Comments on: How to Use a 529 Plan to Improve College Savings http://moneyning.com/kids-and-money/how-to-use-a-529-plan-to-improve-college-savings/ A personal finance blog where we share insights on carefully saving money, investing, frugal living, coupons, promo codes because the little things matter in achieving financial freedom! Wed, 23 May 2012 23:57:11 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: WR http://moneyning.com/kids-and-money/how-to-use-a-529-plan-to-improve-college-savings/comment-page-1/#comment-24752 WR Thu, 11 Mar 2010 14:20:44 +0000 http://moneyning.com/?p=4722#comment-24752 Remember that you can set one up for yourself or your spouse if you are planning to take classes, even as an adult. There is no contribution limit and if it is within your state, most times there are tax benefits. What other benefit do you get when you take just one class at your local school? A free gym & pool pass? Student Discounts on software? (www.studica.com) . Maybe even learn a few things :) Remember that you can set one up for yourself or your spouse if you are planning to take classes, even as an adult. There is no contribution limit and if it is within your state, most times there are tax benefits.

What other benefit do you get when you take just one class at your local school?
A free gym & pool pass? Student Discounts on software? (www.studica.com) . Maybe even learn a few things :)

]]> By: Jamel Rose http://moneyning.com/kids-and-money/how-to-use-a-529-plan-to-improve-college-savings/comment-page-1/#comment-24743 Jamel Rose Thu, 11 Mar 2010 06:20:50 +0000 http://moneyning.com/?p=4722#comment-24743 If you use the funds for non-college-related purposes, you will owe taxes and penalties. The tax advantage of a 529 plan, which includes tax-free withdrawals for college tuition (and in some cases other college expenses), makes this savings plan more inviting than a regular savings account. If you use the funds for non-college-related purposes, you will owe taxes and penalties. The tax advantage of a 529 plan, which includes tax-free withdrawals for college tuition (and in some cases other college expenses), makes this savings plan more inviting than a regular savings account.

]]> By: WR http://moneyning.com/kids-and-money/how-to-use-a-529-plan-to-improve-college-savings/comment-page-1/#comment-24736 WR Wed, 10 Mar 2010 22:35:33 +0000 http://moneyning.com/?p=4722#comment-24736 We setup 529's the year our kids were born. Many plans offer age-based or target year based funds. These funds are initially stock-heavy and become more conservative as the target date approaches. Tax bennies are huge depending on your state. check it out: http://www.finaid.org/savings/state529deductions.phtml One thing to keep in mind is that your kids can (and should) participate in funding their own college. They should write a check (from their own account) and mail it to the fund holder. You should put the fund in your name as the "owner" (not the child, they are the beneficiary). Apparently lots of people get this backwards. People are fearful that by having a fund like this it will remove their child's chances for financial aid. This is not the case as this asset is not counted for that purpose when the Parent is the owner. If you are not thrilled with the (rather moderate) returns these funds generate, you can use your IRA to pay for college. One other option is to open a ROTH IRA for them. They can do this at any age and just need to earn income. They can stuff up to 5K per year and have lots of options for investing. (My pat advice is 40% in an Extended Market Index fund, 20% in a REIT Index- 20% in Bond Index and 20% in Int'l Index and move it to 60+ % Bonds while taking money out). Remember that with a ROTH they can take it out any time for any reason and since they are kids their income would probably not qualify for the tax deduction of a traditional IRA. The only potential issue with this approach would be their assets at Financial Aid time. Not sure how a Roth IRA would compute. If this seems complicated, just get a 529 :) We setup 529′s the year our kids were born. Many plans offer age-based or target year based funds. These funds are initially stock-heavy and become more conservative as the target date approaches.

Tax bennies are huge depending on your state. check it out:
http://www.finaid.org/savings/state529deductions.phtml

One thing to keep in mind is that your kids can (and should) participate in funding their own college. They should write a check (from their own account) and mail it to the fund holder.

You should put the fund in your name as the “owner” (not the child, they are the beneficiary). Apparently lots of people get this backwards.

People are fearful that by having a fund like this it will remove their child’s chances for financial aid. This is not the case as this asset is not counted for that purpose when the Parent is the owner.

If you are not thrilled with the (rather moderate) returns these funds generate, you can use your IRA to pay for college.

One other option is to open a ROTH IRA for them. They can do this at any age and just need to earn income. They can stuff up to 5K per year and have lots of options for investing. (My pat advice is 40% in an Extended Market Index fund, 20% in a REIT Index- 20% in Bond Index and 20% in Int’l Index and move it to 60+ % Bonds while taking money out). Remember that with a ROTH they can take it out any time for any reason and since they are kids their income would probably not qualify for the tax deduction of a traditional IRA.

The only potential issue with this approach would be their assets at Financial Aid time. Not sure how a Roth IRA would compute.

If this seems complicated, just get a 529 :)

]]> By: Cd Phi http://moneyning.com/kids-and-money/how-to-use-a-529-plan-to-improve-college-savings/comment-page-1/#comment-24735 Cd Phi Wed, 10 Mar 2010 20:55:36 +0000 http://moneyning.com/?p=4722#comment-24735 Growing up, I wish I would've read these financial blogs earlier because putting my college funds in a 529 would've generated so much more interest than a traditional savings account. I'm telling all my cousins who are starting to have babies to really take advantage of the 529 college fund. I'm sure you'll be starting soon enough for baby Sara too right? Growing up, I wish I would’ve read these financial blogs earlier because putting my college funds in a 529 would’ve generated so much more interest than a traditional savings account. I’m telling all my cousins who are starting to have babies to really take advantage of the 529 college fund. I’m sure you’ll be starting soon enough for baby Sara too right?

]]> By: marci http://moneyning.com/kids-and-money/how-to-use-a-529-plan-to-improve-college-savings/comment-page-1/#comment-24734 marci Wed, 10 Mar 2010 20:53:58 +0000 http://moneyning.com/?p=4722#comment-24734 Shop around tho for low annual fees.... some of them charge more than others on the fees. And yes, you can set them up for grandkids also :) Shop around tho for low annual fees…. some of them charge more than others on the fees.

And yes, you can set them up for grandkids also :)

]]> By: Betsy http://moneyning.com/kids-and-money/how-to-use-a-529-plan-to-improve-college-savings/comment-page-1/#comment-24731 Betsy Wed, 10 Mar 2010 20:31:45 +0000 http://moneyning.com/?p=4722#comment-24731 My kid's 529 plan is setup and everything (state and federal) is tax free. With taxes no where to go but up, I'm going to be saving more and more as time goes by. None of my friends have 529 plans either, and they all think college for their kids is too far down the road. Maybe they are hoping that their children will get full scholarship, or that they aren't going to pay for it when the time comes. Otherwise, they will be sorry. My kid’s 529 plan is setup and everything (state and federal) is tax free. With taxes no where to go but up, I’m going to be saving more and more as time goes by.

None of my friends have 529 plans either, and they all think college for their kids is too far down the road. Maybe they are hoping that their children will get full scholarship, or that they aren’t going to pay for it when the time comes. Otherwise, they will be sorry.

]]> By: Vincent http://moneyning.com/kids-and-money/how-to-use-a-529-plan-to-improve-college-savings/comment-page-1/#comment-24729 Vincent Wed, 10 Mar 2010 18:28:45 +0000 http://moneyning.com/?p=4722#comment-24729 Not many people talk about the 529 plan even though it's one of the best ways to keep more money for most households. Good information. Not many people talk about the 529 plan even though it’s one of the best ways to keep more money for most households. Good information.

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