529 funds - which fund do you invest in for DC's college?

We finally tackled life insurance. Now we have college funds and the will to do.

Which 529 fund do you invest in?

I'm considering Fidelity 2027. It has a max of $340k. Is that is how much college will cost by the time DS goes to college?

Message edited 7/4/2010 8:43:26 PM.

Re: 529 funds - which fund do you invest in for DC's college?

we are doing savings/stocks/bonds for DC.

a 529 is VERY limited. as someone who worked in finance (before becoming a SAHM) i would not recommend 529s to anyone. (i was a CFO of a hedge fund)

JMHO.... if you havent already i would continue looking for alternate methods of saving for your DC.

Re: 529 funds - which fund do you invest in for DC's college?

Re: 529 funds - which fund do you invest in for DC's college?

Re: 529 funds - which fund do you invest in for DC's college?

We have cd's and bonds as of right now. We have not invested in stocks yet.

Re: 529 funds - which fund do you invest in for DC's college?

Re: 529 funds - which fund do you invest in for DC's college?

Posted by momytobein2010
can you explain a bit to us who don't know much about it, or where we can read more about it?

DS and I are at disagreement as to whether to go this route and I need a winning argument

Re: 529 funds - which fund do you invest in for DC's college?

Posted by AJandCJsMommy

Posted by momytobein2010
can you explain a bit to us who don't know much about it, or where we can read more about it?

DS and I are at disagreement as to whether to go this route and I need a winning argument

some key points:

1. the tax excuse is only available if profitable gain is derived from the fund.
(this has not happened in the last 3 years)

2. very inflexible. (they partially open each year to alter investment strategy)

3. 529 can only be rolled over into another plan if it has not been switched in the last 12 months (very limited control of investment)

4. extractions are considered part of students income (50% tuition 35% cash on college expenses) which may hinder chances of child getting Financial Aid.

5. you are penalized if 529 is not spent on education (anyone who withdraws) 10% federal penalty tax, possible 10% state

i'll finish in a little bit, my kids decided to grace me with their presence of waking up.

Re: 529 funds - which fund do you invest in for DC's college?

bonds and cd

Re: 529 funds - which fund do you invest in for DC's college?

I think it depends on your financial situation. If you may be able to help provide for college at the time, 529's are inflexible and your child will be penalized for withdrawing for something else, e.g., like a down payment on a first home. And unlike paying for education, giving a child the money for a down payment is a gift and could potentially be subject to gift tax (not an issue for most people due to the exclusion but I'm a T&E lawyer so I naturally think of this aspect as well) although who knows what those laws will be like in 18 years. If that's very unlikely, then I don't think 529's are so bad - the return may not be the best, but not many people are comfortable with very much risk anyway. Also, there is a state income tax deduction for your contributions, which is small but helpful to some. And they can be used for another child and even other relatives I believe.

For our DD, I think about my DH - his parents were able to help for school at the time so the money they put away for him was a down payment for us and we still have what was left of that money. His parents were awesome savers - the complete opposite of mine who saved nothing for me so I graduated with a ton of loans. I hope to be like DH's parents for DD. We may need to use some of her custodian account for college, but we may not - I'm the eternal optimist on these types of things so I want to keep things flexible. We plan on putting most of her account in the market for now - my investment strategy is always long-term and I feel we're at a low right now, but that's just me and I know plenty of people who disagree and think we will still drop. Also, I'm not an investment adviser - this is totally just my personal opinion.

If you're on the fence, a custodian account gives your more flexibility with regard to how the money is invested and how it's spent. It's not like you lose it if you need it for your DC's college - it's still there, just in a different vehicle than a 529.

Re: 529 funds - which fund do you invest in for DC's college?

Posted by AJandCJsMommy

Posted by momytobein2010
can you explain a bit to us who don't know much about it, or where we can read more about it?

DS and I are at disagreement as to whether to go this route and I need a winning argument

some key points:

1. the tax excuse is only available if profitable gain is derived from the fund.
(this has not happened in the last 3 years)


2. very inflexible. (they partially open each year to alter investment strategy) for your average parent, not a sophisticated investor, that's probably a good thing

3. 529 can only be rolled over into another plan if it has not been switched in the last 12 months (very limited control of investment)

4. extractions are considered part of students income (50% tuition 35% cash on college expenses) which may hinder chances of child getting Financial Aid.

