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Best college saving plan?
Posted on 9/17/15 at 9:17 pm
Posted on 9/17/15 at 9:17 pm
We have our first child and he is 2 months old. We want to go ahead and get a college savings plan started. It seems that a 529 plan is the way to go? Just wanted to check here and see if that is accurate.
TIA
TIA
5
Posted on 9/17/15 at 9:52 pm to GatorReb
What state are you in? It's my understanding that usually the one the state administers like START in La. is usually the best when it comes to fees etc.. There is a match often involved also.
Posted on 9/17/15 at 10:07 pm to achenator
Georgia
Posted on 9/18/15 at 8:09 am to GatorReb
I've been contributing $100 per month for both our daughters in the LA Start College Savings program. We're moving to Tennessee so I'm not really sure how that will change things. I'm planning to just keep contributing to the LA account because I think we'll move back there at some point.
Posted on 9/18/15 at 8:29 am to GatorReb
quote:
It seems that a 529 plan is the way to go?
1. Your AGI matters for matching purposes.
2. How much money do you want to tie up in a college related only expense account where you're penalized 10% for non qualifying withdrawals? If your kid doesn't go to college or gets a scholarship, you might get stuck with a large surplus in that account that is subject to that penalty upon withdrawal.
3. Consider doing a portion in the 529 and a portion in a roth if you qualify for a roth and aren't maxing it out already.
Posted on 9/18/15 at 2:12 pm to LSUAfro
Utah!
Posted on 9/18/15 at 2:57 pm to Chaplain
quote:
We're moving to Tennessee so I'm not really sure how that will change things. I'm planning to just keep contributing to the LA account because I think we'll move back there at some point.
You can use the funds at accredited out-of-state schools.
Posted on 9/18/15 at 2:58 pm to LSUAfro
quote:
3. Consider doing a portion in the 529 and a portion in a roth if you qualify for a roth and aren't maxing it out already.
Roth? Why not just max out the Roth and open up a separate brokerage account for supplemental college savings with no withdrawal penalties at all?
This post was edited on 9/18/15 at 2:59 pm
Posted on 9/18/15 at 3:02 pm to meeple
quote:
Roth? Why not just max out the Roth and open up a separate brokerage account for supplemental college savings with no withdrawal penalties at all?
quote:
Consider doing a portion in the 529 and a portion in a roth if you qualify for a roth and aren't maxing it out already.
Am I missing something?
ROTH contributions may be withdrawn without penalty. Money is fungible, so I suppose you could say it doesn't really matter where you take the money from as long as you don't incur a penalty somewhere and doing so doesn't mess up any other overall goals/tax strategies.
So in this scenario, if necessary the 529 can be used up since no penalty will be incurred by withdrawals for educational expenses, and hopefully limit "waste" by not having 529 savings > costs. If there is more to cover, contributions from the ROTH will be used to cover the remainder, while any return on investment will be tax protected remaining in the ROTH. This suggestion was offered IF the person isn't currently maxing the ROTH.
A separate brokerage account is going to incur capital gains taxes upon liquidation and not to mention every year, while the 529 and ROTH will not if contributions only are withdrawn.
The thing is, there are a multitude of different ways to pull this off with various types of accounts I imagine, depending on each individual's current and expected financial situation. Sometimes labeling a specific account for a specific goal can obfuscate that and the options available.
This post was edited on 9/18/15 at 3:16 pm
Posted on 9/18/15 at 3:19 pm to Teddy Ruxpin
You could always have more kids if you realize the first kid(s) won't exhaust the 529. Move to Orleans or EBR Parish, put kid(s) in public school, and make sure they play every sport instead of just 1 so they don't get too good.
That should help to avoid the risk of scholarship.
That should help to avoid the risk of scholarship.
Posted on 9/18/15 at 3:21 pm to LSUAfro
quote:
You could always have more kids if you realize the first kid(s) won't exhaust the 529. Move to Orleans or EBR Parish, put kid(s) in public school, and make sure they play every sport instead of just 1 so they don't get too good.
That should help to avoid the risk of scholarship.
I already have my strategy to label my child a minority from birth.
Don't steal it.
This post was edited on 9/18/15 at 3:22 pm
Posted on 9/18/15 at 3:22 pm to Teddy Ruxpin
I don't doubt it. Posted on 9/18/15 at 4:17 pm to GatorReb
You can buy any state's 529 Plan. For a lot of people, Utah is the best option, but some states do give their citizens tax benefits for choosing their plan. Not sure about Georgia, so you'll need to look into it.
Posted on 9/18/15 at 5:07 pm to AnonymousTiger
UESP is by and far the best if you don't care about the tax incentives offered by your state. For example I'm a resident of Texas so I don't care about a deduction on my state income taxes so I go the UESP route.
Posted on 9/18/15 at 5:32 pm to OleWarSkuleAlum
That's an easy decision since Texas doesn't have state income taxes.
Posted on 9/20/15 at 4:57 pm to meeple
If overfund a tax free cash value plan-it can also be a supplement for your retirement. When you borrow against the cash value you never lose the compounding growth to act as a liquid tax free pension for your retirement?
Thoughts?
Thoughts?
Posted on 9/20/15 at 7:08 pm to player711
The tax advantages go away if not used for education. Otherwise, you pay taxes on earnings and pay a 10% penalty.
Posted on 9/21/15 at 7:00 pm to GatorReb
Max your retirement savings completely including any IRA you are allowed to contribute to.
If you have more money to save, open a 529.
College savings is certainly a lower priority than retirement savings.
If you have more money to save, open a 529.
College savings is certainly a lower priority than retirement savings.
Posted on 9/22/15 at 7:50 pm to GatorReb
I don't totally understand the saving for college thing. Who even knows if the child will go to college. I'm not convinced that college will be a critical in 18 years. I think it Is over-rated now. That said...
Total non-expert here, but I have sent two kids to college so far and it has cost me only room and board for one child. Here is how to minimize college costs and pay for college:
- Marry a smart woman. Have smart kids.
- decide whether child will go to a public university or a private school with a large endowment.
- if public university, choose a state that pays for tuition and live there - Louisiana or Georgia come to mind. Smart kid gets extra scholarships and banks $20,000 in extra scholarship funds over 4 years.
- if private university, the more money you save the more they will decrease the amount of financial aid they offer. Buy a bigger house, a boat, or fancy car instead - if you don't have much savings they will offer you more financial aid. Choose the private university wisely and your cost won't be any more than a cheap public school.
Total non-expert here, but I have sent two kids to college so far and it has cost me only room and board for one child. Here is how to minimize college costs and pay for college:
- Marry a smart woman. Have smart kids.
- decide whether child will go to a public university or a private school with a large endowment.
- if public university, choose a state that pays for tuition and live there - Louisiana or Georgia come to mind. Smart kid gets extra scholarships and banks $20,000 in extra scholarship funds over 4 years.
- if private university, the more money you save the more they will decrease the amount of financial aid they offer. Buy a bigger house, a boat, or fancy car instead - if you don't have much savings they will offer you more financial aid. Choose the private university wisely and your cost won't be any more than a cheap public school.
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