529? Yes or no

[jennynd]

DH is quite against 529. He feels it is not safe when a recession and we have too little control. I will like to hear why or why not from smart ladies here

[kiwik]

Just curious, why do you guys have numbers instead of names for such things?

[regentrude]

We do have 529s for our kids. The advantage over other investments is that you do not have to pay state tax on the contributions and that you don't have to pay taxes on the earnings if they are used for college.

You have control which funds you put into your 529; it depends on the state what the restrictions are. In our state we have many choices and can pretty freely choose the proportions of bonds and stocks. In our state those are all Vanguard funds, which we'd choose if we were investing independently as well.

ETA: For example, you can bond market index funds, which would be nearly recession proof.

 

I am curious what alternative your DH would suggest.

[...................]

It's working for us.  But then again we are no financial geniuses.  All I know is that before we started we had nothing for college and now we have thousands, and by the time my ds and dd graduates they will have enough for a few years of CC or in state university.  It won't be tons but it sure beats nothing.

[sunnyday]

Just curious, why do you guys have numbers instead of names for such things?

 

Tax code references. A 529 plan gives federal tax benefits under section 529 of the Internal Revenue code. Plans are state-sponsored and may include some state tax benefits for people who enroll in their own state's plan.

 

IMO contributing to a 529 is a great idea IF you are already very solid on your own retirement savings. Jenny, what is your husband's alternative idea to help your kids pay for college, and where are you investing your retirement options in this recession? Which state's 529 plan are you looking at?

 

Reasons to use a 529: http://www.savingforcollege.com/intro_to_529s/name-the-top-7-benefits-of-529-plans.php

[jennynd]

We are in NY, in my opinion, it has a good plan. But I keep delaying doing it because my husband. We have 401k through the company and also Roth IRA from the company we worked previously. Retirement wise, we are in good shape. We make pretty good income and the downside is we will not qualify for any income based scholarship nor any tax deductible.I am getting nervous about the college tuition. Both kids have their eyes on private school. What we have might not enough..

 

Right before the recession, we switched job. So we actually did not get effect much by this recession as most our money was in the roll over and did not allocate to the fund yet.. We got lucky.

As DH plan?..not really any, just put money away each month. I got really mad at him tonight and he agree he will do the enroll tomorrow. I wish I can more insist sometimes. We made a lot bad decision money wise because I did not insist my instinct

[jennynd]

Nm

[sunnyday]

We are in NY, in my opinion, it has a good plan. But I keep delaying doing it because my husband. We have 401k through the company and also Roth IRA from the company we worked previously. Retirement wise, we are in good shape. We make pretty good income and the downside is we will not qualify for any income based scholarship nor any tax deductible. I am getting nervous about the tuition. Both kids have their eyes on private school.

As DH plan?..not really any, just put money away each month. I got really mad at him tonight and he agree he will do the enroll tomorrow. I wish I can more insist sometimes. We made a lot bad decision money wise because I did not insist my instinct.

 

If you are making a "good income" and beyond the education tax deduction phase-out but are this uncertain about financial matters, it would probably be VERY worthwhile to consult with a financial advisor. Find a fee-only advisor with a CFA designation and arrange a meeting to discuss your financial goals and how to meet them. They'll be able to confirm or deny the benefits of the state tax deduction for college savings (surely you are throwing away hundreds if not thousands of dollars?) as well as checking up to see that your retirement funds and other savings are invested according to your risk tolerance.

[idnib]

Yes, we have one and it's working well so far.

 

It's always good to open a college account; sometimes family members will contribute even if you don't. You could compromise and put half in the 529 and half elsewhere, although I'd do the whole thing. You could also spread it over a couple of 529s with different brokerage houses or states.

[madteaparty]

I generally do not believe in earmarked savings for a limited purpose (one can just save, and then use it for college if need be), but because we are in NY we do get a state deduction for up to 10K contributed a year. So we contribute a paltry amount for DS, and have not yet started one for DD. I joke that I have about 5 minuted of college saved to date ;)

[fourisenough]

Yes, we have 529s for each of our girls. We also have separate retirement savings, but probably not enough of either! Oh well, it's better than nothing.

[Laura Corin]

We have 529s.  It reduced stress for us after Husband lost his job to know that the money is there for the boys.  We have other sources of retirement income, so it wasn't either/or for us.

 

L

[zoobie]

I'd talk to a financial consultant (one who does not sell anything).

