About to Open 529's.....

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QuestionEverything
Posts: 46
Joined: Wed May 31, 2017 9:11 am

About to Open 529's.....

Post by QuestionEverything » Mon Oct 30, 2017 3:12 pm

I am about to open two 529 accounts for my daughters and was wondering if my fellow SatuMedia' might be able to give me some advice....

I am in Arkansas and from what I can gather in order to get the state tax benefits you have to have one of the 529's from arkansas529.org, which carry a maintenance fee of 0.53%. Vanguard offers a lower fee at 0.17%, but I would not be able to get state tax benefits. I plan to put 10k in each and probably won't add to that for a few years. Would the state tax benefit be enough to offset the higher fees if I went with my state's plan? I really don't know how to calculate that but I know if I can deduct up to 10k on my taxes.

I am new to all this, so any advice is welcome :)

ccieemeritus
Posts: 368
Joined: Thu Mar 06, 2014 10:43 pm

Re: About to Open 529's.....

Post by ccieemeritus » Mon Oct 30, 2017 5:39 pm

1% of $10000 is $100 per year.

So .53 is $53 and .17 is $17 per year.

The difference is $36 per year per $10000 saved. The expenses will increase as the accounts grow.

John Laurens
Posts: 253
Joined: Mon Nov 14, 2016 7:31 pm

Re: About to Open 529's.....

Post by John Laurens » Mon Oct 30, 2017 5:51 pm

In Arkansas, You can deduct 6000 per year married filing jointly in out of state plans. Law passed this year.

I would at least do the first 6000 per year in say the Vanguard Nevada plan.

Regards,
John

TravelforFun
Posts: 846
Joined: Tue Dec 04, 2012 11:05 pm

Re: About to Open 529's.....

Post by TravelforFun » Mon Oct 30, 2017 6:09 pm

ccieemeritus wrote:
Mon Oct 30, 2017 5:39 pm
1% of $10000 is $100 per year.

So .53 is $53 and .17 is $17 per year.

The difference is $36 per year per $10000 saved. The expenses will increase as the accounts grow.
Continue on ... Arkansas' tax rate is 7% for income of $72K or higher (my numbers may be outdated) so you would save $700 in state income tax if you put $10K in the 529 accounts. This tax savings could pay 20 years of additional expenses of $36 per year as mentioned by ccle. I would use Arkansas529.

TravelforFun

motorcyclesarecool
Posts: 213
Joined: Sun Dec 14, 2014 7:39 am

Re: About to Open 529's.....

Post by motorcyclesarecool » Tue Oct 31, 2017 4:58 am

More importantly, does Arkansas claw back the deduction if you roll the 529s to a cheaper state in a later year?
Understand that choosing an HDHP is very much a "red pill" approach. Most would rather pay higher premiums for a $20 copay per visit. They will think you weird for choosing an HSA.

John Laurens
Posts: 253
Joined: Mon Nov 14, 2016 7:31 pm

Re: About to Open 529's.....

Post by John Laurens » Tue Oct 31, 2017 6:54 am

motorcyclesarecool wrote:
Tue Oct 31, 2017 4:58 am
More importantly, does Arkansas claw back the deduction if you roll the 529s to a cheaper state in a later year?
Yes

Regards,
John

rkhusky
Posts: 4405
Joined: Thu Aug 18, 2011 8:09 pm

Re: About to Open 529's.....

Post by rkhusky » Tue Oct 31, 2017 7:18 am

John Laurens wrote:
Tue Oct 31, 2017 6:54 am
motorcyclesarecool wrote:
Tue Oct 31, 2017 4:58 am
More importantly, does Arkansas claw back the deduction if you roll the 529s to a cheaper state in a later year?
Yes

Regards,
John
Probably only for the deduction for the amount contributed to the Arkansans plan, not for the deduction for amounts contributed to other state plans.

So, OP could contribute $6K to another state plan and $4K to the Arkansas plan and get the full tax deduction.

John Laurens
Posts: 253
Joined: Mon Nov 14, 2016 7:31 pm

Re: About to Open 529's.....

Post by John Laurens » Tue Oct 31, 2017 7:34 am

rkhusky wrote:
Tue Oct 31, 2017 7:18 am
John Laurens wrote:
Tue Oct 31, 2017 6:54 am
motorcyclesarecool wrote:
Tue Oct 31, 2017 4:58 am
More importantly, does Arkansas claw back the deduction if you roll the 529s to a cheaper state in a later year?
Yes

Regards,
John
Probably only for the deduction for the amount contributed to the Arkansans plan, not for the deduction for amounts contributed to other state plans.

So, OP could contribute $6K to another state plan and $4K to the Arkansas plan and get the full tax deduction.
Correct.

John

QuestionEverything
Posts: 46
Joined: Wed May 31, 2017 9:11 am

Re: About to Open 529's.....

Post by QuestionEverything » Tue Oct 31, 2017 8:47 am

John Laurens wrote:
Mon Oct 30, 2017 5:51 pm
In Arkansas, You can deduct 6000 per year married filing jointly in out of state plans. Law passed this year.

I would at least do the first 6000 per year in say the Vanguard Nevada plan.

Regards,
John
Where did you find that information? That would be good; all I saw was that you can do up to 10k if married, but only if it's in an Arkansas one.

QuestionEverything
Posts: 46
Joined: Wed May 31, 2017 9:11 am

Re: About to Open 529's.....

Post by QuestionEverything » Tue Oct 31, 2017 8:53 am

TravelforFun wrote:
Mon Oct 30, 2017 6:09 pm
ccieemeritus wrote:
Mon Oct 30, 2017 5:39 pm
1% of $10000 is $100 per year.

So .53 is $53 and .17 is $17 per year.

The difference is $36 per year per $10000 saved. The expenses will increase as the accounts grow.
Continue on ... Arkansas' tax rate is 7% for income of $72K or higher (my numbers may be outdated) so you would save $700 in state income tax if you put $10K in the 529 accounts. This tax savings could pay 20 years of additional expenses of $36 per year as mentioned by ccle. I would use Arkansas529.

TravelforFun
Thanks. I'm not sure what rate we are being taxed at, but it is usually just a couple thousand a year that we pay in. I didn't know how much we would actually get back of what we invested. $700 would be great! I thought about opening that accounts with Arkansas 529 and then rolling them over to somewhere else in a few years, but I read somewhere you may have to pay back any tax benefits you received Do you know anything about that?

QuestionEverything
Posts: 46
Joined: Wed May 31, 2017 9:11 am

Re: About to Open 529's.....

Post by QuestionEverything » Tue Oct 31, 2017 8:54 am

motorcyclesarecool wrote:
Tue Oct 31, 2017 4:58 am
More importantly, does Arkansas claw back the deduction if you roll the 529s to a cheaper state in a later year?
See, that is what I was wondering too. I contacted them via their email address and they wrote back and said to call them. Super helpful.


QuestionEverything
Posts: 46
Joined: Wed May 31, 2017 9:11 am

Re: About to Open 529's.....

Post by QuestionEverything » Tue Oct 31, 2017 9:37 am

Thank you so much. I am glad they passed those laws, it looks like that will end up helping me! I didn't know that you can invest $50k and then use it on your returns the next 4 years either.

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