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529 College Savings Plans

post #1 of 15
3/5/07 at 5:54am
Thread Starter 
I was wondering if anyone out there had any experience or knowledge about 529 savings plans. I've heard about them but I don't know anyone who has set them up for their kids.
We currently have a savings account with a pretty good interest rate (ING Direct) for our daughter but I wonder if a 529 would be a better option for her future.
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post #2 of 15
3/5/07 at 6:26am
We have them for our kids. My dh set them up a few years ago for all the kids. We direct deposit a certain amount in them every month. The biggest benefit of having one of these plans is that your kids can take the $ out tax free when used for college tuition. and I think supplies like books. You can roll them over to your other child/children if one child doesn't use all the $. You can even cash them out for a penalty if your child doesn't use the $- I am not sure what the exact $ amount of the penalty would be- but it wouldn't all be lost if the child doesn't go to college. I am not sure what they are tied to- if it like a mutal fund- but it does earn interest. You can just google your state and then 529 at the end and it will show who you should contact.
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post #3 of 15
3/5/07 at 6:31am
we started a 529 bc of www.upromise.com. Our financial planner says they are junk bc there are so many hidden fees. I argued that it was only a $25 fee per year and he claims we would be getting more of an increase in value if they werent so costly to manage.

I disagree. Why should I care about the fees if it is funded by money we wouldnt have had in the first place? We did stop contributing to them though bc of his claim of how much more we could earn in mutual funds for our retirement.

We are also going with the idea that it is better for us to better off in retirement than for our kids to have college paid. the analogy I heard best was that just like on a plane, you put the oxygen mask on yourself before your children. DH's parents paid for what they could for his college and didnt save anything for retirement as a result. DH wound up going to graduate school and having school loans anyway. So, now, we have school loans and they have no retirement money.
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post #4 of 15
3/5/07 at 6:44am
I started a 529 at the advice of my accountant brother and father. We don't have one setup through upromise.com because they have such huge fees. Instead we have one through the state. You can withdrawl your money from upromise and get a check written to you. Then put the money in a 529 account not affiliated with upromise.

We also get so much money withdrawn from our checking account every month that goes straight to the 529 account. This is great becuase it is difficult to really save if we have to move the money because we always worry if we need it. This way we have no option and can make it work without that money.
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post #5 of 15
3/5/07 at 8:09am
I recommend setting one up. I went directly to the 529 plan through Iowa but I have a separate Upromise account. If you are a state employee you can automatic deduct less than another person. For me the minimum is 25.00/month per account. From what I understand there are lots of different 529 plans out there so just investigate them. Make sure your child can go to college in a different state.
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post #6 of 15
3/5/07 at 9:26am
Thread Starter 
Thanks for the input! I have a better idea of where to start now.

I too have heard that parents should focus on their retirement because kids can get loans, scholarships, etc. It makes sense to me (and we do save a little) but I'd really like to provide my kids with at least some help. I put myself through school and had to work a lot of fast food hours while getting my degrees and I'm still paying for my loans now.
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post #7 of 15
3/5/07 at 12:47pm
I've heard of parents thinking of their kids and not their retirement. We do both retirement and college fund now and put more in the retirement.
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post #8 of 15
3/5/07 at 2:39pm
One thing to keep in mind is that they differ from state to state (and you don't have to live in a state to sign your child up for their plan), with some plans being better than others. Before Quentin was born, DH researched them all to try to find the one he thought was best.
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post #9 of 15
3/5/07 at 5:09pm
I'm not sur eif everyone knows, but with upromise, you can request a check and put the money in any fund you want. Each of my kids have a 529 that gets contributed to regularily, but there education IRA's are only gift money and and my survey money, so I also put the upromise money in there.
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post #10 of 15
3/6/07 at 12:31am
There may be no place like home. Many state plans offer their residents tax deductions for 529 contributions, which can be a powerful incentive. If the investment options are decent and the costs low, you might as well stay put. But don't let state chauvinism or a tax break blind you to the long-term disadvantages of a high-cost, poorly performing plan.

Commissions clobber returns. You theoretically can make a case for paying commissions on other investments if an adviser is a whiz at stock picking, say, or offers comprehensive financial planning services. With 529 plans, though, the plan managers, rather than your advisor, make most of the important decisions. Often a commission expense isn't justified, and you probably won't get returns that will offset the extra cost.
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