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529 College plan

529 College plan

Old Sep 18th 2007, 5:51 pm
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Default 529 College plan

Already have a 401K and have an appointment with my investment company with a view to opening 2 accounts for my boys. Hopefully they'll do better than me etc. etc.
Obviously Fidelity are going to highlight the pros of such a plan. So any drawbacks, tips, comments on a 529 as opposed to increasing my 401K contributions or any other plans out there
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Old Sep 18th 2007, 6:42 pm
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Default Re: 529 College plan

We were told to max out 401K contributions before starting to save in a 529. The reason, you can always get a loan for education but you can't for retirement
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Old Sep 18th 2007, 6:43 pm
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Default Re: 529 College plan

Originally Posted by Lord Lionheart View Post
Already have a 401K and have an appointment with my investment company with a view to opening 2 accounts for my boys. Hopefully they'll do better than me etc. etc.
Obviously Fidelity are going to highlight the pros of such a plan. So any drawbacks, tips, comments on a 529 as opposed to increasing my 401K contributions or any other plans out there
Don't know very much about the 529 but assume it's run along similar lines as a 401K, but it's for college, so it can be used to fund your son's college education, whereas AFAIK you cannot withdraw anything from the 401K until you retire - at least not without penalty.

Which Fidelity funds you put the $$$ in is really up to you - it's just like investing in mutual funds or bonds.

Fidelity are good (low charges), but I'd also look at Vanguard (even lower charges).

Trackers tend to have the lowest charges.
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Old Sep 18th 2007, 6:48 pm
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Default Re: 529 College plan

As well as looking at the financial company plans, double check to see what your State Plan is like. The one here in Florida is known to be very good; but they vary state by state.
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Old Sep 18th 2007, 7:17 pm
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Default Re: 529 College plan

Originally Posted by mandpete View Post
We were told to max out 401K contributions before starting to save in a 529. The reason, you can always get a loan for education but you can't for retirement
Good point, I'll raise that on Friday.

Originally Posted by Elvira View Post
Don't know very much about the 529 but assume it's run along similar lines as a 401K, but it's for college, so it can be used to fund your son's college education, whereas AFAIK you cannot withdraw anything from the 401K until you retire - at least not without penalty.

Which Fidelity funds you put the $$$ in is really up to you - it's just like investing in mutual funds or bonds.

Fidelity are good (low charges), but I'd also look at Vanguard (even lower charges).

Trackers tend to have the lowest charges.
I already have the 401K with Fidelity and have done for some years, I'm aware of the mutual funds, contributions that are available rules and limitations.
My question was really wether to add more to 401K versus a separate and additional 529 and any personal experiences with a 529 fund.
A 529 Google search brings up all sorts of contradictions depending on the article.
Appreciate your attempt though
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Old Sep 18th 2007, 7:24 pm
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Default Re: 529 College plan

Originally Posted by Dan725 View Post
As well as looking at the financial company plans, double check to see what your State Plan is like. The one here in Florida is known to be very good; but they vary state by state.
Thanks, didn't even know there was a State plan
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Old Sep 18th 2007, 9:14 pm
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Default Re: 529 College plan

It's all debatable whether its worthwhile...but anyway, I set them up for our kids.

There are plans run by many states, but I believe you can join those of another state if they are more advantageous. In such cases there is no restriction on using the money saved on universities in that state, but there may be advantages for residents of that state.

In Connecticut there is a deduction off your state income tax off of any money you invest in Connecticut's plan - other states may have similar plans for residents.

Also check out Coverdell plans which can be used for any educational expense, not just college, but which I think have lower investment limits.
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Old Sep 18th 2007, 9:24 pm
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Default Re: 529 College plan

It's one of those "ask the questions you'd rather not think about" times, I'm afraid!

However, you need to ask the following questions:
1/ What happens if my children elect not to go on to further education?
2/ What happens if my children get out of control later on?
3/ What happens if one of the children dies?
4/ What happens in the event of my death?
5/ What happens in the event of the death or divorce of spouse and possible marriage into future family?
6/ What happens if grandparents/others want to stump up the money for the kids education?
7/ What happens if we have an emergency need for cash before they go to college?
8/ Have I considered all the alternatives, e.g. Roth IRA?
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Old Sep 18th 2007, 10:17 pm
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Default Re: 529 College plan

Originally Posted by fatbrit View Post
..........8/ Have I considered all the alternatives, e.g. Roth IRA?
Only eligible if joint earnings less than $160k, I believe...
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Old Sep 18th 2007, 10:20 pm
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Default Re: 529 College plan

Originally Posted by Elvira View Post
Only eligible if joint earnings less than $160k, I believe...
Around that, yes. But there are other plans and ways of doing it. Just saying he should consider them all since the "financial adviser" will usually be pushing the one that pays the most commission (or the one his boss promised him a $100 gas card for every one he sells this week) rather than the one that is best for his specific circumstances.
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Old Sep 18th 2007, 11:02 pm
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Default Re: 529 College plan

sod the education, go for 401K...because if you've saved for college you won't be eligible for as many loans/scholarships etc because you've got the money...
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Old Sep 18th 2007, 11:15 pm
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Default Re: 529 College plan

Originally Posted by Lord Lionheart View Post
Thanks, didn't even know there was a State plan
Looks like you are right - the one in California is through Fidelity anyway:

http://www.savingforcollege.com/529_...plans_by_state

The prepaid one in Florida is guaranteed by the state; so its pretty much a no brainer here.
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Old Sep 18th 2007, 11:27 pm
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Default Re: 529 College plan

Originally Posted by Bob View Post
sod the education, go for 401K...because if you've saved for college you won't be eligible for as many loans/scholarships etc because you've got the money...
Is it really as simple as that? If that's the case why would anyone bother.
The biggest incentive for me is
a) So my sons have something starting out
b) It's pre-tax, so will lower your taxable income ( as does a 401K)
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Old Sep 19th 2007, 1:39 am
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Default Re: 529 College plan

A report I read somewhere recommended considering opening fewer 529's than you have kids... the theory being that if you either save too much (err right..) or 1 or more of the kids dont go on to qualifying further education then you haven't locked the cash into an account that will incur penalties for non-education withdrawals. You can re-assign the accounts from one kid to another as they pass through the system without penalty, so say when the oldest leaves uni, his balance transfers to the next and combines with theirs etc. If that is the case, I'm not sure why you wouldn't just open 1 and roll that one.....maybe worth asking your chap.

What the article didn't quite get in to was how to explain to the youngest that you hadn't opened one for them so they'd better get on the pc at walmart.....
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Old Sep 19th 2007, 3:55 pm
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Default Re: 529 College plan

Originally Posted by Lord Lionheart View Post
Is it really as simple as that? If that's the case why would anyone bother.
The biggest incentive for me is
a) So my sons have something starting out
b) It's pre-tax, so will lower your taxable income ( as does a 401K)
If your looking to send your kids to a massively expensive ivy league school it's worth it, because the loans and such will be huge, but if your thinking of most good schools it might not be worth it...if your in a state school, what you've got in private funds/scholarships will be taken out of what deductions the school will give you, so you end up paying the same money, but if you go to a private school, they don't tend to do this, so you have more "saving" which is just lost on higher tuition fee's.

That and you'll be in retirement a lot longer than your kids will be in school, hopefully, so be better off having more more stashed in the 401K and if you've got a hefty chunk of change to pay off their student loans after they graduated, you'll be much better off.

That doesn't always happen, but that's generally the case.
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