[hav2pass]

I have been trying to get started on investing in an education plan for my 5yr old. Preferably with tax savings obviously.

My Q – is it better into get a state plan or not? I love Texas but I don’t know if I will be able to stay here that long. Do these plans transfer if we change states? Is there any other popular plan – stability wise? All these financial meltdowns make me not trust any bank or insurance co….lol

BEC 86 (expires Sept'11)
FAR 85
REG 87
AUD 8/27 - waiting

[jeff]

I have my kids in a 529.

[Anonymous]

Per the suggestion of our financial advisor, we have our kids' college savings in a Roth IRA. Not the traditional college savings plan, but we max out our 401(k) at my husband's job and also have an investment account. Money can be withdrawn from a Roth for education expenses. If you don't use all the money in a 529 for college, you have to end up paying taxes on it.

I would suggest meeting with a financial advisor. I was a little hesitant about it b/c being an accountant, I thought I knew all there was to know about basic investing, but I have learned so much and feel much better about where our money is going.

[jeff]

apbandj – the problem with that is there is a yearly max contributions for a Roth. So – if you put the college $$ into a Roth – you're leaving $$ on the table that you could have contributed for retirement purposes.

If they don't use it for college – it's taxable…so be it. I'd rather have my Roth maxed out + 529.

I'm not a financial adviser though…take that with 3 grains of salt.

[Anonymous]

I totally understand where you are coming from, and doing it this way is not for everybody. We max out our 401(k) b/c my husband's company has a great match plan and also invest some in the stock market. I realize we are leaving extra retirement savings on the table by using the Roth as a college savings plan, but we really cannot afford to put more than $10,000 (5k for each kid) away for college each year (and can barely scrape that much together). Plus we are comfortable with what we are saving through other means to use the Roth for this purpose. And while I want my boys to go to college and will pretty much force them to, there is a chance they won't go. Then all the money saved in a 529 will be taxed at a higher rate b/c we will be older and in a higher tax bracket.

That's why I think it's important for everyone to meet with a financial advisor. I was all for the 529 until I talked to this guy. And perhaps when I go back to work, we will open one. There is nothing wrong with them and they are a great option, but there are other options, too that are outside of the box. 🙂

[Minimorty]

Couple years old but still relevant:

https://www.forbes.com/forbes/2008/1110/071.html

I have steered clear of 529's primarily because of the limited investment options and the administrative fees.

[jeff]

Pretty sure you can put your 529 in whatever you want.

I have mine in American Funds' Growth Fund of America.

[Minimorty]

@Jeff – I believe the investment options vary from state to state. Most are restrictive though.

[hav2pass]

Thanks all for the input. Nice to know what others r doing. I think after I research and read the above document, I will meet a financial rep for some situation specific advices.

BEC 86 (expires Sept'11)
FAR 85
REG 87
AUD 8/27 - waiting

[Author]

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