Anyone here use the MS 529 plan for kid's college (MACS not MPACT)? I was wondering if the state tax benefit outweighs the high fee costs (compared to other state's plans or plans like Vanguard). Most of my income will be taxed by another state, but the wife pays MS income tax. She's looking to invest a little money into something for the kid's college costs.
OT: Mississippi 529 Plans
- Thread starter jwtorch
- Start date
The fees are ridiculous. It just depends on your tax bracket. The fees on my son's account for 2024 have been about 2.5%. That is what has been charged on the contributions anyway. I am not yet familiar with what fees the underlying funds might have. Assuming a 5.0% Mississippi rate, I get a net benefit of about 2.5%, and of course there is no Federal tax benefit on the front end.
I borrowed for my two kids. When they finish, I will use my 401K to pay it back. I also have a pension plan that will pay 70% of my salary when I retire so my method is not for everyone. However, two other methods you could use is a Roth IRA. You can do one on yourself or you can do a ROTH IRA for kids. One of these CPA's on the board would know more about them. ROTH are FIFO and once you are past the surrender charge period set by the financial institution you can take all your after-tax money out with no penalty.
It's a a hard argument to have and most won't agree with me, but I ran the numbers and the 529 wasn't worth it.
I think they're good for less sophisticated/experienced investors. If you only have a retirement account through work and want somewhere to sock away a little scratch for the kids tuition, it's a good option. Or for grandparents to throw a little in for the cause.
But if you have brokerage accounts/investments outside of a retirement or if you own rental properties or other real estate investments, a 529 may not be the best for you. There are lots of ways to access funds that can help pay for college where you have a good tax shelter, lower fees, better potential returns, and less risk from a kid that doesn't want to go to college or gets a ton of scholarships.
Not a fan of using your retirement or primary home to fund college. Having been a young adult with both, you're much better off saddling your kids with student loans than the burden of having to take care of their parents when they get old and sick. Nothing worse than forcing your kids to decide on buying their first house after getting married or moving Mom into a better facility where they actually wash the sheets weekly and serve decent food.
ETA. Make sure you are putting enough away in retirement before you worry about your kids college. Not having anything other than social security and having an accident/illness/disease force them into having to provide for you when they're in their 20's or 30's can crush their opportunities way more than figuring out how to pay for college.
- High fees
- Limited investment options
- When you get closer to the time to actually withdrawal, you have to flip from volatile equity investments into lower risk/reward bonds in case the market poops the bed while your kid is in college
- There's risk that your kids don't go even to college or get scholarships and you left it in like a low return high fee account
I think they're good for less sophisticated/experienced investors. If you only have a retirement account through work and want somewhere to sock away a little scratch for the kids tuition, it's a good option. Or for grandparents to throw a little in for the cause.
But if you have brokerage accounts/investments outside of a retirement or if you own rental properties or other real estate investments, a 529 may not be the best for you. There are lots of ways to access funds that can help pay for college where you have a good tax shelter, lower fees, better potential returns, and less risk from a kid that doesn't want to go to college or gets a ton of scholarships.
Not a fan of using your retirement or primary home to fund college. Having been a young adult with both, you're much better off saddling your kids with student loans than the burden of having to take care of their parents when they get old and sick. Nothing worse than forcing your kids to decide on buying their first house after getting married or moving Mom into a better facility where they actually wash the sheets weekly and serve decent food.
ETA. Make sure you are putting enough away in retirement before you worry about your kids college. Not having anything other than social security and having an accident/illness/disease force them into having to provide for you when they're in their 20's or 30's can crush their opportunities way more than figuring out how to pay for college.
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We have a little bit of money in the MS 529. I originally opened through MS because all I needed was $25 to open the account. We took a pause in contributing to shore up our financial foundation and have just started contributing again. It’s time I review it and see if we are happy with it.
It may end up that we do like Pops said and keep it in a normal brokerage or some other investment vehicle. 529s are super restrictive and with the amount of money you need for college now it gives me some pause locking it in like that.
My kids won’t get any of our retirement till we are dead. The wife and I dealt with student loans. Hopefully my kids won’t but not at the expense of our retirement.
It may end up that we do like Pops said and keep it in a normal brokerage or some other investment vehicle. 529s are super restrictive and with the amount of money you need for college now it gives me some pause locking it in like that.
My kids won’t get any of our retirement till we are dead. The wife and I dealt with student loans. Hopefully my kids won’t but not at the expense of our retirement.
Wow! I had no idea the fees would be that high. Paying a 2.5% annual fee to get a one-time 5% state income tax benefit is break-even after year 2, and a losing proposition every year after that.
Edit: Also, as Poo Pops said, save for your retirement first, then save for kids college. And tell your kids that if they want you to pay for the first year, it will be a summer-fall-spring-summer at the local junior college, and then you'll pay for 3 years after that. It's just too expensive to let them party there for 5-6 years.
