Saving for your kids' education

[mUUser]

Because a California-based plan wouldn't have helped me from a tax perspective, I went with Schwab's 529 program which I think is based in Kansas. But we can use the plan anywhere.

Good point. Start with your own state's plan as it might give you a state tax benefit. Ours does and provided a decent choice of investments so went with it. However, if it doesn't fit your needs, move on to other state plans.

Start with this web site for basic info:

http://www.savingforcollege.com/529_plan_details/

[Uncle Ted]

We decided to go with education IRAs for our kids. It has lower limits than a 529 ($2k/yr), but (like a traditional IRA) it allows you to directly control how the money is invested. We maintain a 25/75 blend of bonds/stocks respectively; US treasuries for bonds and nothing but GOOG and AAPL for stock.

Does BYU participate in any 529 plans? They didn't when I started my oldest son's EduIRA. But that may have changed.

cheers.

The Texas 529 plan "can be used at any accredited public or private post-secondary institution in the United States and abroad. This includes most two-year and four-year colleges and universities, vocational and technical schools, graduate schools, professional, medical and law schools."

And you don't have to be a Texas resident to enroll.

[Uncle Ted]

What if you have 529s but don't end up using all of the money after your kids have graduated? Can you withdraw the money and take the tax hit? I'm assuming you don't have to forfeit it.

From the FAQ...

What if my beneficiary does not go to college?

As the account owner, you always have control of your withdrawals. If the beneficiary chooses not to attend college, you have three options:

Keep the funds in the account. Since there are no age restrictions on the investments, they will be available in future years if the beneficiary changes his or her mind about school.

Change the beneficiary. You can change your beneficiary at any time, provided that your new beneficiary is a qualified family member. You should consult your tax advisor to determine whether this may create a taxable gift.

Make a nonqualified withdrawal. Earnings will be subject to federal income taxes and any applicable state income tax, as well as an additional 10% federal tax.

[landpoke]

Get a coffee can, start putting all your change in it, when full bury in the back yard. Repeat until college.

Bonus tip: Make a map of where you buried the can(s). You wouldn't want to condemn your children to a fast food career because you can't remember where you buried their college fund.

[Uncle Ted]

Teach him how to throw a ball and pray for a scholarship.

Yes, the 529 even has a provision for that...

What if my beneficiary receives a scholarship?

If your beneficiary receives a scholarship for higher education expenses, you can withdraw an amount equal to the value of the scholarship from your account(s) or account. Earnings on the amount you withdraw would be taxed at your tax rate but will not be subject to the additional 10% federal tax.

Mom and Dad get to go on a nice vacation.

[Moliere]

MJ and I discussed this about two weeks ago and determined a 529 plan is the way to go. Then we ran the numbers in some online calculator (Schwab?) and found out that college is expected to cost us around $369,000, and that was only forthe four kids that the calculator allowed us to enter. I guess Schwab thinks people are crazy for having more than 4 kids.

[RC Vikings]

Get a coffee can, start putting all your change in it, when full bury in the back yard. Repeat until college.

Bonus tip: Make a map of where you buried the can(s). You wouldn't want to condemn your children to a fast food career because you can't remember where you buried their college fund.

Are you new around here, we don't drink coffee. Try and keep up.

[ERCougar]

Just a word of caution about 529s--you obviously should max out your own tax-free options first. I'm guessing that colleges look at 529 assets differently from your own assets when determining financial aid eligibility, and if they don't now, they almost certainly will in the future as these things get more popular.

Other than that, utah's 529 is consistently rated as one of the top in the country.

[landpoke]

Are you new around here, we don't drink coffee. Try and keep up.

Well than use one of those giant cans of hard red wheat y'all love so much. This is why SU is always on you people, your religiously inflicted tunnel vision doesn't allow for any dynamic thought.

[pellegrino]

So, I take it nobody wants to buy a bumper sticker.

[falafel]

Just a word of caution about 529s--you obviously should max out your own tax-free options first. I'm guessing that colleges look at 529 assets differently from your own assets when determining financial aid eligibility, and if they don't now, they almost certainly will in the future as these things get more popular.

Other than that, utah's 529 is consistently rated as one of the top in the country.

Are you talking about retirement savings or some other tax-free college savings options?

[RC Vikings]

Well than use one of those giant cans of hard red wheat y'all love so much. This is why SU is always on you people, your religiously inflicted tunnel vision doesn't allow for any dynamic thought.

Thanks Landpoke. You know when all hell breaks loose I hope you are one of the gentiles that is spared, and I mean that from the bottom of my heart.

[ERCougar]

Are you talking about retirement savings or some other tax-free college savings options?

Retirement. Thats the first priority. Better to save now and then stop saving for retirement when your kids hit college (if you have to), then put some money that could go into retirement into a more restricted 529 plan now, particularly given likely financial aid implications.

[CardiacCoug]

Just a word of caution about 529s--you obviously should max out your own tax-free options first. I'm guessing that colleges look at 529 assets differently from your own assets when determining financial aid eligibility, and if they don't now, they almost certainly will in the future as these things get more popular.

Other than that, utah's 529 is consistently rated as one of the top in the country.

ER, I hate to break this to you, but your kids aren't going to get any need-based financial aid for college unless you lose your medical license.

[landpoke]

Thanks Landpoke. You know when all hell breaks loose I hope you are one of the gentiles that is spared, and I mean that from the bottom of my heart.

Thanks man. I hope so too.