529 Plan?

Discussion in 'Off-Topic' started by ISU_Alum_2000, Jul 20, 2010.

  1. ISU_Alum_2000

    ISU_Alum_2000 All-Star

    Oct 21, 2006
    Aliso Viejo, CA
    Have any of you looked in to setting up a 529? I'm just starting my research, and I am sifting through which criteria I think will be most important. For example... most funds appear to have fees attached by the co. managing the fund. Obviously, nobody likes fees, but what are the trade-offs with funds with little/no fees?

    I'm sure that each of us may have different reasons for selecting different plans, but I was curious if anyone had any "lessons learned" or advice on keys things to watch out for.

  2. Boorstin

    Boorstin Member

    May 13, 2010
    Hmmm. Not much for advice, except the regular stuff. Consider how far from college your child(ren) are. They usually qualify for a state income tax deduction, assuming your state allows it. Also, be sure you're kids are going to college. If he decides to be an electrician, for instance, the fund won't be that useful. Withdrawals for other-than-education reasons are generally subject to a 10% penalty, plus withholding.

    My fees are pretty small - smaller than my mutual fund, in fact. 529s are the way to go for college savings, as far as I'm concerned. Hope that helps a little.
  3. bos

    bos Legend
    Staff Member

    Apr 10, 2006
    Network and Server Admini
    I opened a 529 for each of my kids. Even if they dont go to college, their kids can use it instead. Its not a bad deal really.
  4. DaddyMac

    DaddyMac Well-Known Member

    Oct 18, 2006
    I have 529s set up for my three nieces, nephew and baby X. All through CollegeSavingsIowa. There are no explicit fees, but I'm sure Vanguard is getting a cut off the top. And in Iowa you can deduct the contributions on state taxes.

    What's nice is that you can xfer funds between family members. So when it became obvious that our nephew wouldn't be attending college, and it became necessary to "remove" those funds - we were able to split them between his sisters with no trouble.

    Another thing to look at is UPromise. Earn money through various companies (groceries, restauarants). Completely free. And when you hit certain thresholds of earnings, they automatically transfer it into your 529 account. Dell computers is another, and when I last refi'd my mortgage, Country wise donated something like 2% which was just shy of $200 free cash.

    Edit: Just realized your in CA. I imagine they have a state sponsored plan though.
  5. sp8815

    sp8815 Member

    Apr 10, 2006
  6. BleedCycloneRed

    Sep 1, 2009
    Construction Management
    Chicago, IL
    I have 2 kids in college currently and a 3rd one scheduled to start in a year. I have a 529 plan I purchased many years ago but the returns have not been much to talk about, but of course they are tied to the stock market, which has underpreformed since I purchased the 529. Another option I would recommend you consider is prepayed tuition if that is available in Iowa. I reside in Illinois which has a College Illinois program. I purchased 4 years of tuition for each of my children about 6-8 years ago. It averages the tuition of all the state schools and you pay that average. Then when the go to college, they can select any one of the state schools and tuition is covered. If they go somebody else, you get the current average to be used at whatever school they select.
    Given the we can be pretty sure that tuition is going to to up every year but the stock market may not, it seems liked a better bet at the time for me and my family. For me, I paid about $25K for 4 years of tuition for each kid, and now the state is paying over $12 a year to University of Illinois for my daughter and $15K for my son to attend. Been a great investment for me.:smile: And no taxes on the growth of the value.
    They have changed the program some (mabye because guys like me got too good a deal), but at least worth seeing of an option like that exists in your respective state.
  7. jpete24

    jpete24 Well-Known Member

    Vanguard actually has some really nice funds. If you have a sec you should check them out just for general saving.
  8. ruxCYtable

    ruxCYtable Well-Known Member

    Aug 29, 2007
    529's are a good idea, but I'm sort of bitter about the whole college savings issue. People who are responsible, like you, and save for their children's education are penalized when the time for college arrives. Your children will get no financial assistance because you were responsible and saved for their college education(s).

    People who are irresponsible and save nothing often end up getting rewarded with free or reduced tuition for their children.

    I was discussing this with my wife the other day. Our house will be paid off the same year our first child is ready for college. (She's 9 years old and already wants to major in Vet Med at ISU.) We've decided NOT to save specifically for college because we will have money we were previously paying on our house available around that time.

    But, to each his or her own.
  9. cytech

    cytech Well-Known Member

    Apr 10, 2006
    Hiawatha, Iowa
    It is not just the people that save for college that are punished, it is another child whos parents are somewhat successful, it doesn't matter if they have the ability to pay for the college education. They won't get assistance in the form of low interest loans or grants etc.
  10. BryceC

    BryceC Well-Known Member

    Mar 23, 2006
    So much of it is based on parent's income - which is absolutely ridiculous as my parents made pretty good money but were only a few years from retirement so they weren't helping me much.
  11. capitalcityguy

    capitalcityguy Well-Known Member

    Jun 14, 2007
    Des Moines
    Depending on the state, a person doesn't necessarily have to use their state of residence 529 plan. You'll need to check to see what CA allows. Iowa's is often recognized as a great plan as it offers low cost Vanguard.
  12. Bobber

    Bobber Well-Known Member

    Apr 12, 2006
    Hudson, Iowa
    I agree, but that's not going to help your kids out. I view it as a forgone conclusion that my kids won't qualify because we have too many assets.

    I started contributing to the Iowa 529 as soon as each one of my kids were born. $190/month and it's starting to dollar up nicely. Returns have not been great, but what has in the last few years?

    Be proactive and not reactive and you'll be much happier in the end.
  13. BigLame

    BigLame Well-Known Member

    Feb 6, 2008
    Western IA
    You do not have to put it in the stock market. Pick something conservative, earn 2-4 percent, but then add in the fact (here in Iowa) you get a deduction from state income taxes, and your return becomes more like 10 percent.

    After the last 10 years of the stock market, I'll take that. I did this 11 years ago (picked the conservative route), and am very glad I did.

    However, many good points are being made in this post. Anything in your child's name (> 2K) gets counted against them. The assets that do not are your home, retirement accounts (including life insurance with CSV), one vehicle - others?

    Also keep in mind one can borrow for their education, but you cannot borrow for your retirement.
  14. capitalcityguy

    capitalcityguy Well-Known Member

    Jun 14, 2007
    Des Moines
  15. Cato2handjam

    Cato2handjam Member

    Nov 26, 2006
    Finance Manager
    St. Louis, MO
    I've opened up a 529 specifically for the financial gifts that my child recieves from grandparents and relatives. I felt it was a good place to store these and allow them to grow. In Missouri if you open a 529 in child A's name and then Child A doesn't use all or any of the funds, you can transfer those funds to child B. I liked this option.
  16. capitalcityguy

    capitalcityguy Well-Known Member

    Jun 14, 2007
    Des Moines
    Just as with a 401(k) plan, a 529 plan is found within the Federal tax Code. In other words, this option can't be unique to Missouri, since this is a Federal law/reg issue. That said, the Federal law allows each state to set up their own 529 plan and where the differences come in is what state requires you to have their plan to get a state income tax deduction and which do not. Obviously, if you live in a state without state income taxes, it probably doesn't matter which state's plan you choose, so you might be more likely to just focus on what funds are offered on a particular state's 529 platform.

    Regardless, I think anyone is wise to visit with a CPA in their respective state to get some advice on what plan might make the most sense for their situation.

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