Why I Left the NC 529 Plan (And Why You Probably Don’t Need To)

Emily and I opened 529 accounts for Jack and Gwen within a month of their birth with The College Foundation of North Carolina (CFNC). When I set up Jack’s account more than 10 years ago what initially stuck out was how dated the website was and how hard it was to navigate. User experience notwithstanding, I decided to move forward with the NC plan for a few reasons: a limited in-state income tax deduction (since done away with), investment options with near-zero expense ratios, and low administrative fees. These reasons ultimately trumped any concerns about the website because once I opened the accounts, picked the investments, and set up recurring contributions, I wouldn’t be interacting with it much.

Over time, the website has improved but navigation is still cumbersome. It requires too many clicks, sends me (and clients) in too many wrong directions, and is a bit quirky. A few months back a client told me they tried to change their investment allocation one evening after work but couldn’t. When they called CFNC they were informed allocation changes can only be made during market hours, which is silly. On Monday, a different client tried to re-start recurring contributions but received multiple error messages. And on Tuesday a client told me of their frustration trying to open accounts for their three kids: “I think I opened an account for one of them, but I couldn’t open the others.” All of this sent me searching for a better option.

Don’t get me wrong: the guts of the NC plan are still solid and, everything else the same, I don’t anticipate any change impacting how much money accumulates in the kids’ accounts. Administrative fees remain low (.25% per year) and the investment options are rock-bottom cheap. But, without the in-state tax deduction there’s no compelling reason not to try something else. Switching to a new plan is as much a personal experiment as it is a desire for something better.

So where are Emily and I moving the kids’ accounts to? As of yesterday morning, Jack and Gwen are set up with the Utah My529 plan. (A quick aside: That each state has its own plan can be confusing. Though it’s a Utah plan, we can use it for the same institutions and expenses as the North Carolina plan. If the state you live in offers an in-state tax deduction—a la, Massachusetts or Pennsylvania—then you usually want to use your state’s plan. North Carolina doesn’t so it can make sense to shop around. I wrote something longer about this four years ago.)

Our reasons: better website, lower fees, Utah’s 12-year streak as a “Gold-rated plan” by Morningstar, and more services like a pre-paid debit card a student can keep with them to use for qualified education expenses. (While I like the convenience of this, I can also imagine Jack, 10 years from now, explaining to me how a midnight burrito qualifies as an education expense. But I digress…)

Ultimately, I’m betting on an improved user experience during the 1-2 times a year I check on their accounts. Sure, Utah’s fees are lower, but only by about $2 per $1,000. Investment options? Roughly the same. Pre-paid debit card? Nice, but ripe for misuse. And while it’s “Gold-rated,” I spent little time with the NC 529 plan and don’t anticipate interacting with Utah any more regularly. Will it be worth the hassle of opening new accounts, cancelling recurring contributions, setting up new contributions, and filling out paperwork to transfer the funds from NC to UT? Honestly, I don’t know, but I’m excited to find out.

If you have accounts with the NC 529 plan, should you move, too? Maybe. As I said: the change isn’t about performance or fees or accumulating a larger balance. Any difference in these is negligible. I’m simply hoping for a website that makes it easier to manage my accounts and, if it does, can give my clients a better experience.

If you haven’t set up a 529 account and want to, give NC and Utah a look (provided your state doesn’t offer an income tax deduction). Vanguard, which is the Nevada plan, is another good option. You’ll be in good shape with any of these three. I don’t mean to come off as blasé about which is best. It’s just that the differences are minor which means it’s more important that you get started saving for your kids’ college (if that’s a goal of yours) and not get bogged down with which provider’s fees are lower by 0.01%.

As always, let us know if you have questions, and have a great weekend!


The content above is for informational and educational purposes only. The links and graphs are being provided as a convenience; they do not constitute an endorsement or an approval by Beacon Wealthcare, nor does Beacon guarantee the accuracy of the information.

Ryan Smith
[email protected]

Born and raised on the North Shore of Massachusetts, I moved to Raleigh in 2011 to marry my wife, Emily. We have two kids, Jack and Gwen, a golden retriever named Olly, and are members of Church of the Apostles. I have been a Financial Advisor since 2005 and earned a Master’s of Science in Financial Planning from Bentley University in 2007. I became a CFP® professional in 2009, a Retirement Income Certified Professional® in 2015, and a Certified Tax Specialist™ in 2023.