I assume I'm going to have to spend a full afternoon reading up on these two plans before deciding on which to use for a 3 year-old and a one-year old? Has anyone found any great advantage or dis-advantage using one or the other?
Has anyone found any great advantage or dis-advantage using one or the other?In 2001, when I did my research and made my choice, the 529 was the clear winner over the Coverdell because of the contribution limits. There was no practical limit to the 529; the Coverdell was limited to $500 a year at that time. I believe the laws have changed since then.We chose the 529 plan sponsored by the State of Alaska, administered by T. Rowe Price. Rationale at the time:• I was familiar with T. Rowe Price and was confident they wouldn’t screw this up.• The funds in the target date plans were reasonable choices. Some other plans (looking at you, Fidelity) seem to be stuffing funds that didn’t belong in the target date plan because I don’t know why.• Texas does not, and likely never will, have a state income tax. I was confident Alaska wouldn’t try to tax my 529 withdrawals in the future. (This was an outlier concern at the time that never came to pass.) We started DD’s 529 the month she was born. $100 a month. We should have saved more. It still grew to $38k over that time. (We prioritized retirement savings over college savings.) Between her scholarships, the 529 savings, and our other assets, we’ll be able to cover this.Hope this helps,- HCF
HaltCatchFire's response reminds me of what we did waaaay back in the mid-90s. We chose Fidelity's 529 sponsored by the state of New Hampshire. Looking at Fidelity's website today, I see they still have the UNIQUE College Investing Plan, State of New Hampshire. My reason for choosing this plan was that I was not limited to a certain set of investment options. I was allowed to invest in virtually any stock, mutual fund, bond, etc. I don't know if that is still the case.
Started researching in 1997 when son was born. We live in NY state but chose the Utah plan,highest rated at the time. NYS improved over the years, and opened an account there, and also for daughter in 2002 (born 2001). Kids are in college now and very happy with our decision. Some comments:1. We are dual income couple and didnt want our kids to start in debt 2. Our goal was to be able to pay for at least a 4 year degree from a public institution.3. I started $25/ month,and increased each year. At one point our monthly contribution was our highest monthly expense (several hundred per month per kid),because we could, we thought the trade off of 2 full time jobs vs a stay at home parent was the right thing to do, even if it delayed retirement.4. Almost all financial info says fund your retirement first, but we wanted to fund our kids education. We talked to other parents and felt the same way and never regretted putting their kids education first.5. Savingforcollege.com was a great resource, and still is.6. We are in NY, and the NY plan became very attractive. State tax deduction, and tax free withdrawals for qualified expenses. 7. Balances can be moved between family members8. The qualified expense definition has expanded, and may offer additional benefits.9. Although funds can be moved, we started to be concerned about contributing too much, and started backing off contributions. If you contribute too much, you can move funds to another family member, or pay a penalty for withdrawing. I think this is the biggest watch out.10. Son graduates in the spring, and has enough for a year of grad school. Daughter is a freshman, and has 3.x years paid for. My strategy is to pay the last bit out of pocket if we need to.11. My opinion is finding a 529 was one of my best financial decisions based on our goals, but make sure to shop around and look at different plans!
Thanx very much for the info, your thoughts and experiences, the link, and how you came about with your decisions. I owe you a craft beer (or a soda pop) if you make your way to Asheville, NC anytime this year.
You should check your state's tax laws. Indiana gives you a 20% *credit* for putting up to $5K into a 529. By funding a 529 from the state-approved source, you can give yourself $1000 off your state income taxes. If NC does anything like that, the 529 is a big plus, even if you combine one with a Coverdell. Apply for all possible scholarships. When one of my kids graduated, the local Coke bottling company gave $500 for four areas: Math, Arts and two others. They only awarded three that year because nobody even applied for the Arts one. I couldn't help but notice that several kids were going to such-and-such college to study Art or Music (which is one of the Fine Arts). My local alumni group offers a scholarship to our (out of state) school, which some years goes unclaimed because nobody applies despite the college matching (so our $600 turns into $1200 for the student). One year we awarded it to a B+ student with a ton of extracurricular activities, so you don't have to be a 4.0 class president and science fair winner to get money.
You should check your state's tax laws. Indiana gives you a 20% *credit* for putting up to $5K into a 529. By funding a 529 from the state-approved source, you can give yourself $1000 off your state income taxes. If NC does anything like that, the 529 is a big plus, even if you combine one with a Coverdell.NC does not.PSU
"with ten miles behind me and 10,000 more to go", as James Taylor sings. Since a lot of water has to go under the bridge before either grandchild will step on a campus, I'm wondering if 529's can be transferred to another state's plan (if I found there was some great advantage do doing so, such as the example of Indiana giving a break on state tax). Will always hate the BeeGees for their song "Indiana Wants Me". Some radio DJ will cue it up while I'm driving, and I immediately start looking in my rear view, side views, and a place to pull over to the right. Then when they start singing, I cuss them out pretty good.
blacktreechaser - great pop music reference there. Alas, it was R. Dean Taylor who sang Indiana Wants Me, not the Bee Gees.
I have transferred 529 to a different state plan. But check with the plan you are entering to be sure.Started a plan for each Grandchild a few years back. While doing some research found a better fit and transferred the each one. Did a Trustee to Trustee Transfer so no chance of any tax fouls.
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