[Farrar]

I generally do not believe in earmarked savings for a limited purpose 

 

This has been my hesitation about them.  We have small ones, but we aren't currently funding them.  My father has generously been gifting for my kids and managing that money, but we all agreed not to put it in a 529.  That way it can fund a gap year or private high school or housing for an internship or simply a start in life in other ways.  Or college.  We'll have to see.

[Pawz4me]

We never put anything into 529s.  Because I *believe* there is a penalty (on earnings) if any or all of the money isn't used for college expenses.  Plus earnings not used for college are taxable as income and if contributions were deductible from state income taxes, they are subject to a "recapture" tax if some or all of the money isn't used for college.  So what if you save enough for four years and the kid chooses to go to community college, so there's a large portion unused?  Or enlist in the military, so none of it is used for college?  Or decides to go right into the working world?  The cost could be pretty stiff.

 

Now that was a long time ago and my memory is more than a little fuzzy, and laws may have changed since then.  But it's something I'd research thoroughly before investing in.

[RootAnn]

We never put anything into 529s.  Because I *believe* there is a penalty (on earnings) if any or all of the money isn't used for college expenses.  Plus earnings not used for college are taxable as income and if contributions were deductible from state income taxes, they are subject to a "recapture" tax if some or all of the money isn't used for college.  So what if you save enough for four years and the kid chooses to go to community college, so there's a large portion unused?  Or enlist in the military, so none of it is used for college?  Or decides to go right into the working world?  The cost could be pretty stiff.

 

Except the money can be rolled into another person's 529 as long as they are related (parent, sibling, child, even a 1st cousin, I think). If you get a scholarship, I believe you can pull out the same amount as the scholarship without a penalty and use it for a computer or other college-related purchase.

 

The rules keep changing for the 529s - and I agree that you should do your research. Talking to a fee-based (rather than commission-based) investment adviser is smart, too.

 

I can't remember how the FAFSA looks at 529s, but that's a consideration as well. It looks like the 529 plan is now considered an asset depending on who the account owner is and withdrawals are counted as non-taxed income. Here are some links about that if you are interested:

 

Does a 529 plan affect financial aid?

Don't let that 529 college plan hurt your financial aid

529 Plans and Financial Aid Eligibility

[MotherGoose]

We have ones for our girls. We put money in it when they were toddlers and are letting it grow. It's particularly good if you have a high income and are not able to invest in other tax-exempt ways.

[Luckymama]

Dh is a Certified Financial Planner. You bet your sweet bippy we have 529s for the kids.

[Nart]

We are fully funding our retirement first. 100% of available funds into a 403b (equivalent to a 401K) for school employees. There is not enough to fund a 529. We figure that the best gift we can give our kids is not to worry about us when we are older and not to have to financially support us. You can borrow for college, but you can't borrow for retirement. We are not certain what we are going to do for college for our two kids. We are investing now into their education and our future. 

[duckens]

Yes, we have 529s for our girls. 

If you have control of the money for non-designated uses, will you make wise choices with it?  (You don't have to answer here; it's none of our business).

 

Our 529s are doing MUCH better (in yield and amount) than the money my grandmother earmarked for our girls for college.  She put my father in charge of it, and he got spooked after the crash of 2008.  He pulled it out of the market at it's lowest point.  *facepalm*   I BEGGED him to reinvest, but he cannot be moved.  Now it makes 2% interest sitting in a savings account.  College expenses rise 8-14% each year.

Did you know that the Dow Jones had 52 record high days in 2014?  Just because I'm poor doesn't mean that I'm ignorant about money.

The only saving grace is that the money from grandma is for "any educational expenses."  This includes piano books, swim lessons....and homeschooling supplies.  I save receipts because Documentation is my friend.  This money is reinvested for our girls in alternative financial vehicles.  It may pay for college, or it may be a nice little nestegg for our girls after college.

[SkateLeft]

.

[abacus2]

I would only do 529s after all tax advantaged retirement options are fully funded and all debt is paid off.

[EmseB]

This has been my hesitation about them.  We have small ones, but we aren't currently funding them.  My father has generously been gifting for my kids and managing that money, but we all agreed not to put it in a 529.  That way it can fund a gap year or private high school or housing for an internship or simply a start in life in other ways.  Or college.  We'll have to see.

 

This is why we went with Coverdell accounts instead of 529s.