a private university.

Filed Under: College & Education
Last updated: June 24, 2024
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Worried about Overfunded 529 Balances? The Half-Time Community College Method

December 27, 2023 By Jonathan Ping 9 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

If you are considering a year-end contribution to a 529 college savings plan, you may be concerned about the possibility of not using the full balance. To be honest, this is not something that I worry about at all (spread across three kids, I highly doubt I’ll face this issue), but I do find that this question comes up regularly.

Here are the standard ways to assuage these fears:

  • Qualified expenses include a lot of things besides tuition, including room and board, textbooks, computer equipment, etc.
  • Qualified expenses also go beyond a traditional 4-year college to include graduate school and other forms of education including registered apprenticeships and vocational school. You can also use it to help pay for private school K-12 tuition (up to $10k/year) for a younger child or grandchild.
  • You can change the beneficiary to another child, yourself, or a grandchild and keep it invested.
  • If your child ends up receiving merit aid or other scholarships, you are exempt from the additional 10% penalty for non-qualified withdrawals, although you will still be subject to taxes on your investment gains (treated as ordinary income).
  • Other exceptions to the 10% penalty include if the beneficiary becomes disabled, receives employer-based tuition assistance, or attends a US military academy.
  • Starting in 2024, you may be able to use the 529 funds to fund a Roth IRA.

However, here’s one you probably haven’t heard of from Justin of RootofGood:

  • The overall idea is that you are allowed to claim room and board as a qualified expense if you are at least a half-time enrolled student. Room and board is expensive, especially relative to community college tuition.
  • If the 529 beneficiary (could be you, could be your child) took community college classes as a half-time student for a single quarter, the tuition may cost you about $800 a term, but would also allow you to claim about $5,000 a term in room and board as qualified expenses. This could scale up to ~$3,200 tuition and ~$20,000 room and board annually.
  • The eligible room and board number is up to the specific college or university’s official published allowance for room and board. Usually shown as something like “resident not living with parents”.
  • This method makes the total amount a qualified expense and thus you avoid both income taxes on any investment gains AND the 10% penalty. $3,200 divided by $23,200 is a little under 14%, which may be a better percentage than what you’d pay with the ordinary income tax bracket. Of course, there is also the value from the increase in your knowledge and community connections.

The specific tuition amounts and food/housing estimates will vary by community college. Some places even offer free tuition for residents (ex. San Francisco). I took my numbers from a place I attended many years ago, Portland Community College:

Basically, instead of worrying about not having a qualified way to take the money out of your 529, here is a way that anyone can be eligible while minimizing the taxes and penalties involved. Nearly anyone can attend community college on a half-time basis.

Filed Under: College & Education
Last updated: December 27, 2023
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Michigan MESP 529 College Savings Plan: $100 Bonus Per Accountholder/Beneficiary Combo

September 11, 2023 By Jonathan Ping 8 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

The Michigan Education Savings Program (MESP) is offering a $100 bonus when you open a new account by 9/30/23 and deposit $1,000+ within 10 business days of establishing the account. Your $100 matching deposit will arrive by 1/31/24. The 529 account must be open with a non-zero balance to receive the bonus.

Compared to all 529 plans nationwide, MESP is a top overall plan with reasonable costs and good investment options (official plan of Michigan, run by TIAA-CREF), making it an excellent option for those without specific in-state tax incentives. See here to compare 529 tax benefits across all 50 states.

This offer is very similar to the ScholarShare 529 promo, as both are managed by TIAA-CREF and this also has a limit of “one (1) Matching Deposit pernew Michigan Education Savings Program (MESP) account per unique accountholder/beneficiary combination.” Please see that post for more background information. Additional considerations for this promo:

  • Michigan taxpayers may qualify for a state tax deduction up to $10,000 if married filing jointly ($5000 single), for contributions made into an MESP account.
  • You should be able to stack this with other 529 offers like that from California Scholarshare. If you have multiple 529 accounts from different state plans/managers, you can later transfer the balances and merge them into each other, although there may be a modest amount of paperwork required each time. You are allowed one rollover per beneficiary during a rolling 12-month period.

