need help college fund

2moms2twins

I think i asked a while ago but my MIL is driving me nuts about this and I need a 529 acct for the girls she can deposit money in to ... I have a read a ton and Still feel so clueless.  DO you have a 529 and what one do you have and i think its wonderful that she wants to do this but I have no clue as to what I am supposed to look for

thanks 

 

 

LolaBelle515

Our financial advisor specializes in college savings plans.  He does NOT recommend a 529 or any other account in the child's name.  The reason for this is that the gov't and the college count any money in the child's name 5x more against them when looking at what type of aid they need (the FAFSA form).  So, if you as the parent have $1000 in your account that you want to put towards their college and they have $200 in their account in their name...it counts the same against them.

Instead, he highly recommends putting college money into your adult ROTH IRA.  The reason for his is that there is no penalty for taking money out for educational expenses with a ROTH.  And, the FAFSA does not ask about money in a ROTH, so any money in there is not counted as an asset.

We've told both sets of parents this and now if they want to send us a financial gift (ie: birth money, baptism money), they send it to us and we deposit it into the ROTH.

The cap for a ROTH is $5000 per year, per adult.  So, you could potentially deposit $10,000 a year...not something we're able to do right now, but be aware of the cap if it would affect you.  

hlke

I would definitely speak to a financial adviser if at all possible.  What is best is very specific to your individual financial situation, if you anticipate getting financial aid (most middle class families qualify, especially with twins), and a whole bunch of complicated tax considerations.  For C and my financial situation, the 529 plan will probably make the most sense, but for others the ROTH IRA option might be best.

LolaBelle is right that usually what is best is to avoid putting assets in the child's name.  I had assets in my name from my grandparents when I went to college, and the FAFSA considered 35% of those assets available to pay for college each year. It was fine because the funds were meant to pay for college, but it would have been a better financial move for the money to be in my parents' names.  But it's also possible my grandparents wouldn't have given the money if it wasn't going to be in my name, so that's another consideration.

Also, as with everything involving same-sex couple taxes, being a same-sex couple adds another layer of complication.  Definitely something best left to a pro, in my opinion.

LolaBelle515

I completely agree with PP--having a financial advisor is key, since everyone's financial situation is different.  I hope our suggestions will be helpful if you take the ideas to him or her!  Try to find one that does not work on commission--they will be more unbiased about the advice they give you:)  Good luck!!

hlke

Also, if you do decide to open the 529 plan, it is better to choose a savings plan rather than a prepaid tuition plan.  The prepaid tuition plan can only be used at certain schools, while the savings plan can be used anywhere. No way to know right now if your twins end up being Harvard-bound, so flexibility is important.

I really like Vanguard as a company - their fees and expenses are low, and I've found setting things up really easy.  I use them for all our retirement accounts, and I see they also offer 529 plans with a "age-based investment option".  You tell them how old the kiddos are, how aggressive/moderate/conservative you want to be with your investments, and they invest the money accordingly.  I use a similar option for my retirement account, and it's very much a "set it and forget it" way to invest, which I really appreciate!

2moms2twins

Thanks thanks for the input .. i just want to be clear.. I will only be opening this acct for my MIL as she wants to make deposits and asked about a 529 because she wont get taxed on the money.  So it is kind of a benefit for her I think

I dont think she will go for a ROTH .. and M and I are so tight that right now we dont have any money to contribute at this moment. 

 she seems to be insisting on a 529 - and its usually her way or the highway .

I am going to look for a financial planner I guess...  she is just asking and it something I have been lagging on and i read stuff but i am just so confused  and quite frankly MONEY / Numbers are not my strong point at all