529 Savings Account

[Avonlady1001]

I was curious how many of you have used or are using a 529 to save for college. Has is been successful for you? Is it making money? My grandparents want to give each of my kids some money to put in a 529...I guess my question is if the 529 is the way to go? What are your thoughts? My kids are 5 & 2.

 

[Ava]

I'm wondering this as well. I have a regular savings account set up for DD, but not sure if I should open a 529 for college savings or just continue putting money into her regular account. Any opinions on 529s right now?

 

[AmberHeartsDisney]

Are you 100% sure your kids will go to college? then 529 can be a great. They most of the time can be rolled from child to child, so say child #1 does go to college but #2 does. you can give #'1s money to #2


There are also UTMA accounts they can be used for anything.... they either get them at 18-21.

 

[bored]

We're using 529 plan because NC doesn't offer prepaid tuition programs. If DD doesn't use it the wife has always wanted to go back to school so we'll use it for her.

 

[MsStinkerBelle]

I have two 529 plans for DD. One is the 'college expenses' one, the other is a UTMA (Uniform Transfer gift to Minor Account). Both have their advantages but the UTMA I like best because of the tax advantages and you don't have to use it just for college expenses.

 

[PrincessNoelle'sMom]

I have had one for the past 5 years and have not seen any positives in having one. I am in the process of closing it as we speak. I don't feel it is worth it - jmho...

 

[powelweb]

I was curious how many of you have used or are using a 529 to save for college. Has is been successful for you? Is it making money? My grandparents want to give each of my kids some money to put in a 529...I guess my question is if the 529 is the way to go? What are your thoughts? My kids are 5 & 2.

I have a 529 plan through Fidelity that has an automatic transfer each month, so this has helped me save without having to think about it. My account is just starting to show some gains after the market crash last year, and my DD is only 7, so I do expect to have some time before I need this money.

I also opened a savings account in her name at Citizens through which if I keep making $25 deposits each month (and you're allowed to miss 1 month a year), Citizens will give a $1,000 bonus when she turns 18. Since you have to sign up before the child is 6, this makes it a nice return even though their interest rate is not that good. Since my DD just missed the cut-off for school as a September baby, she'll be turning 18 for her senior year in HS, so I plan to use this money for SAT fees, college application fees and college scouting trips.

I also plan to use some of our nest egg investments to earmark for college costs without putting them into a 529 plan that would be subject to penalties if she doesn't go to college ( we only have the one child). I also don't want her to get a ferrari fund when she turns 18 from a savings account under her SSN.

good luck and it's great that you're starting so early.

 

[pmanko]

some states (oh and Pa for sure - others?) offer tax deductions for contributions on your income tax return.

You definitely have to do your homework, some 529 plans are not doing well. It's a tough economy right now - so hard to tell what 5 or 10 years will bring.

I know we have a 3 yr old and we asked ourselves every year if we shoud set one up. We have a ~ $10K CD for him that matures next year - if we do one it will be then... no extra $$ right now!

 

[PatsMom]

The question of whether your 529 plan is doing well is a function of which plan and which investment option you have chosen. Options run the gamut from emerging markets small cap equities to FDIC insured CD's. I think just about every plan also has options for age based portfolios that adjust the equity exposure based on the child's age.

I am in the process of spending down my daughter's 529 account. It was an excellent savings option for us. The gains in the account are now being withdrawn tax free to be used for education. We were always pretty certain that she would go to college so we were comfortable taking the risk that we would ultimately pay a penalty on the gains if they were used for options other than college. When we are done payihg for my daughter's college, we are opening an account for our grandson (my step daughter's child). Its a bit more questionable whether he will go to college but the funds can be used for vocational education which might be more likely. And we are making my daughter the owner - if our grandson doesn't use the money, she can use it to pursue a doctorate or perhaps for one of her unborn children.

UTMA accounts have very significant tax disadvantages along with requirements that they be turned over to the child at specified ages. The 529 account is much more flexible.

 

[brergnat]

Yes, we have one for each child. Opened them up as soon as they were born and issued SSN's.

These should be considered long term investments. If you start early, and have MORE THAN TEN YEARS before college, they are a great investment. You can set them up with different savings goals.

We put in $100 per month into each child's account.

DS6 currently has close to $10k
DS4 currently has close to $8k.

Since we started early, and do monthly contributions, we are "dollar cost averaging" which is the best way to invest. Putting a huge lump sum in all at once is a bad idea. Since we began, we've lost a bit of money, but the market bottomed out fairly early in our investments, and now as it goes up and up, their accounts are increasing steadily in reflection of the market. I plan to re-distribute the accounts into less stocks and more bonds as they approach high school.

