I’m mainly a lurker on this board, but I’m off this week with the flu and decided now would be a good time to finally figure out whether to invest DS’s small savings account into a 529 or other investment option. Ha!! Now I feel even more confused that when I started.
The Utah plan is one that I keep seeing recommended both here and elsewhere, but even it had various age-based options. If you use the my529, can you tell me which one you chose and why?
Are there any advantages to saving the same amount of money in a regular investment account so that the money isn’t completely tied to his education?
Important details: DS is 5, an only child, Class of 2030, and I’ll be about 10 years from retirement age when he graduates from HS. Texas residents, so no state income tax.
TIA for any advice. I know this is the millionth question on 529 plans!
We went with a 529 since I fully expect that the the money will be used for education in some way. We are in Texas and went with the Texas College Savings plan. I probably could have researched more at the time, but it only required a $25 start up, and we didn't have a lot to put in initially. We just use the age-based investment option, so it gets more conservative as DS gets closer to graduation, which works for me.
Post by sandandsea on Feb 22, 2018 14:28:28 GMT -5
We did our state’s 529 plan and invest in a passive age based fund. It was easy and we chose that vs other investments so it could grow tax free. We are in a high tax state and pay a ton in taxes.
I live in NY, which has hefty income taxes and offers a limited deduction for 529 contributions, so we use the NY Saves 529. I go with age-based, moderate risk investments. For now, while we are juggling a lot of other financial commitments, the 529 is the only vehicle we're using to save for college (DD is 2).
Post by covergirl82 on Feb 22, 2018 14:47:44 GMT -5
We have a 529 (not state-specific) for each kid through Franklin Templeton. We opened them before each kid turned 1 and contribute $70 per month to each account. (I'm hoping to increase that a little bit soon when DH gets a merit increase in April.) Each account is in an age-based investment, which I believe is moderate risk at this time. I didn't look closely at the last quarterly statement, but I would guess DS's account balance is about 30-40% from investment growth/earnings and DD's is probably around 20-25% from investment growth/earnings. (His balance is quite a bit more as my parents put in a few more contributions to his (while he was the only grandchild) than DD's.)
We aren't planning to fully-fund college for either kid, but more like 50%. We expect them to have some skin in the game.
Texas does not have a state income tax, therefore I don’t believe there’s a tax advantage for using a state plan...but I’m no expert, obviously. There’s no way I’ll be able to afford his entire tuition, but I need to get the ball rolling. Anything has to be better than 0.01% interest. Lol.
We just did this last week. He had a Capital One account earning .01% interest and I finally just opened a 529. My hesitation was just being overwhelmed by all the options. Im in WA and theres no state income tax here so we did the NY Saves 529. Not only did it have the lowest fees but it was also one of the top performing plans over 3, 5, and 10 years. I had initially looked at Utah but it seemed more hands on than I wanted. We did an aggressive age based account (87% stocks and the rest in bonds) that will get more conservative every 4 years.
@juno - thank you! I don’t think I realized I could withdraw the amount of scholarship money received. It’s a little early to tell with my kindergartener, but I fully expect him to at least try. I was able to leave undergrad without loans, but realize college costs are on a completely different level now.
We lived in Texas when we set up DS’s 529, and ended up going with the NY 529 plan. The Texas one doesn’t have great ratings, and with no state income tax, there’s no good reason to use it. We also looked at UT, IA, MN, and VA, I think.
We’re in Kansas now, and they give a credit on state income tax regardless of which state’s 529 plan you use, so we still use the NY plan for DS, and added one for DD.
Also, I ended up not going with the age-based auto pick options and choosing from the available options how I wanted to allocate/invest the money for each kid.
Post by goldengirlz on Feb 27, 2018 13:55:10 GMT -5
The tax-free growth is a big advantage over a regular investment account. Our state doesn’t give a tax break for 529 contributions so we use the New York plan. It’s been great. Obviously the market has been hot so we’d probably be doing well no matter where we put our money, but I love how user-friendly the interface is.
Thanks everyone! I feel so relieved to have finally made a decision!
I ended up choosing the moderate Utah plan; it seemed pretty user friendly and and I like the fact that I can add the 529 as a bill pay option. I may regret choosing the moderate option in about twelve years, but just about anything has to be better than what his savings account was getting.