From the full fine print:

Offer Description: The Michigan Education Savings Program (MESP) is a 529 college saving splan administered bythe Michigan Department of Treasury, and managed by TIAA-CREF Tuition Financing, Inc. (“TFI”). To receive a $100 matching deposit (“the Matching Deposit”), eligible individuals must (a) open a new Michigan Education Savings Program (MESP) account (for a new beneficiary) online at www.MIsaves.com between September 1, 2023 at 12:01 AM Eastern Time (ET) and September 30, 2023 at 11:59 PM ET with an initial deposit of at least $1,000 to be contributed and invested at the time the new Michigan Education Savings Program (MESP) account is opened. The initial $1,000 deposit must be received within 10 business days after the account is established. The Matching Deposit will be made to the eligible Michigan Education Savings Program (MESP) account on or before 8:59 PM ET on January 31, 2024. To receive the Matching Deposit, the Michigan Education Savings Program (MESP) account must be open with a dollar balance greater than zero on the day the Matching Deposit is made. Limit: one (1) Matching Deposit per new Michigan Education Savings Program (MESP) account per unique accountholder/beneficiary combination.

Filed Under: College & Education, Deals & Offers, Investing, Taxes
Last updated: September 11, 2023
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Oklahoma 529 College Savings Plan: $50/$100 Bonus Per Beneficiary

September 11, 2023 By Jonathan Ping Leave a Comment
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

The Oklahoma 529 College Savings Plan is offering a $50 or $100 bonus when you open a new account and meet these deposit requirements:

  • $50 bonus: Open with a minimum initial deposit of $250 and set up recurring contributions via bank account or direct deposit) of $50 or more per month until 3/31/2024.
  • $100 bonus: Open with a minimum initial deposit of $500 and set up recurring contributions (via bank account or direct deposit) of $100 or more per month until 3/31/2024. Note that the info on the offer page conflicts with the fine print.
  • After six months, your $50 or $100 bonus will be deposited in your account on or before 5/17/2024.

Compared to all 529 plans nationwide, MESP is an above-average overall plan with reasonable costs and investment options (official plan of Oklahoma, run by TIAA-CREF), making it an acceptable option for those without specific in-state tax incentives. See here to compare 529 tax benefits across all 50 states.

Note that this offer has a limit of “Only one Matching Deposit per new Oklahoma 529 account per beneficiary”, which is more restrictive than the ScholarShare 529 bonus promo. Please see that post for more background information. Additional considerations for this promo:

  • Oklahoma taxpayers may qualify for a state tax deduction up to $20,000 if married filing jointly ($10,000 single) for contributions made into Oklahoma 529 account.
  • You should be able to stack this with other 529 offers like that from California Scholarshare. If you have multiple 529 accounts from different state plans/managers, you can later transfer the balances and merge them into each other, although there may be a modest amount of paperwork required each time. You are allowed one rollover per beneficiary during a rolling 12-month period.

From the full fine print:

PROMOTION DESCRIPTION: To receive a $50 promotion deposit (“the Promotion Deposit”), eligible individuals must (a) open a new Oklahoma 529 account (for a new unique Account Owner/Beneficiary combination) online during the Promotion Period with an initial deposit of at least $250 to be contributed and invested at the time the new account is opened and (b) establish a recurring contribution (from a bank account or by payroll direct deposit) for the new account of at least $50 per month, and shall be maintained at minimum through 11:59 PM CT on March 31, 2024. The Promotion Deposit will be made to the eligible account on or before May 17, 2024.

To receive a $100 promotion deposit, eligible individuals must: a) open a new Oklahoma 529 account (for a new unique Account Owner/Beneficiary combination) online during the Promotion Period with an initial deposit of at least $500 to be contributed and invested at the time the new account is opened and (b) establish a recurring contribution (from a bank account or by payroll direct deposit) for the new account of at least $100 per month, and shall be maintained at minimum through 11:59 PM CT on March 31, 2024. The Promotion Deposit will be made to the eligible account on or before May 17, 2024.

Limit: Only one Matching Deposit per new Oklahoma 529 account per beneficiary. Void where prohibited or restricted by law.

Filed Under: College & Education, Deals & Offers, Investing, Taxes
Last updated: November 30, 2023
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

ScholarShare 529 College Savings Plan: $100 Bonus Per Accountholder/Beneficiary Combo

September 5, 2023 By Jonathan Ping 10 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

The ScholarShare 529 College Savings Plan is offering a $100 bonus when you open a new account by 9/30/23 and deposit $1,000+ within 10 business days of establishing the account. Your $100 matching deposit will arrive by 1/31/24. The ScholarShare 529 account must be open with a non-zero balance to receive the bonus.

