529 Plans

http://www.kiplinger.com/columns/drt/archive/2005/dt05061...

listing pros and cons

http://www.savingforcollege.com/kiplinger/plan_details.php
best plans

good luck!

4 moms found this helpful

A good friend of mine passed this info along to me a while ago. We haven't set it up yet but plan to - it sounds like a great way to go.

It's called "CollegeBoundFund" by Alliance Bernstein. It's a Rhode Island-based 529 account that grows federal tax FREE and as long as you are withdrawing funds for school purposes, you can withdraw that TAX FREE too! AND it is open to CA residents, does not discriminate based on your yearly income, and you can open it with a minimum of $1000. All subsequent contributions can be as little as $50. The first year we had this for Vivian, it grew by 10%! huge! Bonus: Your name is on the account, too, so if your child is brilliant and earns a full-ride scholarship somewhere, YOU can retrieve all the funds for something else...(taxed). Just google "collegeboundfund" and you can obtain the information you need to get started.

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Interesting that you ask...I just set one up for my 10-month old last week! They are great, for you can suggest to those who don't know what gift to get your wee-one that they make a contribution to her college fund. And, if you sign up for BabyMint which piggybacks your 529, you get a % back on purchases. So, if you use a credit card for regular purchases and you're not worried about accumulating airline miles or gas discounts, you can earn money that directly goes to the 529 of your choice as well(no annual fee)! You also can get family members and friends to do the same for your account.

The cool thing about 529 plans is that they give you a higher percentage than a Coverdell Education Savings Acct, do not have a cap to the annual contribution (Coverdell has $2K max), 529 withdrawals are tax free as long as they are used for education purposes, if your daughter gets a scholarship, the amount may be removed without penalty, and if your little one decides not to go to college, YOU can use it for yourself to take any classes you wish tax free. There is a nominal annual maintenance fee ($20 in my case).

My financial planner suggested this after I had already set up the Credit Union and Coverdell college plans. I am much happier now...with many more ways to get money into her acct, particularly with family members who are BabyMint card holders :)

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Hi R.,

I would recommed checking out Utah's 529 plans (www.uesp.com). I chose them after I went to the MorningStar website and found that Utah was among their top five ranked plans.

Many states give tax incentives to their residents for investing in their 529 plans, however California does not. Therefore there is no benefit for choosing a CA plan over another state's (unless of course you just really like the plan).

Keep in mind that some states may offer plans that will automatically adjust how the money is invested as the child gets older (becoming more conservative the closer they get to college). If keeping close tabs on the investments and tweaking them occasionally is not something you feel comfortable with, look for a plan that will do that for you. (Utah does offer age-adjusted plans and plans that don't automatically adjust).

Anyway, I spent many, many hours researching this myself and did finally choose the Utah plan. My last piece of advice is to look at what the plan will cost you...many plans take money up front just as a fee for investing ("load funds") and then may also take a piece of what your investment makes. Try to find plans that are "no load" so that the most money possible is invested up front (or at least try to find a plan with a very small load fee). Definitely go to the MorningStar website and check out the page where they list all the states 529 plans (http://www.morningstar.com/529/529Table.html), give you their rating for each, and tell exactly what fees are associated with each one. (They break it down very nicely in terms of what a $10,000 investment will cost you over the course of 10 years for each state's plans). It can be a little overwhelming at first, but is a great resource if you have some plans already in mind...

Hopefully you can make sense out of all of this! Good luck! I know how much time it can take to really feel like you're making the best decision... (by the way, the Utah plan that I selected is already up almost 10% since we invested in February! It helps that the market tanked before we did invest, however...)

All the best!
G.

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We decided to go with a variable annuinty 250K life insurance with cash surrender and guranteed 6% return. I don't like the fact that 529's have to go to college only. With our plan, we can take up to 90% out in cash, no taxes, for anything, and still continue to have life insurance at the age of a 3 year old. We will control the account until we think he is cabable of maintaining it.