5. you are penalized if 529 is not spent on education (anyone who withdraws) 10% federal penalty tax, possible 10% state

i'll finish in a little bit, my kids decided to grace me with their presence of waking up.

Re: 529 funds - which fund do you invest in for DC's college?

Posted by AJandCJsMommy

Posted by momytobein2010
can you explain a bit to us who don't know much about it, or where we can read more about it?

DS and I are at disagreement as to whether to go this route and I need a winning argument

some key points:

1. the tax excuse is only available if profitable gain is derived from the fund.
(this has not happened in the last 3 years)

2. very inflexible. (they partially open each year to alter investment strategy)

3. 529 can only be rolled over into another plan if it has not been switched in the last 12 months (very limited control of investment)

4. extractions are considered part of students income (50% tuition 35% cash on college expenses) which may hinder chances of child getting Financial Aid.

5. you are penalized if 529 is not spent on education (anyone who withdraws) 10% federal penalty tax, possible 10% state

i'll finish in a little bit, my kids decided to grace me with their presence of waking up.

Re: 529 funds - which fund do you invest in for DC's college?

Posted by shamrock124

Posted by AJandCJsMommy

Posted by momytobein2010
can you explain a bit to us who don't know much about it, or where we can read more about it?

DS and I are at disagreement as to whether to go this route and I need a winning argument

some key points:

1. the tax excuse is only available if profitable gain is derived from the fund.
(this has not happened in the last 3 years)

2. very inflexible. (they partially open each year to alter investment strategy)

3. 529 can only be rolled over into another plan if it has not been switched in the last 12 months (very limited control of investment)

4. extractions are considered part of students income (50% tuition 35% cash on college expenses) which may hinder chances of child getting Financial Aid.

5. you are penalized if 529 is not spent on education (anyone who withdraws) 10% federal penalty tax, possible 10% state

i'll finish in a little bit, my kids decided to grace me with their presence of waking up.

1. Isn't the state tax credit (NYS specific) given for the year in which the contribution was made if you fall within the MAGI levels? That is an immediate tax advantage. The probability of the investing today for a withdrawal in 10+ years has a greater chance of having a gain then it does of having a loss as evidenced with the S&P and Dow trending upwards over a decade for the most part.

2. Inflexible? I believe that is for investments in age based portfolios and you are only allowed one transfer per year. If you choose to do a al carte investing, you can move in and out as you choose expect some of the funds have short term trading fees for the first 60-90 days.

3. I don't know the specifics of moving from one state plan to another. I don't know why someone would go switching from NYS to another state on a regular basis unless the state of residence is changing. For the most part, if you are choosing an out of state plan it's for the money managers and should you be moving the funds that often that this is a real concern?

4. Is that for UGMA accounts? I believe those figures are only accurate if the 529 plan is owned by the beneficiary and most parents tend to own the plan and name a child as beneficiary. That way if the funds are not used up by the initial beneficiary, they can name another.

5. Withdraws not outlined by code would be penalized but if titled accurately and the money is put aside for higher education costs, this should never be an issue. Not all a child's money needs to be invested in a 529 plan.

There are some very good reasons and incentives to use 529 plans as well as some reasons not to. It's up to you, as the investor, to seek out help and educate yourself and then make the right choice for you.

Re: 529 funds - which fund do you invest in for DC's college?

what it really comes down to is what you are comfortable with.

i am more comfortable playing the market to get maximum for my DC.

because of my trading status, i dont pay much when i trade.

we are aggressive with the money bc we know even if they tank tomorrow (knock on wood) we have at least 16 years to make up for it.

if you are conservative and is completely satisfied with slow growth then it's for you.

if you want aggressiveness and options for emergencies and what nots it is not a plan for you.

a lot of people are afraid of the market, which i guess if you never really played it, its totally understandable.

there are pros to 529s, but to me the cons outweigh the pros...

some would say speak to a financial advisor, but there are so many out there, for and against it, it kinda puts you in the same boat.

a lot of bank financial advisors will recommend them (no offense to bank financial advisors) but what we used to call them on wall street are the "wanna bees who never made it"

but a lot of wall street advisors will steer you away.

good luck in your decision.