Compared to all 529 plans nationwide, the ScholarShare 529 is a solid overall plan with reasonable costs (official plan of California, run by TIAA-CREF), making it a good option for those without specific in-state tax incentives. See here to compare 529 tax benefits across all 50 states.

I find that having an open 529 plan is a great way to redirect various gifts from friends and family (like grandparents) so that the money doesn’t just get spent mindlessly and then forgotten. If someone gives them a gift card, I just put the equivalent value into the 529 and spend the gift card myself. Since by the time they really understand money it will have been 10 years since birth, it can been a good lesson on how steady saving and investing adds up. Finally, opening a plan and making any contribution also starts the 15-year clock on potential future 529-to-Roth IRA rollovers.

This specific bonus is also interesting due to the limit of “one (1) Matching Deposit per new ScholarShare 529 account per unique accountholder/beneficiary combination.” That means a couple with three children could open six accounts for $600 in total bonuses. It would also require a significant upfront deposit, but many families are already setting aside $100+ each month per kid for future college expenses.

  • Spouse 1 + Child 1
  • Spouse 1 + Child 2
  • Spouse 1 + Child 3
  • Spouse 2 + Child 1
  • Spouse 2 + Child 2
  • Spouse 2 + Child 3

If you have multiple 529 accounts from different state plans/managers, know that you can later transfer the balances and merge them into each other, although there may be a modest amount of paperwork required each time. You are allowed one rollover per beneficiary during a rolling 12-month period.

From the full fine print:

Offer Description: The ScholarShare 529 College Savings Plan (“ScholarShare 529”) is a 529 college savings plan administered by the ScholarShare Investment Board (“SIB”), an instrumentality of the state of California, and managed by TIAA-CREF Tuition Financing, Inc. (“TFI”). To receive a $100 matching deposit (“the Matching Deposit”), eligible individuals must (a) open a new ScholarShare 529 account (for a new beneficiary) online at www.ScholarShare529.com between September 1, 2023 at 12:01 AM Pacific Time (PT) and September 30, 2023 at 8:59 PM PT with an initial deposit of at least $1,000 to be contributed and invested at the time the new ScholarShare 529 account is opened. The initial $1,000 deposit must be received within 10 business days after the account is established. The Matching Deposit will be made to the eligible ScholarShare 529 account on or before 8:59 PM PT on January 31, 2024. To receive the Matching Deposit, the ScholarShare 529 account must be open with a dollar balance greater than zero on the day the Matching Deposit is made. Limit: one (1) Matching Deposit per new ScholarShare 529 account per unique accountholder/beneficiary combination.

Filed Under: College & Education, Deals & Offers, Investing, Taxes
Last updated: September 11, 2023
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

List of 529 Day (5/29) College Savings Plan Promotions 2023

May 22, 2023 By Jonathan Ping 9 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Updated for 2023. 5/29 is “National 529 College Savings Plan Day” and every year a few state plan offer promotions and/or giveaways. Most offers end by May 31st. Some offers require in-state residency, but some don’t. 529 plans can now also pay for K-12 tuition and other educational expenses beyond college tuition and room/board.

I find that having an open 529 plan is a great way to redirect various cash gifts from friends and family (like grandparents) so that the money doesn’t just get spent mindlessly and then forgotten. Finally, opening a plan and making any contribution also starts the 15-year clock on potential future 529-to-Roth IRA rollovers.

Here’s a list of what I could find, please let me know if you find more. I’m listing the state, but you do not have to be a resident of that state to open a 529 account there. You can have multiple 529s from different states. However, you may need to be a resident to qualify for a specific bonus, or there may be an age restriction on the beneficiary, etc.

Filed Under: College & Education, Deals & Offers
Last updated: May 30, 2023
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Worried About Unused 529 Funds? New 529 to Roth IRA Rollover Option

May 3, 2023 By Jonathan Ping 9 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

One of the concerns about contributing to 529 plan for college savings is that you won’t end up using all the money and end up being hit with additional taxes (at ordinary income rates) and penalties on an non-qualified withdrawal. The funds potentially would have been better off simply invested in a taxable brokerage account (and long-term capital gains rates).

