529 Plans

**hippyfisher** · #1 07-22-2012, 04:14 AM

Are they all basically the same? My 401k is through fidelity and they offer 4 different 529 plans. I was thinking to keep things simple i would just use one of those. Their UNIQUE plan has no annual fees other than investment expenses. I mean fees and return history are the two major things i should be looking at right? Sorry for the broad question but im lost on which plan to pick since there are about 2.4 million of them...lol

**hippyfisher** · #2 07-22-2012, 09:59 PM

The Upromise program looks pretty interesting also, does anyone have experience with it? Im curios which 529 plans qualify for their benefits, i cant find an answer without creating an account with them.

**Twitch-Twitch-Boom** · #3 07-23-2012, 10:26 PM

There are many different 529 Savings plans out there. The biggest reason to get an in state savings plan is if your state has a state income tax. You can get some tax breaks. With Texas not have a state income tax, it doesn't matter which plan you select, you can use any 529 plan. Texas 529 Plan, Florida, Virginia etc.

For example, I use American Funds - Virginia College Savings plan. Mutual fund companies have various expense ratios and investments in each plan. I like the American Funds investments and favorable fees, that is why I chose them.

Now if I lived in a state with a state income tax, I would use that state's specific plan to help against my state income tax.

This may help you a bit. http://www.kiplinger.com/features/ar...tml?kipad_id=x

In regards to upromise, I have sign up with them as well. I opened up an account and registered my credit card. If shopping online you can rack up some serious "free" money to be deposited into your 529 plan depending on a stores current promotions. Most of the time I do not pay much attention but I get cash back from many normal purchases.

Similar to getting the 1% cash back on your credit card. Over time it does add up.

Best of luck to ya.

**fangard** · #4 07-25-2012, 09:39 AM

savingforcollege.org has tons of information for 529 plans.

Most important thing is to check fees. A plan with Vanguard will probably be the cheapest.

Upromise isn't too bad. If you pay attention to online shopping and always check there first, you can accumulate some pretty good rebates.

They will cut you a check once you accumulate(over $50 I think) and you can move it to a 529 of your choosing. The Upromise site is not an actual 529 plan, but links to a bunch of them.

If you are confused about them, for now, just put the money into an UTMA account and figure it out later.

**WGA1** · #5 07-25-2012, 04:20 PM

Another way to look at this is are you fully funding your 401k and a ROTH IRA? A lot of people seem to want to put their childs college savings ahead of their own retirement. Reason why you might want to fully fund retirement accounts first is that they will not count against you. In otherwords, your child my be able to qualify for grants or low interest school loans to attend college. Maybe not to cover the full costs but to help. If you have a large 529 plan then your child may not be able to qualify for grants or loans. The money you used to fund the 529 could have been used for your IRA and provide you with a better return and you can always take out your contributions to help pay for tuition. The 401k and IRA will not count against you if your child seeks grants or loans but the 529 will.

Disclaimer...I'm pretty sure this is correct but I am not a CPA so double check this.

**hippyfisher** · #6 07-25-2012, 09:26 PM

Thanks for the help folks. I think i got it squared away. Upromise will only link to certain 529 plans. So after mucho research i figured out which plans were rated the best and then found one of the ones i could link up. Its the New York college savings program. Vangaurd handles the investing side of it.

To wga's point about maxing out retirement, your theory sounds solid to me. But this is our first child and we plan to have more. Since any leftover funds in a 529 can be transferred to a sibling, im not too worried about missing out on funds i put in. Also, i can stop contributions once i feel comfortable with the amount we have saved.

**fangard** · #7 07-26-2012, 01:33 PM

Quote:

Originally Posted by WGA1

Another way to look at this is are you fully funding your 401k and a ROTH IRA? A lot of people seem to want to put their childs college savings ahead of their own retirement. Reason why you might want to fully fund retirement accounts first is that they will not count against you. In otherwords, your child my be able to qualify for grants or low interest school loans to attend college. Maybe not to cover the full costs but to help. If you have a large 529 plan then your child may not be able to qualify for grants or loans. The money you used to fund the 529 could have been used for your IRA and provide you with a better return and you can always take out your contributions to help pay for tuition. The 401k and IRA will not count against you if your child seeks grants or loans but the 529 will.

Disclaimer...I'm pretty sure this is correct but I am not a CPA so double check this.

529 actually counts a pretty low percentage in regard to qualifying for financial aid since it is a parental asset.

I do agree with taking care of your retirement first.

Think about it. Kid is in college, say you are 45. He/she has a lot more paychecks ahead of them than you do.

**Twitch-Twitch-Boom** · #8 07-26-2012, 01:54 PM

Do remember there are no loans in retirement.

I do agree it's smart to start putting in a 529 plan early, but with the bulk going into retirement accounts.

**awally** · #9 07-30-2012, 06:27 PM

Im confused so is it better to just put the money in a roth ira or do the 529, I have been pondering on this also and I dont know enough to know which one to do, I am currently putting 15% in my 401 and 3% in a roth ira, would I be better off putting something in the 529 instead of the 3% in the ira?

**fangard** · #10 07-31-2012, 09:21 AM

I think it is important to separate your retirement from funding your child's education. Retirement comes first, funding education comes second.

Roth is important for managing tax brackets in retirement. Good job. You need to take a step back and look at what the %'s mean. We have no idea what you make, so you need to look at what dollars the %'s represent. Do some online calculators and work it out that way. Starting now, with X per month- how much will I have in 15 years assuming X return. Classic time value of money calculation. Start there, and sneak up the percentages periodically...painless that way. Maybe every other year reduce your Roth contribution and redirect, or just find the money to do it on top of current retirement funding.