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  1. #1
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    Does anyone invest in 529I

    plans for your childrens future college tuition. If so doe sit work well for you?

    Also my children are 8 and 4 years old. WHat happens if I spend the next 10-14 years investing in this program and the kid decides he does not want to go to college and would rather join the military?

    I would assume I am not going to just forfeit all the money I invested??

    What is your advice?



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    Re: Does anyone invest in 529I

    I have one for my daughter. We like it. It's taken directly from my paycheck each time so it's very easy to allow it to grow. I've heard some financial "experts" say that 529 plans are a waste if you're not contributing the maximum amount allowed each year.....but to me that's stupid. I don't make Bill Gates money, I'm no financial wizard who has the time to seek out and invest monies in different areas and manage them effectively. The 529 works.

    You won't lose the money at all if your child doesn't go to college. It's still your money, there will just be tax issues to deal with that wouldn't be there if the money went to education expense.



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    Re: Does anyone invest in 529I

    Quote Originally Posted by Knownothing View Post
    plans for your childrens future college tuition. If so doe sit work well for you?

    Also my children are 8 and 4 years old. WHat happens if I spend the next 10-14 years investing in this program and the kid decides he does not want to go to college and would rather join the military?

    I would assume I am not going to just forfeit all the money I invested??

    What is your advice?
    You do not forfeit the money, but you can no longer take it out tax free. You're taxed on your earnings, plus a percentage penalty for not using the investments for education.

    Personally, I think having two kids starting as late as you are, you're probably not going to be able to invest enough to cover both of their educations if they decide to go to school. If the older one decides to go the military route or something else, you can always transfer the money without penalty to your other childes 529. Chances are, one of your kids will go to college if both you and your wife did.

    Now, if your kids turn out brilliant or athletic and get scholarships, you're allowed to take out money equivalent to their scholarship amount tax free and without penalty. We do it for our kids (and while they're not doing really well right now) I think they're a good idea. Especially since with the 529, it's you're money. You could also put them as the custodian of an ESA account and have more flexibility, but in that case when they turn 18, it's their money to spend on Harleys and Tattoos and there's nothing you can do about it.


    Last edited by ColoradoClone; 08-13-2008 at 08:48 AM.

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    Re: Does anyone invest in 529I

    We have them for our kids and encourage our parents/grandparents to contribute to them instead of giving our kids money or big gifts at holidays. For some reason, they still buy bonds though



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    Re: Does anyone invest in 529I

    The key points were hit above - you can transfer the 529 to someone else, or you can take the money out with tax consequences.

    When you make the contribution you'll get tax benefits at the state of Iowa level, but not at the Federal level.

    The biggest downside is that having these plans will adversely affect any financial aid awards. The value of the accounts are considered as assets of the student when considering aid - and the kids assets are factored in the "equation" at about three times as much as the parents assets.

    The decision to contribute to these often depends largely on your expected future earnings. I can tell you, that in today's dollars, if the parents are making $70K per year or more, aid awards are going to be very small if not non-existent. In addition, any tax credits/deductions you receive for paying these expenses are basically nill at that point.

    In short, IMO these are excellent vehicles to save for future education expenses, but the people that will get the greatest benefit from them are those that are not likely to receive much aid in the future and will make enough to also not receive any of the tax breaks associated with higher education expenses.

    At least, according to todays code. So many of these types of things are designed with good future benefits, but by the time you actually get to use them the code has changed and you're penalized.


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    Re: Does anyone invest in 529I

    I think it's a great tool. The investment plan automatically changes as the child gets older (gets more conservative). I have an individual plan for each of my three kids and so does my wife. Each of our six plans is age appropriate for that child. Also, your yearly deposits can be deducted from your Ia income tax.


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    Re: Does anyone invest in 529I

    Quote Originally Posted by 1100011CS View Post
    We have them for our kids and encourage our parents/grandparents to contribute to them instead of giving our kids money or big gifts at holidays. For some reason, they still buy bonds though
    I got a bunch of those sitting in the safe deposit box. As soon as they mature, bam, into the 529 account. I have one for each of my boys, and It does pretty good. Better than nothing at all.



