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LA Start Plan
Posted on 7/18/14 at 1:54 pm
Posted on 7/18/14 at 1:54 pm
MT,
Give me the pros/cons of opening an LA Start Plan account for my 3 yr old daughter. What are the advantages/disadvantages? Should I just open a investment account instead? Lay it all on me.
Thanks.
Give me the pros/cons of opening an LA Start Plan account for my 3 yr old daughter. What are the advantages/disadvantages? Should I just open a investment account instead? Lay it all on me.
Thanks.
Posted on 7/18/14 at 1:59 pm to ThatsAFactJack
Personally, I don't like accounts that you can't touch. I'd just invest in an account you can use for other things and take the tax hit as the cost to have flexibility.
Imagine she gets a scholarship somewhere and doesn't need the money or has TOPS, etc. I'd rather have the money available for a variety of uses rather than having it locked in an education specific fund (unless you feel like it is easier to not spend the money by having it inaccessible- in that case, go for it).
Imagine she gets a scholarship somewhere and doesn't need the money or has TOPS, etc. I'd rather have the money available for a variety of uses rather than having it locked in an education specific fund (unless you feel like it is easier to not spend the money by having it inaccessible- in that case, go for it).
Posted on 7/18/14 at 3:00 pm to ThatsAFactJack
quote:
pros
Money grows tax-deferred. If the earnings are used for higher education, the earnings come out tax free. If you use the LA start plan, you get a limited state tax deduction for contributions.
quote:
cons
If you need to pull the money out, or, if you don't use it for education, you pay taxes and penalties on the earnings. Also, if you took a state deduction for contributions, you gotta put that amount back in as income for state taxes.
Posted on 7/18/14 at 5:19 pm to LSUFanHouston
Huge pro is state matching up to 14% of your contribution based on last years Adjusted Gross Income from your tax return.
Example. Your AGI LAST year was $40,000. You now know for each dollar you contribute to 529 plan THIS year the state will automatically match 11%. That's guaranteed return even before tax free investment growth. If you know one tax year may be better or worse than others you can make contributions planning for it. The match is between 2-14% based on last years AGI.
With the match, tax free growth, state tax deduction it's a no brainier. My daughter starts LSU this fall and we have fully funded. If you are worried about getting TOPS etc and not needing so much of your 529 then don't fund as much along the way. You can transfer the money to another beneficiary though like other children, grandchildren or others.
CON. Nothing of note that wouldn't be offset by advantages in my experience.
Example. Your AGI LAST year was $40,000. You now know for each dollar you contribute to 529 plan THIS year the state will automatically match 11%. That's guaranteed return even before tax free investment growth. If you know one tax year may be better or worse than others you can make contributions planning for it. The match is between 2-14% based on last years AGI.
With the match, tax free growth, state tax deduction it's a no brainier. My daughter starts LSU this fall and we have fully funded. If you are worried about getting TOPS etc and not needing so much of your 529 then don't fund as much along the way. You can transfer the money to another beneficiary though like other children, grandchildren or others.
CON. Nothing of note that wouldn't be offset by advantages in my experience.
Posted on 7/18/14 at 5:24 pm to Crbello4Hiceman
We have it for my daughter. I chose four vanguard funds. Small, mid, large, and international. In ten years or so ill put a bond fund in the mix. I v think it's great. We put 100 a month in and a 1000 lump sum once a year. Performance has been solid so far, as would ve expected since my daughter is only 2. There are other ways to go aside from the vanguard funds but i know little about them. Also depending on your household income. They match a little at the end of the year.
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