How would you save to fund your childs education, I have 16 plus years to save?

Question

How would you save to fund your childs education, I have 16 plus years to save, I am looking for ideas on how to save for kids educatiion. I have some time but I am curious what type of investment option you would take and why.

Answer 1

I'm one of the few people who frown on 529s. Did you know that if that money is not used for education, say your kid is a slacker and doesn't go to college, that it is subject to a 10% Penalty + normal income taxes on the gains?

First off, if you are not saving enough for retirement, put that first. I know it sounds selfish, but your kid can get federal loans, grants, scholarships, can work, etc. There are no scholarships, grants or loans for your retirement.

Second, consider using a Roth IRA to save. Because a Roth uses after tax money, you can withdraw your contributions before retirement age without penalty. Contributions only! Not earnings. If the child goes to college, there's the money. If not, it's more money for your retirement.

However, if you decide to go the 529 route, please use the site I've linked to help you choose a good one. Clark Howard, a syndicated radio consumer advocate has prepared a list of the top plans.

Answer 2

I don't think 529 is a good idea. Look into Traditional IRA, I believe if you decided to withdrawal from it to pay for your kid's tuition, it would be tax free. That way, the money is totally tax free, because even when you contribute to your TRADITIONAL IRA account is Pre-Tax dollers, that means, it will lower your income tax bracket. Do pay attention to the annual maximum. I believe is $13,000 a year now. But do double check...

Answer 3

Im going the 529 route. Pick a plan with low transaction fees and see what your state's plan is, as you may qualify for a small tax advantage using that plan.
I found that the 529 may give me the most flexability.

Answer 4

mutual funds