For a newborn you’re better going with an out of state 529 it looks like. To compare, MD offers you a deduction, but has a 0.87 expense ratio + $10 annual fee. If you use the NY (for sake of comparison) plan, you don’t get a state tax deduction, but the expenses are 0.17% and no annual fee.
Let’s say you deposit $2500/yr for 17 years into the account. So $42500 in deposits. Let’s say with pre-fee growth that would grow to $60,000.
The tax benefit on using the MD plan is $125/yr assuming you’re in the 5% bracket there. So that’s $2125.
So the question becomes is $2125 more than what it costs in extra fees to be in the MD plan?
Annual fees add to $170, so we’re now at $1955.
For year 17, the difference in expense ratios will cost you .006*60000=$360, so we’re at $1595
For simplicity sake I’ll lop off $4k a year going backwards from here on
Year 16 difference = .006*56000=$336, so we’re at $1259
Year 15 difference = .006*52000=$312 so we’re at $947
Year 14 difference = .006*48000=$288 so we’re at $659
Year 13 difference = .006*44000=$264 so we’re at $395
Year 12 difference = .006*40000=$240 so we’re at $155
Year 11 difference = .006*36000=$216 so we’re at -$61
and so on
This calculation is the best case for MD by the way, if you go higher or lower than $2500 a year, it tilts harder to out of state. (Lower tilts because the annual fee becomes a bigger deal proportionately, and higher tilts because you’re paying higher expense ratio and not getting tax benefit).
If the timeframe is short, there isn’t enough time to have the expense ratio compound. So for a 13 year old, you would go in state. But for an infant, the 0.6% compounded over 17 years swamps the state income tax benefit.
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