Save for College with a Vanguard 529 Plan

The Vanguard 529 College Savings Plan strikes the perfect balance with being convenient and being low cost.

Being sponsored by the state of Nevada, this strong performance college savings plan may not be for everyone.

In this post we will uncover all that one needs to know about the Vanguard 529 Plan offered by the Silver State.

Vanguard 529 Eligibility

Does the Vanguard 529 plan from Nevada have a state residency requirement? The answer is no. U.S. citizens and resident aliens must be at least 18 years old and UGMA/UTMA custodians. This plan started in 2002 and its easy-to-manage options are distributed by the Vanguard Marketing Corporation hence its name.

Alternatives

Remember that you are not limited just to your states plan or even this particular plan that we are discussing. You can take a look at the Best 529 Plans here: Best 529 Plans to help you more with your research.

Contributions

Like any other plan, the Vanguard 529 Plan will have contribution limits that you will have to be aware of. Let’s take a look at the maximum and minimum contributions.

Maximum Contributions

The plan will accept contributions in the Nevada 529 plan until the account balance for the same beneficiary reaches the limits of $500,000.

Minimum Contributions

The minimum contribution for this plan is $3,000 or $50 through an employer automatic investment plan. The minimum initial contribution for Nevada residents is only $1,000. After that the minimum subsequent contribution is $50.

Investment Options for Plan

There are a few investment options for the Vanguard 529 plan. Similarly to the New York 529 Savings Plan, they are some different risk levels in the options. Let’s take a look at the options and see what they are all about.

Age-based investment options

Offering a choice of 3 different risk levels (Aggressive, Moderate, and Conservative) that each contain 12 portfolios. The contributions are placed into the portfolio according to the selected risk level.   

Like many age-based options, the account is invested aggressively while young and then more conservatively while they are approaching college age.

Let’s see how they differ with regards to investment distribution:

Conservative age-based option

  • Child 0-2 years
    • 60% stocks and 40% bonds
  • Child 3-4 years
    • 50% bonds, 30% US stock, and 20% foreign stocks
  • Child 5-6 years
    • 60% bonds and 40% stocks
  • Child 7-8 years
    • 70% bonds, and 30% stocks
  • Child 9-10 years
    • 80% bonds and 20% stocks
  • Child 11-12 years
    • 90% bonds and 10% stocks
  • Child 13-14 years
    • 55% bonds, 25% cash, 18% short-term bonds
  • Child 15 years
    • 50% bonds and 50% short-term reserves
  • Child 16 years
    • 50% bond and 50% short-term reserves
  • Child 17 years
    • 75% short-term reserves and 25% bonds
  • Child 18 years
    • 75% short-term reserves and 25% bonds
  • Child 19 years or older
    • 100% Cash

Moderate age-based option

  • Child 0-2 years
    • 90% stocks and 10% bond portfolio
  • Child 3-4 years
    • 80% stocks and 20% bond portfolio
  • Child 5-6 years
    • 70% stocks and 30% bond portfolio
  • Child 7-8 years
    • 60% stocks and 40% bond portfolio
  • Child 9-10 years
    • 50% bonds, 30% US stocks, and 20% foreign stocks
  • Child 11-12 years
    • 60% bond portfolio and 40% stocks
  • Child 13-14 years
    • 70% bond portfolio and 30% stocks
  • Child 15 years
    • 80% bond portfolio and 20% stocks
  • Child 16 years
    • 90% bond portfolio and 10% stocks
  • Child 17 years
    • 57% bonds, 25% cash, and 18% short-term bonds
  • Child 18 years
    • 57% bonds, 25% cash, and 18% short-term bonds
  • Child 19 years or older
    • 57% bonds, 25% cash, and 18% short-term bonds

Aggressive age-based option

  • Child 0-2 years
    • 60% US stocks and 40% foreign stocks
  • Child 3-4 years
    • 60% US stocks and 40% foreign stocks
  • Child 5-6 years
    • 90% stocks and 10% bond portfolio
  • Child 7-8 years
    • 80% stocks and 20% bond portfolio
  • Child 9-10 years
    • 70% stocks and 30% bond portfolio
  • Child 11-12 years
    • 60% stocks and 40% bond portfolio
  • Child 13-14 years
    • 50% bonds, 30% US stocks, and 20% foreign stocks
  • Child 15 years
    • 60% bond portfolio and 40% stocks
  • Child 16 years
    • 70% bond portfolio and 30% stocks
  • Child 17 years
    • 80% bond portfolio and 20% stocks
  • Child 18 years
    • 90% bond portfolio and 10% stocks
  • Child 19 years or older
    • 90% bond portfolio and 10% stocks

Static investment options

The static investment options are not programmed to change over time. The funds do not use mutual funds such as stable-value options, guaranteed options, and CD options.

