529 College Savings Plan - A good idea?

Question

My husband and I have one for our daughter. She is 8 and it has $3,500 in it. We contribute $75 monthly. Is this a good college savings plan? How will this effect her financial aid once she gets to college? I just went back to school and have to include it on my FAFSA, even though it's not for me! :(

Answer 1

509 is good to

Answer 2

Absolutely! He has at least, what, 12 years for that money to grow? 12 years of compound interest plus whatever you invest in on a consistent basis will really add up. And consider this: a 529 plan is the only one of its kind that offers a tax-deferred and a tax-free component. If all the earnings go towards college expenses, no taxes are paid. Yes, this is a very good idea. Your son will thank you in 12 years. Good luck to you as well.

Answer 3

It's an excellent idea, as long as the tax preference remains in effect (it needs to be renewed in 2010 I believe).

The assets are not your daughter's - they are yours, so they would be treated the same way that any asset that you have (typically, an asset held by the child is given less favourable treatment (meaning that a school expects the child to give over a greater percentage of it) than an asset held by a parent - the belief being that the parent has other financial responsibilities to attend to).

Where else are you going to get an account that grows tax deferred while it is in the instrument, is not taxable ever as long as withdrawals go to educational expenses, gives you a deduction on your state taxes, and is transferable to any other family member if there is any money remaining?

You have to include it in your FAFSA because it is considered your asset - technically, as the owner, you could choose to liquidate it and spend it.

That being said, you are not limited by the number of accounts that you can have as long as they are for different beneficiaries, and in most cases you get a state tax deduction for each account you maintain; why don't you open an account for YOURSELF and paya portion of your educational expenses out of that account so that you can get the state tax deduction (up to the maximum per account) for your costs as well? Some states have a minimum period before first withdrawal (it's never more than 1 year), so check the regulations.

Answer 4

In my opinion it's not as good as the Coverdell Plan.

YES 529 heavily affects your chances of recieving financial aid. This happens because whatever you invest now will be considered apart of your Expected Family Contribution (EFC) and if you EFC is too high then you will recieve little if anything back.

It also depends on where your child goes to school. This is pre-paying for a state school- what if he/she gets accepted into Harvard?

It is a GREAT idea to begin saving now for your child's education. Honestly the best way would to be just hide money under the mattress that no one knows about. Since that's not exactally practical, I reccomend looking in to the Coverdell Plan.

I write blogs on student loans and I just wrote on reguarding this topic of 529 plans- you may want to check it out. http://www.toryforpresident.com .

Answer 5

best plan out there... for FAFSA, its considered owner money, so they weigh it less. dont count of gov't hand outs, it is always less than you expect. plus you usually get a state tax deduction. leftover money can be transferred to other children or even yourself without tax or penalty.