529 Plans

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.

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!

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.

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.

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.

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.

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 :)

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!

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!

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!

I've been looking into this too. By googling I found several articles comparing the different states, and we picked Utah because it was consistently well rated. As far as I can tell, even though California is pretty good, there's no benefit to using it over another state that is better (unless maybe hoping the tax laws will change?) However, before we invest I am trying to figure out if it's true one should max out a Roth IRA first, and use that as college savings (there seem to be differing opinions on that). I looked into Upromise as well -- seems like a generic cash-back credit card is better (just remember to put the savings into the college fund!) Seems like Upromise is just a sneaky way to make you feel good about spending too much money!
And as for fresh air, I'm sure that's helpful too :)

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.

Hi R.. My son has one set up by my Grandparents through the state of Michigan. We went with a conservative plan because I'm not all too familiar with stocks and money-management accounts. I spoke with a TIAA-CREF rep. who was very informative and helped me find the plan that worked best for me. Their 800 # is 1-800-974-2013, give them a call and they can help you with all your questions.

The only downfall I have found with these types of accounts is that my son has lost $55.64 in his last statement and I fear because of the economy plummeting this loss might increase over the next 6 months or so.

Good luck! I wish I had something like this growing up instead of having to pay back almost $50,000 in student loans!!

Cheers,
Jenn

My husband has actually set up an account through Upromise. We had gotten the brochure at Stater Bros. We have our debit, credit, grocery store savings cards, and even cards of my parents signed up. Purchases of certain products and at some stores will qualifiy to have a portion of the purchase price go in your account!!! It's not much, but if you have lots of cards signed up from family the little bits add up from things you would be spending on anyways. Then when we can we pitch in some money. Check it out here: http://www.upromise.com/

I too went with the Fidelity 529 for CA. I've had my 401k with Fidelity for years and have always had good experiences with them, so I trusted them with my daughter's college fund. I went with the most aggressive plan because I started early (like you), when she was about 9 months old. I started it with $600 and will add a little bit each year. Hopefully it will grow to be big enough to cover all the expenses when she's ready for college!

Hi R.,
I set up a 529 for my son through Wells Fargo when he was about 3 (he's 5 now). We signed up for the California State 529 plan which is through Fidelity Investments. We are very happy with the plan and the return on investment. The 529 money does not have to be used just for tuition - it can be used for other expenses.

If you look on line you can get complete information on what the 529 covers.

Good luck.

It's been some time since I researched this, but I chose to go with the Nebraska plan. I do not remember all of the research I did or why I chose Nebraska, but I did do thorough research. Since, I've been very satisfied and their customer service is outstanding.

However, I am also a member of Upromise (www.upromise.com) which I highly recommend to any parent...it's free money!!! My Nebraska 529 plan cannot be linked to Upromise. Although I've been procrastinating about it, I'm looking at opening another 529 account specifically to be linked to Upromise.

So....my recommendation is to join Upromise, look at and compare the plans offered by them, and choose one of those. There are some good plans that can be linked to Upromise and you'll gain the benefits of free money from Upromise.

And, in response to some negative thoughts some have about Upromise, I can only say that you can't change your shopping habits to benefit your Upromise account. It's not a ton of money you earn, but well worth joining. I already shop online and have been thrilled when I chose to buy product on certain sites because they have the best prices/shipping rates and before clicking the "checkout" button learned they are a Upromise member and I got "free money" from the purchase. I still use my best "cash back" credit card for the purchase and don't change my shopping habits. I also get small returns from normal grocery shopping and again don't do anything different. I earn about $150 a year in "nickle and dime" offers. I think it's all well worth it!!!

Hi R.,
I know people who can set you up with these types of accounts. Another option would be a coverdell Ira, this money can be used for school expenses as well. The guy who set us up has a computer progam where you punch in how old your child is, the college you would like him/her to go to, and it will tell you the amount you need to save/month to fully fund your child's education. It is awesome. It has a database of all the schools and it will tell you how much it will cost in future dollars based on inflation to send your child to that specific college. Let me know if you want his number. E.

We have a John Hancock Plan which we've been satisfied with...Talk to a financial planner and let them help you figure out what would give you the best results.

I don't know anything about them, but I think it's great that you're planning your child's education. I wish more people were as on it as you are!

We opened a Vanguard 529 but from Nevada (even though we live in CA). My finance guy said this was the best option for us and even when I looked into other options, this one seemed the best. It's a pretty big openning balance, but the rates are good. I know Vanguard has a lot of options, so maybe there is one that works for you. Good luck.

I have been doing uPromise for about 6 months. You get contrinutions from participating companies (ziploc, etc) just by linking up your grocery store card. Also, I got a Citibank uPromise visa that gives me 1% on all purchases.

So far I haven't made a ton of money but it's better than nothing!

I am trying to decide what is best for my kids investments too and just started looking at 529 plans so I am glad you posted this.

I will be checking out all the sites that everyone here has recommended!

Thanks!

Take a look at Upromise. It only pays a few cents but after 2 years I have received an additional $80 to my daughters account. It is not a program that will suit everyone but it is worth taking a look at.

In Nevada, our State Treasurer's office has a couple of plans. My daughter's 4-years of college will be paid by the time she graduates.

Hello! Yes, I have looked into it and we decided to go with a Roth IRA instead. The only reason, is the 529 college funds are more restrictive...whereas a Roth IRA can be used for college funds, to buy a home, etc. etc. The problem with a Roth is the current annual contribution amount is $4K and once you hit a certain income level (I believe it is $95K a year for a single person in 2008), your annual allowed contribution rate goes down pro-rata based on the income level in excess of $95K and is eventually phased out.

Another good thing about a 529 investment is if you do not use it on one child, it can be used on another. But, if they do not decide to go to college, you lose out on the benefit.

Good luck and hope this helps!

There are other options our there that are better... so I would recommend doing a little homework and weighing the pros and cons. For example, the money in a 529 or an educational IRA is not accessable to your child if he/she does not go to college. bummer huh? There are also tax consequenses that you will have to face in any plan you look into.
We decided to get a life insurance policy for our son because we can draw on the cash value without paying taxes, and in an investment fund, it has more oppertunity to grow than some other plans. There are also some with garantees. (NOT the Gerber plan though... have you read the fine print? It is a whole life policy and quite a dinosaure. There are MUCH better plans available in this day and age.)
You might want to talk to a financial adviser to get a good idea about the options out there.
My husband is in that business, and you are welcome to call him if you don't know of someone reliable in the financial field. Jeremy ###-###-####

Good luck!

Check out the Fidelity Scholarshare plan (for CA). They offer funds based on your child's high school grad date, so you don't have to manage them yourself. I use Fidelity for several of my accounts and have been extremely happy with their service. They also offer a no annual fee AMEX card linked to the account, where 1.5% of what you spend gets deposited in your account... it can't be any easier than that! They also offer other plans if you are not in CA.

I opened a plan for each of my grandkids. I use Iowa Vanguard. I don't pay any fees. My son in law opened a U Promise account and has a charge account associated with it. A percentage of what they purchase goes into the account. It is like a reward visa that accumulates points towards airline miles, but the reward is monetary that goes into a Vanguard 529.