The fees in Mississippis 529 are ludicrous. Almost hedge fund like. Take a look at Nevada, Utah and Michigan.
If I am understanding it correctly, the fees are on the contribution and not the assets.
Another option is have your kids look into their state's Air National Guard. The Air Force IS NOT the military. It's easy, plus they pay an incredible amount for college including sign on bonuses.
That’s not quite as bad then. But still. Is it worth a 2.5% tax benefit to lock yourself into the states plan rather than just save on your own? Up front fees for investments are generally a nope for me.
Thanks guys. These are my step kids & I think they will both go to college. The oldest is already taking all of her classes from JUCO as a HS junior. Based on the comments, I think I'll just start looking at taxable accounts. Wife just had a little money sitting in a CD that she wants to use for their college.
I used the Alaska 529 (through T. Rowe Price) for my three kids. It was well worth it. I did that when we lived in Mississippi; the lower fees and better investment options outweighed any state tax break benefits. I moved to Texas later, and here, that is not a concern anyway.
Even back in the early 00's, I never thought that MACS was even worth considering. High fees and limited options. There are much better plans out there.
Even back in the early 00's, I never thought that MACS was even worth considering. High fees and limited options. There are much better plans out there.
Their uncle (wife's brother) did that or at least he did for law school. He's still in the Guard. I'll talk to him about it. Thanks.
I don’t see any upfront fees in the disclosure. It’s 60 bps for the plan fee plus negligible underlying expense fees.
I use NYs bc early on it was cheap and used Vanguard.
I don’t have any desire to let the state manage my money in MPACT plus a 529 can be used for much more. And I always have access to my money in case of emergency. Also You get your money penalty free if your kid gets a scholarship.
Absolutely. Also, I think every 18 year old boy should go through some kind of boot camp. I have 2 boys and I have finally convinced my wife that we aren't helping with college. They can either get full rides through their own hard work in high school or join some version of the military to pay for school and become a man in the process.
If I had a daughter it would probably be different, but boys need to figure it out on their own at some level in my opinion and nothing you'll learn in college beats picking yourself up everyday in boot camp after you get kicked down.
Hijack. But one of my friends kids is in his 3rd year playing football at the Merchant Marine Academy. After graduation they can pick any branch including Coast Guard and NOAA as well as go civilian in the maritime industry and keep up with Navy reserve stuff. Real interesting service academy I knew nothing about.
I would basically agree with all of this but not going to college isn't a big deal if you don't put too much into it because beneficiaries can roll up to $35k into a roth. It does take the place of their roth contribution for that year, so basically you're talking about funding a roth for 5 or 6 years from the 529.
I think a 529 is for after you max out whatever 401k/403b/457 options you have and your roth, except that if you can find a state with decent options, it's a nice way for relatives to throw in small amounts if you are so lucky and it gives kids a place to stick their money that they earn if they aren't earning it with formal employment (in which case they should open a roth).
We have not done a 529 for any of ours and in hindsight, I wish we had done one for each when they were born for just that reason. Not a huge deal, but they probably have gotten on average $500 in gifts from grandparents and aunt/uncles each year. Particularly when they were young, that was a huge waste. If we had thrown $3k in a fund to get started and convinced grandparents to give contributions instead of physical gifts, that would probably be enough to pay for their first year of tuition at MSU after 18 years of small contributions. Throw in having them put portions of their earnings into it, and it would probably be a relatively painless way to pay two or three semesters of tuition.
We looked into that for my oldest. Supposedly it's the best Academy for those who want to make the most money the fastest after the commitment is through.
Not only is the Guard ripe with college money, there are also may vocational skills to learn. HVAC, Pluming, Heavy Equipment, Air Traffic Control, Biomed Repair, Surveying, Aircraft Maintenance, etc.
Where are the 2.5% fees coming from? The disclosure booklet says they charge 0.72% https://macsprogram.wpengine.com/wp-content/uploads/2017/06/MACS_Disclosure_Booklet.pdf (pg 14). They pay the underlying fees of any funds they invest in, so it's actually higher than that, but that's shown as a reduction in performance I think, not an asset based fee. But even including that, it should be like a 1.25% drag, not 2.5%. And there is a $20 fee if you don't do opt in to electronic only communications, but that's easily avoidable.
Just looked that up, it's a new one about 2 years old. It gives does give an extra out, but if my kid's a 17 up and wants to go on tour as a roadie for Taylor Swift instead of college, the last thing I am going to do is give him a $35k Roth IRA in his name.***
You hit the nail on the head with the gifts though. That's the big opportunity with the 529 is having family donate to the cause. That is a foreign concept to me that I probably discount too much, because what little family we have that's still alive is much more in the sticking their hands out business than ever dreaming of paying toward's someone elses kids college.
This is what we’ve done, have MACS for both kids. Basically just throwing portions of Christmas and birthday money from the grandparents into it. My mil in particular is big on education (retired teacher) so she’s all about investing in it. It’s not going to be a ton of money but it’s something.