2 moms found this helpful

We opened 529 plans for our sons with Utah (Utah Educational Savings Plan). Since there is no tax benefit to opening a 529 in California, we looked out of state. The Utah plan has one of the lowest fees available and no minimum contributions. The funds are managed by Vanguard. Other inexpensive plans are Illinois and Ohio.

Check out www.savingforcollege.com to compare different state 529 plans. There is a great message board on the site if you have any questions.

good luck!

2 moms found this helpful

http://www.savingforcollege.com/ has the 529 plans broken down by state with the lowest fees. I read an article by CNN that 529s are the best way to go when saving for college. Also be sure to put the account in your name, but for your child, NOT in your child's name (when it comes time for college and you fill out the FAFSA, the gov't takes much less of your money into account as available for college, but much more of your child's money into account--this means your total contribution to tuition will be lower according to FAFSA and your child will be eligible for more free aid like grants that don't ever have to be repaid!) Hope this helps.

2 moms found this helpful

Clark Howard has a wealth of information on his website about 529 plans. clarkhoward.com. He is a radio talk show cheapskate who knows the best deals of everything. Some state's 529 plans are supposedly better than others, and he lists the good states on his website. I am in California and it was rated pretty good by Clark so i went with it.

I enrolled my girls in Fidelity Fund's 529. It is pretty easy. I would retain proprietorship of the fund instead of putting the fund in the kids name as owner of the fund so you can take better advantage of college grants and other aid and also to maintain controll.

Vanguard may have them as well. Both Fidelity and Vanguard are no load funds and are real knowledgeable on the phone. They'd be happy to help as well.

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I haven't looked into it yet because we're not in the financial shape to do so, but that's the advice that I am going to give you- look at your own finances first. Make sure that you have all/most of your debt paid off and a good handle on your retirement fund before starting something for your child's education. Paying for a child's education is becoming less and less realistic for parents as both the average debt and cost of school goes up. While it would be great for you to contribute, you also have to think about what affect it will have on your children if you do not save enough to sustain yourself through your retirement. But obviously I don't know your financial situation, so go for it if you can! And I think that any of the 529 plans or the IRA's are a good idea- talk to someone at your bank, as well as looking for input here.

1 mom found this helpful

Hi R.,
I'm in the process of setting up a 529 plan for my son, and as a CPA I have some contacts in the financial community. The plan that's been recommended to me by a financial advisor that I trust as the best and cheapest is American Funds CollegeAmerica which is sponsored by Virginia. Here's the web-site. http://www.americanfunds.com/college/college-america/inde...
You're right; the choices seem endless. Happy hunting!

1 mom found this helpful

Hi. The 529s are fairly easy to deal with especially if you do it online. I get intimidated by long-term/investment/financial stuff but even I could handle this. If you Google 529s you'd probably get a huge list of sites dealing with this that would clearly spell out the rules and regs of each state's 529 re: transferring to an out-of-state fund or college. I started 529s for my kids with California ScholarShare. At the time, TIA-CREFF ran the program and it later changed to Fidelity. If you can't find this 529 under the California ScholarShare name through Google, try going through Fidelity instead. Their customer service reps on the 800 # telephone line are very helpful so they can walk you through finding it if you're having trouble. Basically the California 529 will allow you to use the money in your account for accredited colleges all over the country, not just in California, so that's another reason I chose it. I think most states allow this now. Once you open the account you can set it up online to take automatic deposits from your paycheck or you can do it yourself periodically by transferring money from your bank account into the 529s. I do not remember the tax implications of 529s, so you should check into that on your own. However, once I got our kids' accounts set up through the Fidelity web site it has been a no-brainer to transfer money into their 529s monthly. Because it's easy and not intimitading I'm actually saving for college now as opposed to just sometimes tossing a little extra money into a bank savings account, where it wasn't gaining any interest. Good luck. You're smart to start with this so early, trust me!

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