With a Ziggy on the way, I’m now thinking long term. Like 2023, when Ziggy will be tossing a graduation cap into the air. To get there, I’m wondering which 529 College Savings Plan I should be routing all the baby shower festivities towards. Yes, I’m going to be that guy who asks for college tuition in lieu of diapers or daddy gear.
Looking around at the tri-state area, I’m surprised to see that both Virginia and Maryland have well-regarded plans, and Washington offers a sweet financial incentive to invest with the District. The question is – which should I (or you) choose?
First, let’s start with the District’s DC College Savings Plan, which is attractive to me as a District Resident because:
- I can deduct up to $4,000 from my AGI for DC taxes, saving me $340 if I max out contributions
- Sales loads are waived for me – non-residents pay 4.75%
- Calvert is the fund manager, so there are socially responsive and international funds available
In addition, as a DC resident, my child can also get a DCTAG grant to cover out-of-state tuition at almost any public university.
Next, Virginia offers the Virginia Education Savings Trust for-out-of-staters like me. I would not get the $2,000 tax deduction for Virginia residents, but I can see why Morning Star ranks it so high – there are no annual account fees and very low management fees (the max are around 0.57%). The fee structure alone makes this look better than DC’s over the long term.
Lastly, we have the Maryland College Investment Plan, which offers two options:
- The Maryland College Investment Plan is similar to Virginia’s and DC’s with a $2,500 tax incentive that I would not be eligible for. Still, it’s been a Morningstar favorite for several years.
- What really excites me is the Maryland Prepaid College Trust, with is open to Maryland and DC residents. Unlike other plans, this one allows you to pay fixed amounts for tuition at Maryland schools, and can also be used at almost every public university. You can even buy in with one payment, currently around $35K for a newborn.
With these three options, I am leaning towards combining the DCTAG grant with either the Virginia Education Savings Trust for its low fees, or the Maryland Prepaid College Trust to know college is paid for.
If you were a Ziggy Daddy, which would you choose?