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    Re: Does anyone invest in 529I

    Quote Originally Posted by NWIAclone View Post
    I think it's a great tool. The investment plan automatically changes as the child gets older (gets more conservative). I have an individual plan for each of my three kids and so does my wife. Each of our six plans is age appropriate for that child. Also, your yearly deposits can be deducted from your Ia income tax.
    Up to 2,685 per account I believe.

    A married couiple with 1 child could deduct up to 5,370 on their IA return.

    The deduction ammount is adjusted yearly, contributions must be made by Dec. 31.



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    Re: Does anyone invest in 529I

    Quote Originally Posted by akclone View Post
    Up to 2,685 per account I believe.

    A married couiple with 1 child could deduct up to 5,370 on their IA return.

    The deduction ammount is adjusted yearly, contributions must be made by Dec. 31.
    I don't have the exact '08 amount, but this looks right. It was $2,595 in '07. Also - you can actually contribute more than that in a single year - but you have to amortize and take only the maximum allowed in each year.

    Many people that are trying to "catch-up" because the kids are older will contribute $12K - the maximum gift amount allowed without the gift tax kicking in - and then take the $2,595, $2,685, deductions each year until the $12K is used up.


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    Re: Does anyone invest in 529I

    I have one for each of my two children.

    What I like is you get a deduction from State income tax. That's like earning 9% right there. You can then put it a very conservative investment vehicle. So if it earns 4%, you are really ahead 13%. The 'adjusting' with age as you child gets older scares me (it's like trying to time the market over 18 years).

    The remainder of the posts hit the benefits/advantages pretty well. What I would like to know is how it factors into your child's financial aid. When they first came out, I read that it would not be held against, or lessen, you child's financial aid. Now, in the past year or two, I heard that it will offset financial aid to some degree. Anybody know about this?



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    Re: Does anyone invest in 529I

    I set up a 529 for my daughter when she was 1. Started it with 2k and only contribute $50/month. We also use the account for cash gifts from relatives/friends. My daughter is now 6 and the account has about 10K in it right now.

    I never intended the 529 to be the main source of education income for my daughter. The same day I took out the 529, I bought 5, $25,000 municipal bonds that mature when my daughter is 18, 19, 20, 21, and 22.



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    Re: Does anyone invest in 529I

    We have the college savings Iowa 529 plan for our daughter and it seems to work well.



  13. #13
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    Re: Does anyone invest in 529I

    I've been putting money in since 2002 for my 3 kids. Iowa's state 529 plan is ranked one of the best. Vanguard manages it and the fees are extremely low(that's if you do it direct and not through a broker) I just dollar cost average and pull money in out of my checking account on a monthly basis. I've been well satisfied with the returns up until the last year, but nobody has a stock portfolio that looks good right now.

    I agree it depends on your asset base. If you have a low or zero net worth, it probably doesn't make sense. You should instead work on saving for yourself. That way the kid will be eligible for financial aid and worst case can get a loan for it all(which still makes a lot of sense when you think of the benefit for the kid in getting an advanced degree).



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    Re: Does anyone invest in 529I

    Quote Originally Posted by BigLame View Post
    The 'adjusting' with age as you child gets older scares me (it's like trying to time the market over 18 years).
    Not me. Having an aggressive growth plan for a senior in high school would scare me much, much more.


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    Re: Does anyone invest in 529I

    Quote Originally Posted by BigLame View Post
    What I would like to know is how it factors into your child's financial aid. When they first came out, I read that it would not be held against, or lessen, you child's financial aid. Now, in the past year or two, I heard that it will offset financial aid to some degree. Anybody know about this?
    I mispoke above - was thinking of the UGMA or UTMA and certain exceptions to 529 distributions. In those cases, the assets are considered assets of the kids.

    The site you want to look at to get more answers is www.fafsa.org. However, here is an excerpt that directly answers your question as it relates to 529 distributions:

    Qualified distributions do not affect eligibility (i.e., qualified distributions do not count as income or a resource). Note that non-qualified distributions (i.e., distributions that are subject to federal income tax) do count as income to the distributee. Custodial 529 college savings plans owned by dependent students, where the student is both the account owner and beneficiary, are not reported as an asset due to a legislative drafting error in the Higher Education Reconciliation Act of 2005. When owned by an independent student or a parent, the account is still reported as an asset.


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