This was partially addressed within the SECURE 2.0 Act of 2022, part of the Consolidated Appropriations Act (CAA) of 2023. Specifically, Section 126 [PDF link], “Special Rules for Certain Distributions from Long-term Qualified Tuition Programs to Roth IRAs”, which adds the ability to roll your 529 funds into a Roth IRA both tax-free and penalty-free starting in 2024. Kitces.com covers many of the major points. Here is a quick summary of the rollover requirements:

  • The Roth IRA receiving the rollover money must be owned by the beneficiary of the 529 plan. (Unless the beneficiary is also the owner, the money can’t go to the owner’s Roth IRA.)
  • The 529 plan must have been open for at least 15 years.
  • The rollover amount must have been in the 529 account for at least 5 years before your distribution date (contributions and attached earnings).
  • The annual rollover amount is limited to annual IRA contribution limits, and is reduced by any “regular” Roth IRA contributions made during the tax year. (You are not able to exceed the usual max contribution limits. However, the income (MAGI) limits that usually lower the contribution limits due to high income do not apply.)
  • The Roth IRA owner still needs to earn taxable income, at least equal to the amount of the rollover.
  • The maximum lifetime amount that can be moved from a 529 plan to a Roth IRA is $35,000 per person. (This may not be as much in 15+ years if they don’t increase it with inflation.)

In general, this seems like a reasonable way to alleviate the over-contribution concerns, although the money must still technically go to the beneficiary (usually the kid) and not the owner (usually the parent or grandparent). Previously, options for leftover money included graduate school, changing the beneficiary to another family member or future grandchild, or paying back up to $10,000 in qualified student loans.

There are a few interesting, potential wrinkles that a few readers have pointed out:

  • Making yourself both owner and beneficiary to fund future Roth IRA contributions for yourself (even with no kids). As you aren’t really increasing the total amount you are able to stuff into a Roth IRA in the future, the primary benefit is basically to access the tax-deferral benefit early. For example, you could put in $2,000 today and expect to roll over $6,000 in 15 years (7.6% annualized return). The exception may be if you expect not to be able to do Roth IRA contributions in the future because your income is too high AND the Backdoor Roth IRA method is not available to you. Still, 15 years is a long time to wait, and the law may change in the future to restrict this type of move. In such a case, it may backfire and subject you to taxes and penalties.
  • Planning to change the beneficiary from kid to yourself later on. Maybe you don’t want your kid to have the unspent funds, and plan to simply change the beneficiary to yourself later on. However, it’s not 100% clear if beneficiary changes will reset the 15-year clock or otherwise affect rollover eligibility. The law specifically restricted the rollover
  • Contributing extra money for the specific purpose of early funding for your children’s Roth IRAs. This might spur higher-income parents to put even more money into their 529s on purpose, as you are essentially indirectly able to fund a Roth IRA with tax-deferred growth for your kid way before they have earned income. When they eventually do have any form of earned income from a part-time or entry-level job in their teens or early 20s, the money can just roll into their Roth IRA officially (up to the limits).

I don’t have any immediate plans to take advantage of any of these potential scenarios, but taken together it does make me feel better about the 529 contributions that I have already made. Which I suppose is the overall idea?

In terms of other actionable advice, it may be worth it to start a 529 for each child immediately or as soon as possible, even if only putting in $25 or whatever is the minimum amount, just to start the 15 year clock in case you do want to take advantage of this feature down the road. There are countless examples out there of the benefit of starting the compounding early, especially when it can keep growing tax-free forever.

Filed Under: College & Education, Family, Investing, Retirement
Last updated: May 3, 2023
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Refinery29 Money Diaries: Interview Questions Answered

March 28, 2023 By Jonathan Ping 3 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

I’ve always been fascinated by stories about money. There are just so many ways that people earn and spend their money, yet we rarely share because we are taught to be secretive about it. I recently discovered the Refinery29 Money Diaries such as A Week In Portland, OR, On A $105,000 Salary. There is even a book. The participants are all asked the same set of questions, and I have answered them myself below as an interesting exercise in self-reflection.

Was there an expectation for you to attend higher education? Did you participate in any form of higher education? If yes, how did you pay for it?

Yes, there was definitely an expectation for me to attend higher education. My parents were willing to help pay for some of my tuition, but they had limited resources and there was definitely a “value” hurdle. If they personally didn’t think the school was worth it (based on their personal opinion of the school’s reputation), they weren’t going to help pay for it. I applied to about four schools.

I am very thankful that my parents did help me with a significant portion of my college tuition and boarding costs. I finished my undergraduate degree with about $30,000 in student loan debt (this was over 20 years ago now). I went straight onto grad school and at that point was able to cover my own tuition and living costs using a fellowship stipend and income as a graduate student instructor and/or researcher. I started paying down the $30,000 in student loans during my graduate school years (helped by various side hustle income) and finished paying it off completely within 4 years of finishing my undergraduate degree. A major motivator was that I wanted to be debt-free before proposing marriage to my then-girlfriend.

