Section 529 plans for your little ones?

MickeyDecember 26, 2001

This is a peculiar place to put this post but you all have little kids and have to think about their future.

Has anyone looked into section 529 plans? Which states have the best plan, if you have done the research? What are the disadvantages except use it or lose it aspect of it?

According to our our financial planner, we need to put $730 per month per child (toddler) to put him/her through 6 years of Ivy league school. 6 years beause we gotta consider grad/professional schools in addition to the now ubiqutous and not so coveted bachelor's degree. Yikes!!!!

What numbers are you getting for state schools? We did not ask him to run the numbers for state colleges.

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I've looked into NJ plan which will be state and federally tax free starting in 2002, are transferable to other relatives, and can be used for grade schools too. I don't believe in putting aside all money for bachelor and grad school. Have started saving some though (DD is 6 months).

Read that Michigan 529 has good returns.

Plan to use financial assistance, scholarships, etc. and if you have too much saved you won't qualify for any help (stupid to penalize the ones that planned). Also feel that I'll help with 1st degree and they can get grants/company to pay for grad school.

    Bookmark   December 27, 2001 at 9:02AM
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I have a real doubt that $730 per month for a toddler is going to be necessary. Considering that hopefully that money would earn interest. 12 months a year, 18 years, that's $157,680. Just in deposits, not including compounded interest.

And I've never considered it my duty to provide an Ivy League education for my child. I figure getting them through high school intact and reasonably intelligent is a tremendous accomplishment!

    Bookmark   December 27, 2001 at 10:34AM
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Doing the numbers for Missouri state schools (I live in missouri) the calculator that I used assumed a reasonable rate of return on your investment and the current projections for how much college tuition will increase (expected to increase faster than overall inflation). For MO state schools, tuition room and board for 4 years, you'd have to put away about $150 per month per child starting when they are babies.

Your $730 figure sounds about right for 6 years of ivy league. The same financial calculator I used said you needed around $500 per month for 4 years at Harvard.

Money Magazine did an article recently (mid-2001) on the various states' 529 plans. Rating the fees, returns, and tax benefits. Try doing a search on their site or at the library for the article. Often, choosing your own state's plan is the best option because you may be able to deduct contributions from your state income taxes, which you can't do if you participate in a different state's plan.

    Bookmark   December 28, 2001 at 11:53AM
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well, we are planning to set one up very soon for "shrimpy" who will be here in august. our financial advisor told us we can start the plan before the baby is even born. also, the plan we have is not a use it or lose it account. it is generally setup as a college fund but, if not needed for school, the money can be taken out for just about anything. plus, it doesn't all have to be used for the one kid, anybody can use the money. another good feature is that any money given to us for the baby can go directly to that account and we won't have to pay taxes on it like it was income. we figured our plan for a state school and if we put in approximately $20,000 right now, we would never need to add any more money and there will be enough. our advisor showed us that the more money you put in when the baby is an infant, the less you'll need to put per month as they are growing up. also, if our kid wants to go to an ivy league or more expensive school, they will have to do it on scholarships and grants. no point in us PAYING to send a kid to a school they couldn't earn their way into anyways. and we will do everything in our power to not let the kid get any student loans either. there is nothing worse than a young kid fresh out of school with more debt than they can ever imagine paying off. school loans are just an easy way for the gov't to make money and fool innocent people into believeing they can get out of debt by just getting a "better" job. sorry i got off the topic, student loans are just a VERY sore subject with us. anyway, do look into the 429 plans in other states and see if you can find a better plan that won't penalize you if you don't use the money for school. i'm not sure what state our will be thru as we are gettign it thru Merrill Lynch and they just use the best plans for whoever they are advising.

    Bookmark   January 4, 2002 at 12:55PM
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I believe that the finanical advisor in the above post was incorrect on a number of counts.
1. The beneficiary has to be named on the account, so therefore it cannot be started before the baby is born. 2.Money taken out for "just about anything" will incur penalites. 3. Under certain conditions, the money can be used for other children's educations without penalties, but it is important for those considering a 529 plan to understand what those conditions are.

    Bookmark   January 7, 2002 at 11:44AM
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Check out this site. They have info on 529 plans plus other info.

