College Savings Fund

Peedy

Has anyone already researched this or set anything up? I still have an inside baby, and I don't think I can open up an actual account till she's outside. I've already asked at my credit union... They don't have any special college savings mechanism... So I guess I need to research all the different options. I've heard of a 529 account, but I don't know any of the specifics about it. Thoughts? Opinions??

Cat&S

We're going to do a 529. Each state is different as far as what is tax deductible, so research what plan your state has and make sure you do an allowed one so you get your tax deductions.

chase16

We plan to set up a 529 account as well, probably for the state of Wisconsin. From what I've researched on it (very little), it seems like the best way to go. My parents recommended it because they want to contribute.

BeachM

We have a 529 through USAA for DS1 and will set up another one for DS2.

kaitm22

We will be doing an account through H's work.

ungraceful13

We have a 529 plan for our DD and will make one for DS too.

Peedy

Leskay said:

I have a mutual fund that I contribute to monthly for my daughter. She is currently in high school and after doing some research I stopped contributing to her 529 account because if your child is going to get a scholarship (we are hoping for an academic one) colleges do a query and are able to determine if the child has a 529 or savings account and they take that amount off the top of what their scholarship amount would be.
The 529 has the benefit of being tax deductable but it's also is a very slow growing fund. The funds also can only be used for an accredited college. You can transfer the funds to another recipient if your child does not use them.
A huge benefit to having a mutual fund is that you can put it as aggressive or stable as you like. My account is primarily small caps and has had incredibly growth over the last four years. Another benefit is that if my daughter gets a full scholarship to a college of her choice I can use the funds to supplement her cost of living. If for some crazy reason (over my dead body) she doesn't go to college I can use the funds for whatever I like.

Good to know!

caballablanca

Leskay said:

I have a mutual fund that I contribute to monthly for my daughter. She is currently in high school and after doing some research I stopped contributing to her 529 account because if your child is going to get a scholarship (we are hoping for an academic one) colleges do a query and are able to determine if the child has a 529 or savings account and they take that amount off the top of what their scholarship amount would be. The 529 has the benefit of being tax deductable but it's also is a very slow growing fund. The funds also can only be used for an accredited college. You can transfer the funds to another recipient if your child does not use them. A huge benefit to having a mutual fund is that you can put it as aggressive or stable as you like. My account is primarily small caps and has had incredibly growth over the last four years. Another benefit is that if my daughter gets a full scholarship to a college of her choice I can use the funds to supplement her cost of living. If for some crazy reason (over my dead body) she doesn't go to college I can use the funds for whatever I like.

That's not entirely true.  I can use it for tuition for private school (k-12), clown college, beauty school, etc.  It has to be some sort of education type class.

My DD has a savings account.  DS will get one soon as well.  We have our own investments that can be used towards college if need be, but I'm not a fan of how restrictive 529's are.  Plus, I work in the financial industry and my company makes you jump through all kinds of hoops to get new investments set up.  It's kind of a pain in the booty, so its just easier to contribute more to the existing stuff.

alphaxi614

Nevada has a program where you can pre-pay for in-state tuition. So I can lock in the 2014 rates and they will pay for 4 years at the current rate when they go to college. You pay monthly from when they are born until they are 18, and other people can contribute as well. Of our kid decides to go out of state they get the equivalent of current NV in state rates paid to that school and then they have to make up the difference. So that's what we'll be doing

jmsv6d

You can also set up an ESA or and Education IRA which have the same tax benefits of a 529 but you have many more investment options. You can contribute up to $2000 a year. But the contribution limit is phased out for contributors with a modified adjusted gross income between $95,000 and $110,000 for single persons and between $190,000 and $220,000 for joint filers

Peedy

jmsv6d said:

You can also set up an ESA or and Education IRA which have the same tax benefits of a 529 but you have many more investment options. You can contribute up to $2000 a year. But the contribution limit is phased out for contributors with a modified adjusted gross income between $95,000 and $110,000 for single persons and between $190,000 and $220,000 for joint filers

Thanks for the tip! I had never heard of an ESA.

kashock-2

jennl7 said:

We are leaning toward the 529.  One question I had -- that I haven't looked into yet -- is what happens if you move out of state.  Say we set one up for Michigan (where we live now) but then in a few years move to another state?  Has anyone had any experience with this?

I think you can roll over your 529 plan to a new 529 (for example from a different state) once per 12 months with no penalty.


ETA: https://www.collegesavings.org/commonQuestions.aspx#question7

This link is helpful!

Allison7

DH started contributing more to savings when we get into the second trimester. He has some investment stuff through work that is more aggressive than a 529 and it is more flexible too. We will likely also do a 529, but the other savings give us time to research all of our options.

cappleby

I don't think it matters if you live in the state that you have the 529 in. My parents had one for me from like NY or something and we lived in MA. We have a financial planner (large scale because we share him with my inlays if that makes any sense) and he set up my son's 529 in some random state because they had the best deal. I don't really know the details because my DH is much more interested in that stuff than I am but I know you don't have to live in the state

megknyc

I work in asset management and have helped launched a state 529 plan. My recommendation is to do your research. You don't need to have your states 529 plan - while it can be tax deductible (depending on your state) it only works out to $400-$600 if you are maxing out. Other states can have higher returns than that - so look at track records. Also you can choose age based (more aggressive investments when younger), asset allocation or portfolio based. You are locked in for a year but can change annually.

Check out where funds can be used.
https://fafsa.ed.gov/FAFSA/app/schoolSearch

The best part of a 529 compared to other investments is that withdrawals for education are federally tax free. Family/friends can easily contribute for bdays, etc....and you can also contribute the max at once for 5 years for those who can (Estate planning etc).

Please just do research.

I just did a quick google search, but look for a plan comparison tool such as: https://www.archimedes.com/jpmorgan/comp529/index.phtml