We are using Upromise's 529 accounts along with the Upromise program. To date, we've earned approx. $3000 in "free" money through Upromise, via merchant contributions. Every time I shop online, I get anywhere from 1-15% in a matching contribution deposited into our Upromise account. Quarterly, those funds are divided and transferred into the kid's 529's. It's a great program.

And, 529 plans do NOT have to be used for education. They remain TAX FREE when used for that, but if your kids choose not to go to college, or get scholarships, or whatever, you still can withdraw the money and do whatever you want with it, but you do pay a tax penalty. I think that's fair.

 

[SoonerSarah]

MIL and FIL started one for each of my girls after their births. So I'm not exactly sure all of the specifics, but they were doing very well until last year. Currently, the older two girls accounts are around where they started out, but as someone else said, it's long term.

 

[mjkacmom]

My DH is a CFP, and we have them for all of the kids. IMHO, get in now (or last year), because they bottomed out with the stock market. We're back to where we were a few years ago finally.

 

[mjkacmom]

I have had one for the past 5 years and have not seen any positives in having one. I am in the process of closing it as we speak. I don't feel it is worth it - jmho...

Don't close it now! Before the recession, mine made a lot of money! It's a long term investment that is starting to rise again.

 

[pfeifferdcat]

I have had one for the past 5 years and have not seen any positives in having one. I am in the process of closing it as we speak. I don't feel it is worth it - jmho...

I'm wondering what are the negatives that you see in it? Are you just going to save the money elsewhere?

 

[JaymeC]

We put all of the savings we can muster into a Roth IRA. It can be used for our retirement or the dc's school, depending on which way we go and where we're sitting financially at that point.

I'm also really hoping we can have a house and have it paid off by then (hoping to pay it off in about 10 years if we buy soon, this isn't totally unreasonable houses are pretty cheap where we live) so that we can contribute what would have been our monthly mortgage to their college costs.

And I'm still crossing my fingers for a scholarship I just (finally!) graduated and was on a full academic scholarship. Dh went the military route and they're paying for his school. Our goal is to offer to pay for the kids in-state tuition and they can live at home free of charge. If they want to go out of state or live on their own, they can have the money and pay the difference.

 

[TnTWalter]

In our state, we get a tax credit up to $1000 for annual contributions up to $5k. So our goal is to hit the $5k annual for the tax credit; so $416 per month.

Beyond that we are starting annual Roths for me $5k. And that way we can use the Roths if there's not enough. Ideally we'll be able to do one for DH too but yikes...we already do the max allowed [$16,500] in his Roth 401k + his company matches some on top of it.

We have about $75k in 529s for our 3 kids. Our oldest is 11 so we're running out of time. But by then we can stop the $5k contribution to the 529s and the $5k to Roth if need be and have $10k per year extra....

Clark Howard has a great 529 guide.

http://clarkhoward.com/liveweb/shownotes/category/7/76/215/381/

Trish

 

[Avonlady1001]

Thanks for the link! It was nice to see the NY one I opened for my daughter (and opening for my son) is on his honor roll! LOL

 

[Ginamarie]

It's really a personal preference thing. Personally, I think my money is better invested as a savings account for each child. I like the flexibility of the savings account method, as it can be partially converted to a CD if the interest rates go up, and each child will be able to use the money for whatever is needed in the future, whether it's tuition, money for books, transportation, food, etc.

You should check your state guidelines though. Some states offer better incentives for using the 529 program.

 

[aprilgail2]

I have had one for my daughter since the day she got her social security number (she was about 2 months old). I dont put as much in it as my brother puts in for her (he opened his own for her and puts in 100 a week) but its doing very well and sure helps with my state tax! My brother used to have to pay state tax at the end of each year but because he contributes into a 529 his state tax rate is so much lower he actually gets a refund each year now!

 

[PrincessNoelle'sMom]

I'm wondering what are the negatives that you see in it? Are you just going to save the money elsewhere?

Basically I started it at the minimum and put weekly contributions into it for about 2 years. After that we both lost our jobs and the 529 did nothing but go down and incur fees. I am at the point where I can "almost" make my money back and do not want to risk losing it all again. I have savings accounts for both of my children that are doing much better so I will allocate the funds to that after I pay my mortgage modification fees where I am saving $200 a month and 5 years off my mortgage. This way when they are ready for college, my mortgage is paid off. That is my new 529 money . As others have posted, it really is a personal preference. I don't do well with taking risks with my money when there is not so much to go around. I'm still reeling over my 401K - IRA that has taken such a hit, but that I will keep vested (for now)...