I have some good news for Massachusetts residents who are savings for college:
- Beginning in 2017, our state will offer married couples a tax deduction on the first $2,000 in contributions to a 529. With a 5.1% state tax, that equates to $102 of annual savings.
We thought the tax savings would easily be offset by the higher costs of the underlying investment options in the plan; however, there’s good news to report on that front too:
- The U.Fund (our state’s 529 plan) substantially reduced the cost structure of the plan this past summer (2016), making it ~ 0.06% on average less expensive than the Utah Plan we had previously recommended. That savings works out to be about $30 per year, per $50K of invested assets.
In addition to comparing costs and tax savings, we’ve reviewed the comparative investment options, and the paperwork required to transfer. To be clear, the benefit of changing plans is incremental in nature, but our conclusion is that a change likely makes sense for most our Massachusetts-based clients who are still adding to their 529 plans.
