College Fund/Trust?

MrsZ1019

Hi everyone.  I was wondering if anyone would be willing to share their thoughts/experience on the options for college savings plans here in Michigan.  We'd like to set something up ASAP, but reading through the options and plans can get a little overwhelming.  It looks as though the main choices include the Michigan Education Trust, Michigan Education Savings Plan, and a Michigan 529 Plan... Anyone with insight as to why one might be better than the other, or your experience so far?

ballerina06

We are in the process of deciding right now.  We met with our financial guy to discuss everything and we are currently deciding between the 529 and the MET contract.  We are leaning more towards the MET for a few reasons.  #1 we wouldn't have to manage the fund elections like we would with the 529.  #2 we wouldn't lose money with the MET contract like we could potentially do with the 529 if we aren't dilegent.  The positive with the 529 is you can reassign the beneficiary, so if say one child gets a scholarship you can use the $ for the second child.  Plus, with the MET contract you have to put in x amount of $ each month (if you go on the payment plan) whereas with the 529 you can put in however much you want.  Also, the 529 is tax deductible.

We still have some questions about the MET regarding the basic vs. enhanced coverage.  Once we speak to a MET representative we are going to make our decision, but as of right now we are leaning towards the MET.

I'm curious as to what others have to say about this as well.

MrsRenee

Well I believe the Michigan Education Savings Plan (MESP) is just the fancy name for Michigan's 529.  Each state has their own plan and you're able to invest in any program you want- so you don't have to limit yourself with just Michigan's plan.  Here's a good website with lots of information about each state's plan https://www.savingforcollege.com/.  There's some tax benefits to investing in your own state's plan, which is why people tend to just go with their own state plan, but if you have the time, I think it's worth checking out the other options.  IMO, long term performance is better than the small tax break you'd get.  The only downside to the 529 plan is it's tied to the market, so there's risk involved, but it also allows for some great growth potential.

MET you essentially prepay for tuition, so it's good because you're paying today's rates (and we all known tuition will just keep rising).  The biggest downside to this is there's quite a bit of restrictions.  The main one I didn't like is that you're restricted to Michigan colleges only. 

polkadot_03

We have a 529 fund for the kids.  We have one through Fidelity and one through the state of michigan. We did loose some money last year when everything dropped, but not as bad as my 401k.  The investments are not as risky and it changes based on the ages of the kids.  The money we place into the Michigan fund is also tax deductable.  I'm not sure if the MET contract is.

 Also have you heard about upromise?  We do that as well, and have receieved over $2000 for their education.  It's free and easy to do when you shop.  It's a percentage based system where you get a certain percent of what you spend or buy back from the companies.  We also have their credit card and it's amazing how fast the savings accumulates.

 I would talk to a financial planner for your best option.  They are usually pretty good at helping out.  No matter which way you go, they all take a small amount to run the accounts.

SassyBookWorm

We have a 529 plan also - MESP for the taxes. We did lose some money over the past few years, but it wasn't as bad as I thought.  It becomes less "risky" as the child ages (so at my DD's 6th birthday next month, it'll becomes a bit more conservative) so that there isn't as much risk right before college. We also aren't *as* aggressive on it as we could be, but we're building up a savings account for her. 

Loved the idea of the MET contract, but you lose soooo much money if your child wants to go out of state, and I just couldn't do that. It's def. a personal choice though. 

 Good luck with your decision! It was a big stress but I'm glad we settled it and did it so early in her life!!

JandR07

We decided to just do a savings account for Lexi rather than one of the plans for a few reasons. We didn't like everything about the 529 plan and I think the MET plan means they have to go to school in Michigan which I don't want to limit Lexi to that. I know you can transfer to other kids but honestly I am still debating on more kids.

 We plan to save x amount of dollars a year and it shoulld be more than enough to pay for a school like UofM so if there is extra we would like to be able to use the money for a car for her when she is 16. We also put money in stock for her. She has stock in buy buy baby and it is doing really well. She might get Disney stock for christmas.

bll530

I haven't looked into doing this for our LO yet, but here's what I know.

- Contributions to a Michigan 529/MESP are a deduction on your MI return, up to 5k if you're single, 10k if you're married.

- You can deduct the contract price of a MET on your MI return in the year you purchase it. 

Those are the state tax implications.  I don't believe there are any federal tax benefits (I am a CPA, but don't hold me to that statement )

I had a MET and I know you can use it for a non-MI college, but it doesn't cover the full tuition (I"m not sure of the % lost).  But growing up I pretty much knew that I would go to school in MI since it was paid for. So it narrowed down my college choices for me and I never felt cheated that I couldn't go out of state. There are plenty of great MI colleges for kids to go to. 

jsmo

We also have the MESP.  And yes, that's the Michigan 529 plan.  Like pp's said, every state has one and you don't have to use your state's.  However if you talk to a financial advisor, and he or she is pushing another state's plan, make sure you find out how he or she is getting paid.  Many FA's will recommend another state's plan because they are making money on it. Of course, if you want to invest in another state's plan because you like the fund choices better, go for it:)  Just make sure you know exactly why they are recommending it. 

Michigan's plan is directly sold (you don't have to use an FA to invest into it).  It is managed by TIAA-CREF.

www.misaves.com

 

sbowersox

Financial advisor weighing in here -

529 plans give you more flexibility than the MET.  Like PP's, you can change beneficiaries and make investment elections.  Keep in mind - they are taxed like an IRA.  If you use your state's plan, you get a tax deduction for contributions and the money grows "tax free".  If the money is not used for "higher education" (which is a pretty general term) then you will be penalized and taxed on the gains.

Michigan now has 2 529 plan options.  The MESP is through TIAA-Cref and is not advisor sold.  There is another plan now available if you want the help of an advisor and that is through Allianz.  Both will give you the state tax deduction.