Back to Top

Utah's my529 Plan

unsplash-logoKeith Luke

Ah, May 29th, one of my favorite days of the year. If you've got kids or grandkids (or even yourself, or a close relative) who you hope will go off to college one day, May 29th should also be one of your favorite days of the year. May 29th (5/29) is 529 Day!

Here's the simple math behind my 5/29 happiness. My oldest son is off to college in September. The contributions to his 529 plan that my wife and I made when he was a toddler have grown by 166%, about 6.3% per year on average over the last 16 years.1 That growth, which came from dividends and capital gains, has never been taxed, nor will it when we draw down the 529 to pay his college expenses. If we had instead used a taxable account to save for his college, we would have been paying taxes on dividends and realized capital gains over these past 16 years, and on the realized capital gains when we liquidate the investments to pay college expenses in the future. All told, at least 1/4 of this gain would have been diverted from paying college expenses to paying federal and state taxes — taking the annual gain down to about 5.2% (doesn't include lost compounded on the taxes paid). For my son, the difference between a 6.3% and a 5.2% after tax return on his college savings is nearly enough to pay all of his expenses during his first year in college.

This being 529 Day, Morningstar announced its annual 529 plan ratings. To no one's surprise, Utah's my529 Plan (formerly the Utah Educational Savings Plan, UESP) was once again awarded a Gold medal by the Morningstar analysts, one of only four plans to do so. Nevada's The Vanguard 529 College-Savings Plan, Virginia's Invest529 Plan, and Illinois' BrightStart Direct-Sold College Savings Program are Morningstar's other Gold medal awarded plans. This is what Morningstar had to say about Utah's my529 Plan:

Do-it-yourself investors and advisors will appreciate the flexibility provided by this plan's customizable options. This was the first plan to offer set-it-yourself age-based options, allowing investors to build an asset-allocation path from scratch and select from a broad suite of Vanguard and DFA funds to fill each portfolio.

This plan features four age-based tracks, and the steps along the tracks became smoother in July 2017. Each track now cuts its equity exposure by 10 to 15 percentage points as the beneficiary reaches college age. The standout oversight provided by Utah has resulted in multiple years of small but steady fee cuts. Most recently, reductions of 1 basis point or less in several portfolios result in age-based portfolios that now charge between 0.17% and 0.21%; that continues to be competitive compared with other predominantly index-based, direct-sold plans, even as peers cut fees.

If you live in a state that gives a tax deduction for 529 contributions, then choosing the 529 plan in your state is likely your best option. However, if you live in state that does not offer this tax deduction, or does not have a state income tax, or offers tax parity (allows a tax deduction on 529 contributions to any state plan), then you will likely be better offer by using Utah's my529 plan, or one of Morningstar's three other Gold medal plans.

Source: AlphaGlider

Wherever you live, it's a great idea to start saving for your loved ones' education in a 529 plan if you have the ability. If you need help choosing a 529 Plan, coming up with a contribution strategy, or would like an investment manager to help manage your 529 Plan, please shoot me an email ( or call me (415 800 3229) — I may be able to help.

AlphaGlider proudly manages 529 assets for its clients on the Utah my529 Plan platform.


1This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor.

Copyright © 2018 AlphaGlider LLC. All Rights Reserved.
No part of this report may be reproduced in any manner without the express written permisson of AlphaGlider LLC.