Growing up, what kind of conversations did you have about money? Did your parent/guardian(s) educate you about finances?

I don’t remember many direct conversations about money, but I did a lot of learning through observations. I saw frugality, self-discipline, and not being wasteful. My parents did not buy things without carefully considering the cost-to-benefit ratio. We hardly ever ate out at restaurants. They did not focus on material things, and were very practical. They worked long hours, played it safe, followed the rules, and built a very solid life over time. Education was highly valued.

However, I wasn’t exposed to things like entrepreneurship, taking asymmetric risks, or investing in stocks and real estate. That journey was left to me, but I felt that I had a very stable base to get there. I knew how to live below my means, even if my “means” started out as less than $20,000 a year of annual income. I could create the raw material of having money left over to invest.

What was your first job and why did you get it?

My first job was probably either a math tutor or restaurant cashier at around age 16. Here is a list of every job I’ve ever had.

Did you worry about money growing up?

My observation is that kids notice money issues when they have a different experiences from their friends. Most people who “didn’t feel poor growing up” had that feeling because all of their friends were in the same situation, for example living together in a homogenous neighborhood or housing development. Similarly, post people who “didn’t feel RICH growing up” also had that feeling because all of their friends were in the same situation. I’m afraid that my kids are going to be in the latter group.

In my case, my parents put a premium on a good public school education but were probably below the average income level, so we usually ended up living in a cheaper rental in an affluent neighborhood. Therefore, I definitely noticed that I lived in an apartment or duplex when my friends lived in a single-family house. We drove the old import car when they pulled up in the brand-new SUV. The four of us shared a single bathroom, while others had their own bedroom and their own bathroom. I still had a happy childhood and was never hungry or scared, but I did notice these types of things.

Do you worry about money now?

I probably shouldn’t, but yes, I do. Rationally, I should just be thankful for my health and my family’s health. Those are gifts that can be taken away much more easily and suddenly than my relatively-conservative investments and job income.

At what age did you become financially responsible for yourself and do you have a financial safety net?

I started graduate school at age 21 and that was when my income was high enough to pay all of my own bills. My $30k in student loans were in deferral, and I knew that I’d have to take care of them at some point, but my monthly cashflow was net positive.

I’m sure I had a few hundred dollars in my checking account as an “emergency fund”, but even more importantly, I always knew my parents still had my back even if I no longer received money from them. If something truly catastrophic happened, I knew they would come in and help. I’m sure I took it for granted at the time, but now in retrospect it is so valuable because it allows you to feel comfortable taking some risks in your life. Many people struggle today because they had to drop out of college early and were stuck with the tuition debt but no degree. Many people who had the potential to become doctors decided to become nurses because that was a surer, safer path.

Do you or have you ever received passive or inherited income? If yes, please explain.

I have not received any income from a trust or inheritance. My wife did receive an inheritance very recently. We plan to use any inheritance to help “pay it forward” and cover our three kids’ educational expenses and/or help them buy a first home. Both sets of grandparents greatly value education. While we didn’t receive any financial assistance for a home downpayment ourselves, I am not necessarily against helping my kids in such a way. (I would still be impressed if they can pull it off on their own.)

Filed Under: College & Education, Family
Last updated: March 29, 2023
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

University of the People: Tuition-Free, Accredited Online Degrees in Computer Science, Business Administration (MBA), Education (M.Ed.)

February 16, 2022 By Jonathan Ping 3 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Did you know that there exists a tuition-free, accredited, online university where you can obtain an Bachelor’s degree in Computers Science, MBA, or Masters in Education for a tiny fraction of the cost of traditional universities? The University of the People was recently profiled by the NYT in How Can This University Charge Nothing for Tuition? (gift article).

Is is really free? Not quite, but I think the structure is very fair as it charges a small fee only when you are ready to earn course credit. From the NYT article:

The University of the People, which he founded in 2009, is an online-only institution that charges nothing for tuition. Students don’t have to pay for textbooks because all the educational material is made available for free online, and there’s no room and board because there’s no campus. They do have to pay $120 for each final exam, which they must pass to earn credits. For 40 courses, that adds up to $4,800 for a bachelor’s degree — although for students who face severe financial hardship, even the exam fees can be waived.

