Setting up accounts with Virginia529

Despite wanting to reduce the number of financial accounts that I have, this month was a giant step backward. Not only did I sign up for a Suntrust checking account to score a $400 bonus offer, but I also opened up six(!) new Virginia529 accounts, one for each of my kids. At the same time I started an account rollover from an existing 529 into one of the Virginia529 accounts, removing one of the accounts. Up seven, down one makes a net addition of six accounts.

529 Savings? Why Now?

As I talked about before, I haven’t really prioritized 529 savings. One reason was that I prioritized other savings (e.g. 401(k), debt, etc.) ahead of 529 savings. A smaller reason was “what if they get scholarship money like I did?” Wouldn’t the 529 be a waste, with it’s 10% penalty for non-education expenses?

But the biggest reason is that I was playing chicken with the big question: Am I going to fund my kids’ college education or will they be paying their own way like I did?

Once I realized that I plan on picking up a portion of the tuition tab, it makes sense for me to start saving in as tax advantaged way possible. With the state tax deduction for contributing and the federally tax free earnings, the 529 seems a bigger priority than before.

Even though I’ve decided to contribute to the 529, I will continue to max out my 401(k) savings. I want those tax savings too. Instead, I’m scaling back contributions to my taxable accounts and paying extra my mortgage down more slowly.

Rollover, Rollover, Send My Ohio 529 Right Over

To pay for the first year of college for my oldest, I’m going to use the existing Ohio 529 I opened in 2006. But first, I filled out paperwork to roll it into the newly created Virginia529 account.


When I originally contributed to the Ohio 529, I was living in Washington state, with no state income tax. I received no tax deduction for my contributions. Virginia will not only allow me to deduct new contributions to a Virginia529, it will also give me the same deduction on rolled over contributions. I don’t think the earnings will get the same treatment. It’s crazy that the money I contributed in 2006 qualifies for a tax deduction 14 years later.

Application Process

The application process was pretty simple, but I noticed a couple oddities. Some I noticed only because I opened so many accounts in a quick succession:

  • The application numbers increase sequentially by ones, but the final account numbers are multiples of nine. If the application numbers differed by one, the account numbers differed by nine. Application numbers differ by two? Then account numbers differed by 18. This may make it easy to guess account numbers, but I’m not sure that is exploitable. Just interesting and only something you discover when you open a bunch of accounts in quick succession.
  • A twenty minute site timeout is annoying when you have a bunch of accounts you’re trying to set up at once. And the timer started from session start and did not reset with each action I took. I got kicked out a couple of times, even though I was constantly in the site. Lazy engineering. Grrr!
  • I have to put in a 2FA code every time I log in. There is no “remember me on this computer” option. 🙁
  • Virginia529 had no problem withdrawing the initial contribution from my Fidelity brokerage account, but afterward immediately suspended the bank account link and demanded I send them a copy of my driver’s license and a voided check. The email said they used the same Early Warning System. This is the same system used by my water utility and I had the same problem linking my Fidelity account with that bill. I sent in a voided check for my Fidelity Cash Management account and that seemed to do the trick. The prefix of the account number on the check is technically different then the number on Fidelity’s website. I’ll find out if that’s a problem the next time I make a contribution or withdrawal.
  • You can only invest in one portfolio per Virginia529 account. This was different from my experience with my Ohio 529 where you could mix different investments in the same account. Unless I want 100% in one portfolio for each child, I’m going to end up with possibly many more accounts. However, since the deduction is per account and not per beneficiary, this could work in my favor. But if I use auto investing, it will mean several transactions per child that I’ll need to reconcile.

Investment Options

Like many 529s, Virginia529 has a limited set of investment options. The options include age-based options, index funds, and actively managed funds.

I steered clear of the age-based options. Why? Weak returns mixed with high fees. 

To illustrate this, take the age-based 2033 Portfolio, aimed at my seven year-old, and which comes with a .47% expense ratio and a 5-year return of 5%. It mixes equity and bonds with a 63.4%-to-36.6% mix.

Compare that with an equivalent mix of the Stock and Bond Index Portfolios. The Stock Index Portfolio has a 5-year return of 9.91% but an expense ratio of only .11%. The Bond Index Portfolio had a 4.23% 5-year return and an expense ratio only slightly higher, .12%. Mixing them with the same ratio as the 2033 Portfolio gives a 5-year return of 7.83% but a >.12% expense ratio. You would have to drop the equity position to 13.5% of the total to be as bad as the 2033.

To be fair, Ohio’s 529 age-based options aren’t much better with a .322% expense ratio for the same age.

Seems like 529 age-based products are just as bad as Target Date funds in 401(k)’s. Who would have thought?

I’ll pass.

The same can be said of the actively managed funds. I’m sticking to my own mix of the stock and bond index funds.

I’m still figuring out the stock/bond mix that I’ll use and it might vary for each child. For now, I put the whole initial contribution into the Total Stock Market Index Portfolio for the youngest five. But for my daughter who leaves soon I chose the Total Bond Market fund. Her expenses are due in the next few months and I don’t want any short-term market risk. I’ll probably put additional funds into the TIPs option (.16% expense ratio, 3.6% 5-year return), the Stable Value option (.14% exp. ratio/1.99% 5-year), or the FDIC-option (.09% exp. ratio/1.5% 3-year), depending on how much I’ll need to pay out for tuition and housing this year.


I hope you’ve enjoyed reading about my experience with Virginia529. I probably should have been contributing to it a bit more over the past 8 years that we’ve lived in Virginia, but the tax deduction means it’s not too late now, even on the eve of my daughter heading off to college.

Any interesting 529 tidbits you want to share? Let me know in the comments.

Hasta luego!

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