Here is what those options look like:

  • Vanguard Aggressive Growth
    • 60% US stocks and 40% foreign stocks
  • Vanguard Growth
    • 45% US stocks, 30% foreign stocks, 25% bonds
  • Vanguard Moderate Growth
    • 50% bonds, 30% US stocks, and 20% foreign stocks
  • Vanguard Conservative Growth
    • 75% bonds, 15% US stocks, 10% foreign stocks
  • Vanguard Income
    • 57% bonds, 25% cash, 18% short term bonds  
  • Vanguard – 90% stock and 10% bond portfolio
  • Vanguard – 80% stock and 20% bond portfolio
  • Vanguard – 70% stock and 30% bond portfolio
  • Vanguard – 40% stock and 60% bond portfolio
  • Vanguard – 30% stock and 70% bond portfolio
  • Vanguard – 20% stock and 80% bond portfolio
  • Vanguard – 10% stock and 90% bond portfolio
  • Vanguard – 50% bond and 50% short-term reserves
  • Vanguard – 20% bond and 75% short-term reserves
  • Vanguard – 100% bonds

Individual investment options

This is sometimes called a “single-fund option.” This is a portfolio in a single mutual fund. The name of the portfolio is very similar to the name of the underlying mutual fund.

Here are the name of the funds:

Vanguard U.S. Growth Option
Vanguard Totl Stk Mkt Idx
Vanguard Totl Int Stk Idx
Vanguard 500 Index
Vanguard Growth Index
Vanguard Value Index
Vanguard Mid-Cap Index
Vanguard Small-Cap Index
Vanguard Ttl Bond Mkt Idx
Vanguard Infla-Prtd Secur
Vanguard Hi Yield Bd Port
Vanguard Int Accum Port
Vanguard STAR Portfolio
Vanguard Windsor Port

Expenses and Fees

Like any other 529 college plan, there are going to be expenses and fees and the Vanguard 529 plan has some to note. Nevada’s plan is known for having less fees than other state plans.

Let’s take a look at the fees:

Fee breakdown

What’s great is there is there no enrollment or application fee and no account maintenance fee. The program management fees range between 0.11% – 0.19%.

The age-based portfolios will have an expense of 0.03% and 0.03%-0.07% on the static portfolios. The individual portfolios have a range of 0.02%-0.32% for expenses.

Taxes and additional Benefits

It’s important to note that Nevada doesn’t offer tax deductions. There are no tax deductions for single and joint filers with regards to their 529 plan.

Better than your States 529 plan?

With the benefits that the Vanguard 529 plan offers, does that make it better than your states or another states 529 plan?

Let’s review some important things to know before considering this plan.

Not the right 529 plan for everyone

With the plan being sponsored by the state of Nevada, participants in other states may give up big tax savings by enrolling with this Vanguard plan.

If one happens to live in a state that allows married couples that filing jointly to take a state income tax deduction of up to $20,000 for contributions to 529 plans, it will only apply to that state. So contributions to the Vanguard 529 plan would not then qualify.

Before proceeding, it’s best to consult with a professional to see how it will negatively impact the tax deductibility of your contributions.

Lower fees, but higher minimums

With a low minimum initial investment of $3,000, Nevada residents can get started with a little as $1,000.

Vanguard levies an annual fee of $20 on accounts less than $3,000 in assets. After the account is open, additional investments can be made in any amount exceeding the minimum investment of just $50.

Age-based investments

If you are wanting to take a hand-off approach, then the age-based investments may be ideal for you. As discussed above, they come in three types. Each options follows a different path, but the intent is to have you end up in the same place at the end of the day.

Pick your own portfolios  

Investors can pick between 19 different portfolios that offer exposure to stocks, bonds, and cash. With popular choices that include an S&P 500 Portfolio for a small fee, you would have to research to see which one is right for you.

Cost and convenience

This 529 plan compares and stacks up well to the other 529 plans. A lot of your decision will be based on if your state allows you to deduct contributions to 529 plans sponsored by another state.

Drawbacks to plan

Okay so there has to be some downsides to the Vanguard 529 plan right? Well anything is going to have some cons for sure. Let’s see what the main ones would be with this plan:

  1. Need an initial investment of $3,000. Some other plans have a lower initial investment.
  2. Other 529 plans may have higher contribution limits.

What to Expect

As we are approach the end of our post here, let’s look at what one can really expect if they were to sign up for Nevada’s 529 plan.

Plethora of Options

We’ve seen that you have lots of options to choose from which is great. With that said, you can really take your time and see which one is best for you and your family’s needs.

Low Costs

Some of the lowest in the industry and the less you pay the more savings will go into your account.

Vanguard Management

Vanguard offers investment professions that you can seek advice from with reference to your 529 plan.

Stability

The plan is a very stable option for your child so you know that putting forth effort will get you the results that will benefit paying for college.

Easy to Invest

You can link your bank account to your 529 account which is great because then you can set up an automatic investment schedule. This allows you a systematic way to save.

How to apply

Applying for this 529 plan is super simple. If choose to go the Vanguard route then you can open an account here: Open account.

Final Thoughts

I think the Vanguard 529 is a very viable option for parents wanting to invest in their child’s college.

It stacks up against the other plans that we have covered.

At the end of the day it’s up to you and what you feel is best for you and your family.

That is all for now. I’d love to hear from all of you out there.

Talk soon!

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