I Enrolled In A Maryland 529 Plan

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Maryland 529 PlansI’ve talked in the past about the Maryland 529 plan and today I pulled the trigger and enrolled. In Maryland, you get up to a $2,500 deduction each year on your state income taxes (if you contribute $2,500 to the plan) if you are a Maryland resident. It’s not a tremendous amount of money back in our pocket considering it’s a 4.75% tax ($118.75 rebate) but since I’ll be spending money on education in the future anyway, $118.75 for something I should be doing anyway makes it just icing on the cake. Plus ultimately it’s a hundred bucks and that’s not trivial, it’s just seems small percentage-wise.

In Maryland there are two programs, the Maryland Prepaid College Trust and the Maryland College Investment Plan, the latter of which is managed by T. Rowe Price. I’m doing the Maryland College Investment Plan because it gives you more flexibility in terms of where the money can be spent and I figure my kids are all going to be little geniuses and going to the most expensive private school that’s located the farthest away from where we’re living at the time. Whether or not they’re going to be geniuses probably has nothing to do with the expense or distance factor, but I can still dream and Murphy’s Law says the second half of that statement is an absolute certainty.

Signing up for the plan was trivial and took a maximum of ten minutes. I went to College Savings Plan of Maryland, located the Enrollment form for the Maryland College Investment Plan, and was signed up in about five minutes. You simply need to decide on a username, pick a six digit pin, then open up an account. I’ll be naming myself as both the Account Holder and the Beneficiary, as I don’t actually have any kids yet. You can always rollover the account to another beneficiary without tax penalty if the recipient and the original beneficiary are in the same family. If they aren’t, there are some tax penalties.

After setting up an account comes the time to fund it. Simply mail a check or money order of at least $250 and the account is up in a jiffy. You’ll have to specify which funds to put it in but that was pretty simple.

Fee-wise, Maryland was pretty good and they’re getting close to the next tier of assets, $2B, when the fees fall even farther. I was pretty surprised to learn that the fees are related to the assets in its control, something you never see with mutual funds or things like that. In fact, because they had so many accounts and over $1B in assets that they took away the application fee ($75) and lowered a few other fees.

If you’re thinking about a Maryland 529, I’d read over this Disclosure Statement and FAQ. It’s pretty comprehensive and written in easy to understand language so you won’t have to wade through lawyer-speak.

(Photo: lednew)

{ 9 comments, please add your thoughts now! }

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9 Responses to “I Enrolled In A Maryland 529 Plan”

  1. sandycheeks says:

    How did you decide between the prepaid and the investment plan? Do you think your choice may have been different if you already had children? For whom do you believe the prepaid is a good choice?

    I’m trying to figure out the answers to these for myself 🙂

  2. jim says:

    That’s a good question and it’ll be the topic for a post I’ll publish this afternoon. 🙂 In short though, I don’t think my decision would’ve been different.

  3. eric says:

    I am sure you checked it out but the website below gives some good information regarding state college savings plans. It is especially good to make sure that your home state’s plan competes well with other states. If not, in some states it may actually be beneficial to invest elsewhere and pass on the in-state tax benefits if they apply:

    I chose the investment plan as well in my home state of Illinois because of the flexibility it provides but have found out recently that the pre-paid plan can be used for out-of-state colleges. Still they are not accepted at all institutions. The savings plan is more like a retirement plan where funds can be used for any qualifying educational expense. Not knowing where my kids will go to school (in-state, out-of-state, vocational, etc.), the savings plan provides the flexibility I want them to have.

  4. Patrick says:

    I’ve thought about doing the same thing for myself so I can save for an MBA program. I can always transfer the money to my children (or other family members) if I don’t use it. I need to look into it – I’ve heard OH has a good 529 program.

  5. Steve says:

    As coincidence would have it, I also enrolled in the Maryland 529 plan this week. What are your thoughts on the investment choices? I trust TRowe (have Roth IRA there), but the expenses on the funds are all about 80-90 basis points when you look at the underlying fund expense ratio and the program fee. I didn’t shop around, but they seemed a little high. In any case, I ended up going with the Target-date 2024 fund.

  6. Louis says:

    For those who are considering the Prepaid College Trust plan, it is important to note that you are actually buying units of a trust that are priced daily. If you decide to exit the plan at some point (by, for example, transferring your value of your units in the Prepaid College Trust to the Maryland College Investment Plan), then the price of the units on the dates that you made payments to the Prepaid College Trust becomes very significant. In other words, you will want to try to make the payments when the stock market is relatively low. Also, be sure to request a valuation of your trust account each time you make a payment to the trust. The Trust documents try to minimize the fact that you are buying units of a trust, but it is to your advantage to keep track of the unit value each time to make a payment.

  7. lane burritt says:

    The responce from Louis was very interesting. In light of the trust stock in todays climate would that change your advice on a prepaid trust vs. a MD College Investment Plan?

  8. Richard says:

    Watch out for the (poorly disclosed) $25 account fee, on $250 that will eat your returns even in a good year – you have to set up a monthly electronic distribution to have the fee waived, even at the $25 minimum this is much better.

  9. geo says:

    Do not sign up for Md prepaid..Get the coll investment trust ..The prepaid is really poorly run.It is very difficult to get reimbursed and you can not speak with someone readily…have to leave a message.beware!!!!!!!!!!!!!!

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