Here are the total approximate costs (not per year!) to earn a UoPeople degree:

Associate Degree: $2,460
Bachelor’s Degree: $4,860
Master of Business Administration (MBA): $2,940
Master of Education (M.Ed.): $3,180
Master of Science in Information Technology (MSIT): $3,660

To put this in context, if you assume four years for the BS/BA, that’s $100 a month. That’s less than the average monthly cable and internet bill.

The extra $60 is from the $60 application fee. You can also obtain transfer credit from your previous coursework and/or other free and low-cost educational sites like Saylor Academy, Sophia.org and Coursera to both speed up your progress and lower your total cost even further.

How is this possible?

How is it possible to make a degree so cheap? The instructors and many of the administrators, including Reshef, work for no pay. The chair of the President’s Council is John Sexton, president emeritus of New York University. Professors from top universities volunteer as deans. The instructors tend to be retired professors or recently minted Ph.D.s who are looking for teaching experience. Foundations and individual benefactors have also chipped in. “The amount of people who are willing to do good for the world is shockingly high,” Reshef told me recently.

This reminds of the intro for book Drive: The Surprising Truth About What Motivates Us by Daniel Pink (same author as Power of Regret), where the author reminds us that in 1996 there would two options for an encyclopedia:

  • Microsoft Encarta, run by a huge and profitable company and written by paid experts.
  • Wikipedia, run by a lean non-profit and written entirely by unpaid volunteers.

Today, I probably check Wikipedia once a day and Encarta has been gone for over a decade. People are not solely motivated by money. We like to be part of a greater purpose. (Although I have tried to contribute to Wikipedia and gotten deleted unceremoniously.)

UoPeople won’t work for everyone, but I find it very fascinating. I wonder if they incorporate volunteer tutors or “TAs” as well to help the students along.

See also: 2020 follow-up article on Georgia Tech Online Master in Computer Science, first mentioned in 2013. Total tuition about $7,000.

Filed Under: College & Education, Deals & Offers
Last updated: August 25, 2022
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Coursera: Free Online Courses on Accounting and Finance

December 6, 2021 By Jonathan Ping 2 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

One of my newer interests is better understanding individual businesses and how they work. Accounting is the “language of business” used to write annual reports, 10-Ks, 10-Qs, income statements, and so on. I was afraid a textbook would be too boring, so I am auditing the online Coursera course Financial Accounting Fundamentals by Professor Lynch of the University of Virginia. Here’s a quick summary of what is covered in the course:

Accounting is often called the language of business. It is this language that organizations use to communicate their economic performance to others. In this course, you will acquire the tools that you need to understand the fundamentals of accounting, the language of business.

You will learn to record business transactions in the company’s accounts, understand how they flow into the financial statements, and learn to draw basic conclusions about an organization’s financial health from the three most commonly used financial statements, the balance sheet, the income statement and the statement of cash flow. Are you ready? Then let’s go!

Auditing is completely free and lets you view all the materials and take “practice” quizzes, but you can’t take the “real” quizzes needed to earn the “shareable certificate” (which is fine with me as this is just for personal improvement and not future employment). The course assumes no prior knowledge, requires a commitment of roughly 2-3 hours per week, and lasts for 5 weeks. I finished the first week in about an hour and a half by watching videos at 1.25x speed. So far, I’ve enjoyed filling in the gaps in my knowledge.

This course is the first of a 4-part series by UVA called Entrepreneurship: Growing Your Business:

Welcome to Entrepreneurship: Growing Your Business, a new specialization from the Darden School of Business, University of Virginia. This Specialization was designed to give you the real-world tools and processes you will need to take your business from idea, to action, to growth and revenue. You’ll learn how to create budgets and read financial statements, how to lead with values, how to leverage new business models for growth and how to create new business innovations. Ideal for entrepreneurs, small business owners, and those who have a business plan but aren’t sure what to do next, Entrepreneurship: Growing Your Business will help you on the path to success for you, your business and society.

There are a few similar Coursera courses from UPenn Wharton and the University of Illinois.

I used to feel that I didn’t need to know any of this stuff (just buy a Target Date fund and work on your career, etc), but now I want to compound knowledge in this area as well. I’ll be able to use it for the rest of my life as a private investor living off of my portfolio. This is also related to working for yourself for an hour each day.

Filed Under: College & Education, Deals & Offers, Investing
Last updated: December 7, 2021
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Next Page »