529 Option: Nevada Vanguard 529 College Savings Plan

Tuesday, July 21, 2009 |

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 the part 4 of the 529 option series. In this post, I will share with you my thoughts on Nevada 529 College Savings plan managed by Vanguard. 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, part 2, and part 3.

As with other states that I have mentioned so far, Nevada offers multiple different 529 plans, but there are two that I would consider, uPromise College Funds, which offers Vanguard Funds, or Vanguard 529 College Savings Plan, managed by Vanguard and obviously offers Vanguard Funds. Based on what I see, Vanguard 529 College Savings Plan offers lower expense ratios as long as you don't go with age-based option. If you go with age-based options, uPromise College Funds will offer better options. Since I am willing to manage my own portfolio and rebalance it as necessary, I would prefer Vanguard 529 College Savings Plan, managed by Vanguard.
Here are several important considerations for Vanguard 529 College Savings Plan:
  • If you go with age-based options, there are additional 0.44% fees in addition to underlying funds' expenses.
  • You can build your own portfolio with multiple different Vanguard Funds available, such as 500 Index, Small Cap Index, Value Index, Total International, TIPS, Total Bond, etc. I really like the option available and the fees are the same with whatever those funds charges. However, one major issue, next:
  • The minimum investment for each of those funds are the same as if you invest in Vanguard taxable or IRA funds. If I want to create a portfolio with those funds I listed above (six funds), I would need at least $18,000 to start with, since each funds has a minimum requirement of $3,000. I don't think I have that much money to start with right away.
  • One great advantage, since it is managed by Vanguard, I can keep my finance rather simple since I will be using the same account log in ID with my other Vanguard investments (taxable and Roth IRA accounts).
While I like the option, the minimum requirements to create the portfolio I like really hinder my option to create my desired assets allocation. I will have to settle with other funds balanced funds available from Vanguard 529 College Savings Plan, such as Vanguard STAR Portfolio or Vanguard Aggressive Growth Portolio (80% Total Stock and 20% Total International), until a few years later when I have enough to create my desired assets allocation. I would personally rate this option as 4/5. I like the fact that it is managed by Vanguard, with its low expense ratio and the number of funds available, however the minimum requirement for a 529 plan drop the rating for me a notch.


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