Here is a link that might be useful: saving for college

    Bookmark   January 7, 2002 at 12:56PM
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Here is another link with list of all plans and a rating for each states plan. I found this site through the one above.

Here is a link that might be useful: 529 plans

    Bookmark   January 7, 2002 at 1:02PM
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I'm in an Ivy League school, and I've been through all of the financial aid stuff, and just be warned that if you have enough money to cover 4 or more years of it, the school will take as much as they can, and you probably won't get any kind of financial aid outside of merit based scholarships which Ivy League doesn't give out anyway. My family makes about $50,000 a year and my parents didn't save any money at all for my college and I'm paying $1,200 a year to go (the price is $37,000 a year)with grants. I don't know anything about this plan and I think it's wonderful that you want to save up a lot of money for college but you will spend a good chunk if you do. Maybe that's what you want to do, in which case, ignore what i'm saying. At the very least, put it in the parent's name solely. Ivy League and other schools take 35% of child's money and property (savings bonds, stock, even cd's) and 5% of parents. I've just seen so many friends who are paying huge price tags for school because grandparents or parents have saved up for years and years. Since this is a toddler's forum, you still have a while yet =) My recommendation would be once the child is old enough to go to college, put all of the money into a bank account under an aunt, uncle or grandparent's name so it can't be claimed as parent or child property ($150,000 makes a HUGE difference in finacial aid) and then file for financial aid and see what kind of loans and grants and scholarships you can get. Loans don't start gathering interest until 6 months after graduation, at which point you can pay off the loans and still have a pretty little chunk of money for the parents retirement or a new house or something. Just my two cents. I would hate to see people who mean well lose all their hard earned money when these schools are so well endowed themselves. Again, I really don't know anything about the topic of this discussion but I just cringed seeing the amounts people might put away a month.

    Bookmark   January 8, 2002 at 8:12PM
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I am currently looking into college planning. My DD is 4 months now. We have as savings plans

-Roth in DH name
-Roth in my name
-401K from DH work
-IRA in my name (acts as my 401K since I'm independent consultant)

I looked into the 529 and what I didn't like about it was that if you don't use it for college you are penalized. What if my DD decides not to go to college? I can't force her yes it's transferable to another child, but what if you don't use all the money? You are penalized. You must submit any college expenses to the fund and they will pay them, this seems like a lot of red tape to me and I'm certain mistakes will be made. For these reasons I've chosen to designate my ROTH account as "education" for my children. With a ROTH you can withdraw for higher education with no penalty and no tax. The down side to this is that you can only contribute 2K per year and estimates say it will cost 108K for 4 years of public and 255K for 4 years of private and way out of my league for IVY. Hope this information helps

    Bookmark   January 12, 2002 at 3:47PM
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I looked into the 529 and what I didn't like about it was that if you don't use it for college you are penalized. What if my DD decides not to go to college? I can't force her yes it's transferable to another child, but what if you don't use all the money? - that't absolutely right & my concern as well!!!! My husband is successful & didn't go to college so whose to say she will.

We have about $10,000 that we were going to invest in our daughter for whatever her future needs. I am staying away from these college savings plans. The stock market (mutual funds) is a place to put it since it's a long term investment & you start young, but I'm not market savvy & not a risk taker. My accountant told me it would be wise to pay off a portion of our mortgage with that money. The goal is that by the time she's in college the house will be paid off & hopefully we'd be able to pay off her school instead of a mortgage OR we could always take out an equity line then. He said this is like a forced savings of whatever you are currently paying on your mortgage interest rate (I'm paying 5-1/4%) so that's more than I could get at the bank, in a cd or savings bonds plus I can count on it being there unlike the market.


    Bookmark   March 10, 2005 at 12:14AM
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I consider 529 plans better choice for college savings. There are 529 plans from almost each state and each one is different. Within state there are plans which are sold direct and in direct (via broker). Plans sold via broker contains fee (like load mutual fund). Each state plan is different in the way funds are invested in different fund families. So, it is impossible to compare each plans. Best way to find the better plan is to look for the state which offers wide variety of choices at lower cost. I consider Nebraska, New York among the best. Anyway, do your own research.
You can also use credit cards to save for college. Rewards from card will go toward your 529 plans account. List of credit cards can be found at following directory.

    Bookmark   January 7, 2007 at 4:48PM
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