Complain to your state treasurer about the fees. How many of you could name the state treasurer without looking it up?
There's a fine line between being a good citizen and a dork, I think knowing your state treasurer by name is that line.
I can see his last name as the old logo for his families store. Otherwise, I probably wouldn’t know
I looked at the Miss. plans when my kids were toddlers (they're almost teenagers now) and decided not to do it for most of the same reasons everybody else has mentioned. But I'm already maxing out my 401k, so thought I'd do a regular Vanguard 529 just to help me cash flow their college when the time comes. I've had it for a few years now and the return on it has been pretty good - around 12%.
Research 529 calculators, which should provide plan comparisons of fees, performance and tax credits. If you are working with an advisor at a wire house, they are required to show you comparisons of in state plans vs out of state plans as it pertains to tax benefits. I’m unsure of independent or smaller firms requirements.
It’s obvious old popps shouldn’t be providing college financial advice. No families financial situation and goals are the same. I have the means to ensure my kids won’t be straddled with debt when they graduate, much like I was; consequently, I realize not everyone can and they shouldn’t put themselves in debt for their children.
i don’t mean to be message board psychologist, but your post seems to be much more rooted internally than the actual, very real benefits of a tax deferred and tax free distributions college savings plan when properly planned and researched. If I can help my children succeed in life through an education and limit their financial burden, I will sacrifice myself knowing they will graduate and put in the work.
Shut the 17 up tool.
It's not for me. It's not for some others. It is for some. That's my advice. Are you saying everyone should get a 529 then? Or a Roth?There are no one size fits all options.
As for your armchair psychologist comment, the only thing rooted internally is that I want my kids to earn their way to/through college. Give a man a fish vs teach him to fish and all that. If you want to pay for your kids college that's your decision and it's definitely the way most people would go.
I'd rather help them buy a house or start a business if/or when they finish college. There are a million ways to pay for college. But it's hell to round up $80 grand for a down payment on your first house or to buy that skid steer to start your own landscaping business. Does a 529 offer that flexibility? Nope.
You got a problem with that, go take it up with golfer at South Farm... He handles all my lightweights.
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You sound stable. I recommend you start with your original post and work your way down. As I posted, 529’s are not for everyone. Try not to beat any of your offspring or direct lineage due to your declining faculties. My recommendation is not to participate in topics that trigger your bipolar response. Please have your golfer contact me. Message board bad asses are funny.
Beat my offspring? What the 17 is wrong with you clown?
Anytime someone brings up any kind of investment topic on this board your goofy àss comes running out of the woodworks telling everyone how dumb they are. Especially if it gets in the way of you mooching a fee or commission off somebody else's hard earned dollar.
You brokers don't appreciate the effect fees have on your client's returns. Real simply, the +/- 1% in extra fees created from the 529 plan and the underlying investment more than offset the cap gains tax one would pay if they just went with a low fee index fund in a taxable account. Hell, depending on your taxable income there are no cap gains taxes right now.
But I am glad you have come around to my line of thinking since you originally said "It’s obvious old popps shouldn’t be providing college financial advice," regarding my post that said 529's are not for everyone.
You see, pal, that's who I am. And you're nothing. Nice guy? I don't give a shìt. Good father? 17 you -- go home and play with your kids!! You wanna post here? Close!! You think this is abuse? You think this is abuse, you cócksucker? You can't take this -- how can you take the abuse you get talking about a coaching hire?!
You don't like it -- leave. I can get out there tonight with the materials on this board, get myself fifteen upvotes! Tonight! In two hours! Can you? Can you? Go and do likewise! A-I-D-A!! Get mad! You son of a bìtch! Get mad!! You know what it takes to post on Six-Pack?
It takes brass balls to post on this board.
Go and do like wise. The posts are out there, you pick it up, it's yours. You don't, I have no sympathy for you. You wanna get on these threads tonight and make your argument and close, close. If not you're, going to be shining my shoes. Loser sitting around in a bar. (in a mocking weak voice) "Oh yeah, I used to be a SPS poster, it's a tough racket." These are the new threads. These are the @OG Goat Holder threads. And to you, they're gold. And you don't get them. Why? Because to give them to you is just throwing them away. They're for closers.
I'd wish you good luck but you wouldn't know what to do with it if you got it. And to answer your question, pal: why am I here? I came here because @DesotoCountyDawg and @mcdawg22 asked me to, they asked me for a favor. I said, the real favor, follow my advice and ban your 17ing áss because a loser is a loser.
I’d vouch for the Guard. Army or Air here in MS.
Finished basic and AIT after losing scholly at Holmes CC, went to MSU with GI Bill and got on ROTC scholarship. Lived well in college, and had no debt after college.
@Scottfield1 got pwn3d and slithered out in his own vaginal discharge.