what was that college fund account for LOs?

kinibruin · February 2011

so i recall back in the day on TN before TB migration, there was discussion about college funds for baby? something about signing up for accounts or starting contributions or something like that.

i know that my post is really vague, but i wasn't paying attention at the time because 1) i was only lurking and 2) i didn't have BOTB.

does anyone kinda know what i'm talking about? hahahah

lola808 · February 2011

A 529 plan?

You establish it in the parent's name and the earnings are not taxed. This is the route we went for LO's college savings.

MauiBride2008 · February 2011

We are setting our 529 plan up through College Invest, but I think that might be specific to Colorado.

You can have a 529 in any state sponsered plan, but if it's not in your state you may not get your state tax benefits for it. Check what kind of plan your state offers for 529 plans if College Invest is not offered where you are.

MauiWedding08 · February 2011

yes, each state has a 529 plan and there are many independent ones out there too.

We went with our home state's plan but seriously considered others as well, if you do have state income tax any potential benefits of certain plans is something to consider - we don't so it really doesn't matter. So then we just had to decide if we wanted to buy into the prepaid type or the ones that grow with the market/investment plan.

Our state's plan is considered a pre-paid plan. We buy tuition units at a price set each year (supposedly in relation to today's tuition prices, but it's inflated slightly for admin costs I think). We can buy up to 500 units per named beneficiary and every 100 units is worth one full year of in state tuition (at the rate of the highest public school) any "extras" you have (if he completes school in 4 years, or goes to a less expensive school) can be applied to other educational expenses such as room, board, and books. Family members have contributed to J's account and get a kick out of thinking they paid for x% of his first year of college. So the fact that it's easy to understand and guaranteed is neat to them I guess.

Within our plan you can set up auto pay, but I didn't do that because it charges you interest (since they have to buy all the credits for you up front). I thought that was a rip off, plus saving for LO's college will always be in like 3rd place in our priority list of personal expenses, so we only contribute after we feel good about all our other savings (Iike retirement and paying off the house quickly).

inamra · February 2011

lola808:
A 529 plan?
You establish it in the parent's name and the earnings are not taxed. This is the route we went for LO's college savings.

This, except since we're in CA, earnings are *not* tax free but only tax deferred. So instead, I'm just saving on my own rather than through a special acct.

kinibruin · February 2011

ahhh yes! a 529 plan! thank you everyone!

and good to know re tax deferred. i'll check with our accountant after she finishes our taxes.

you guys rock as always.

SanHawaii08 · February 2011

inamra:
lola808:
A 529 plan?
You establish it in the parent's name and the earnings are not taxed. This is the route we went for LO's college savings.
This, except since we're in CA, earnings are *not* tax free but only tax deferred. So instead, I'm just saving on my own rather than through a special acct.

even if you go with another state's 529? Nevada and Utah seem to be popular.

we went with our state's pre-paid plan (ie, what mauiwedding did). we already have other investments we could use for college, so we figured we'd diversify/hedge against the market, heh.

inamra · February 2011

SanHawaii08:
inamra:
lola808:
A 529 plan?
You establish it in the parent's name and the earnings are not taxed. This is the route we went for LO's college savings.
This, except since we're in CA, earnings are *not* tax free but only tax deferred. So instead, I'm just saving on my own rather than through a special acct.
even if you go with another state's 529? Nevada and Utah seem to be popular.

ETA: Hmmm, I actually just called and asked an institution about 529 and they said that the tax deferred thing just applies to funds that you withdraw but do not use for college expenses. So I think as long as you use definitely end up using it for college expenses, then it's tax free. So I think it's worth taking it look. (A friend who was a financial adviser had told me that there was no tax benefits at all, so I think that was a bit misleading actually...)

redshoegirl · February 2011

I vaguely recall someone talking about another plan a while back...not the 529, but a fund where you got some kind of financial matching from the company (up to a certain point, I think), so you contribute $XXX and they'd contribute $X in return to your child's fund. Sorry this is so vague - it obviously didn't apply to me so I didn't bother remembering the details! Hopefully someone will know what I'm talking about.

ETA: I know some states offer matching for 529 plans (like so) but I'm thinking of something different...I wish I could remember what it was called! Maybe it was discussed on the Money Matters board and not here?

SanHawaii08 · February 2011

inamra:
SanHawaii08:
inamra:
lola808:
A 529 plan?
You establish it in the parent's name and the earnings are not taxed. This is the route we went for LO's college savings.
This, except since we're in CA, earnings are *not* tax free but only tax deferred. So instead, I'm just saving on my own rather than through a special acct.
even if you go with another state's 529? Nevada and Utah seem to be popular.
ETA: Hmmm, I actually just called and asked an institution about 529 and they said that the tax deferred thing just applies to funds that you withdraw but do not use for college expenses. So I think as long as you use definitely end up using it for college expenses, then it's tax free. So I think it's worth taking it look. (A friend who was a financial adviser had told me that there was no tax benefits at all, so I think that was a bit misleading actually...)

oh good Smile

MauiWedding08 · February 2011

SanHawaii08:

ETA: Hmmm, I actually just called and asked an institution about 529 and they said that the tax deferred thing just applies to funds that you withdraw but do not use for college expenses. So I think as long as you use definitely end up using it for college expenses, then it's tax free. So I think it's worth taking it look. (A friend who was a financial adviser had told me that there was no tax benefits at all, so I think that was a bit misleading actually...)
...
oh good

glad you called someone else! I was confused when I read your post b/c I though the tax deferred thing was federal law, but figured you must be referring to CA state taxes (which would suck if it was true). Maybe that person meant your contributions cannot be claimed for a tax deduction if you itemize? (such as deduction for student loan interest, higher ed costs, or childcare...)

I actually had to read the IRC re: 529 plans for work a while ago and was pretty confused about a lot of it (my inquiry was pretty narrow though), but one thing is clear, yep you must pay taxes on your gain if you don't end up spending it on educational expenses.

inamra · February 2011

MauiWedding08:
SanHawaii08:

ETA: Hmmm, I actually just called and asked an institution about 529 and they said that the tax deferred thing just applies to funds that you withdraw but do not use for college expenses. So I think as long as you use definitely end up using it for college expenses, then it's tax free. So I think it's worth taking it look. (A friend who was a financial adviser had told me that there was no tax benefits at all, so I think that was a bit misleading actually...)
...
oh good
glad you called someone else! I was confused when I read your post b/c I though the tax deferred thing was federal law, but figured you must be referring to CA state taxes (which would suck if it was true). Maybe that person meant your contributions cannot be claimed for a tax deduction if you itemize? (such as deduction for student loan interest, higher ed costs, or childcare...)
I actually had to read the IRC re: 529 plans for work a while ago and was pretty confused about a lot of it (my inquiry was pretty narrow though), but one thing is clear, yep you must pay taxes on your gain if you don't end up spending it on educational expenses.

Yeah, I remember being shocked and asked if he was sure there was no tax benefits at all and he said that was the case in CA but he doesn't work specifically with people with kids so I guess he just haven't dealt with it before? But I think they just try to focus on the tax deferred thing because they can't be sure that everyone will use the whole amt saved for educational expenses only. But from the start, I knew I would only save a min amt that we needed and use it only for college (as best as we can) so when I heard the tax deferred/no other tax benefits thing, I was like...then who on earth would get a 529 in CA?!? Now that I know it's otherwise, I need to research it again...

what was that college fund account for LOs?

Re: what was that college fund account for LOs?

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