529 Option: Nebraska College Savings Plan

Update: I have selected West Virginia Smart 529 Select with DFA Funds. For the conclusion of my 529 series, go to 529 Plan Selection for My Second Daughter

This is part three of my 529 option series. In this post, I will share with you my thoughts on Nebraska College Savings 529 plan. My hope is by the end of the series, I will choose one option for the younger daughter. Here are the link to part 1 and part 2.

When I visited Nebraska College Savings Plan website, I was very impressed with the flexibility in the funds selection. The range of Vanguard funds available is one of the best for 529 plans. With Nebraska 529, I can put together portfolio that is similar to FundAdvice.com Vanguard Portfolio with the following Vanguard Funds:

• Vanguard Institutional Index
• Vanguard Value Index
• Vanguard Small Cap Index
• Vanguard Small Cap Value Index
• Vanguard Total International Stock
• Vanguard Short-term Bond
• Vanguard Intermediate-term Bond
• Vanguard TIPS

The differences compared to FundAdvice.com Vanguard Portfolio are no REITs (I wouldn't use Goldman Sachs Real Estate Securities with expense ratio around 1.11%), no further breakdown of International equities and some corporate bonds in short-term and intermediate term bonds.

From the surface, it seems like a great option for me that prefer leaning toward small cap and value equities. However, the management fees sort of chase me away. While each of the funds I listed above has low expense ratios, Nebraska College Savings Plan charge $5/quarter maintenance fee ($20/year) and 0.60% management fees! As I would be starting with low amount of money, that would end up to be a really high fees for the first few years. I always believe in the low cost index fund and the management and maintenance fees sort of offset the low cost, low fees Vanguard funds. For now, I would rate this 3.5 or 4 out of 5. This is sort of strange considering I was OK with the higher fees for the option to invest in West Virginia DFA options. May be I like WV DFA option since I couldn't invest in those funds without going to broker or adviser, yet I could do it through West Virginia 529 plan.

If you like Vanguard and want more investment options where you can pick and choose from more funds, this should be high on your list. This would have rated really high on my list if not for the fees.