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MrsHammer
01-31-2008, 12:28 PM
My husband and I are looking at various options for saving for our 20 month old daughter's future education expenses. I've been doing some reading on 529 accounts. Anybody here have this type of account? We live in Ky, so any input on the Ky 529 account would be appreciated.

thanks!

Unassisted
01-31-2008, 12:41 PM
FWIW, you don't have to use your state's 529 plan. It pays to shop around because the return on the funds each plan uses varies widely. The plan we're using in my family is associated with Nevada. Here's a link to a site you can use to compare plans (http://www.savingforcollege.com/compare_529_plans/index.php?page=select_plans&plan_type_id=).

Yachtzee
01-31-2008, 01:08 PM
You can also sign up for a 529 plan and set up a UPromise account. It allows you to get cash back on purchases, automatically deposited into a 529 account. My wife and I signed up for Upromise credit cards, which we use for our grocery shopping. I think you get 1% cash back on most purchases, but then on items with the Upromise logo you get 10% back. There are also a number of restaurants on the Upromise program that give you a bonus when you use your Upromise card. What's really nice is that you can add people to the account, so that Grandma and Grandpa can add money to the account with their purchases too. My parents alone have added thousands of dollars in cash back bonuses to our childrens' 529 accounts. Just make sure you pay off the balance every month so that you don't lose what you save in interest fees.

http://www.upromise.com/

BuckeyeRed27
01-31-2008, 03:29 PM
The point above about not having to have your states plan is correct. The only reason to use your own states plan is if they give you a deduction for contributions to the account and Kentucky is not one of those states.

No matter what plan you have 529's all have the same things in common:
1. The money grows tax free and can be used for any college expense tax free.
2. You can change the beneficiary for no penalty if there is unused money or the child doesn't attend college.
3. You cannot choose individual investments. All plans will have some type of managed portfolio that you can select and change once every calender year.
4. The assets are considered parental assets for the purposes of financial aid.
5. You can contribute up to $12,000 or $24,000 for a couple per year to a 529 without gift tax consequences.

The differences between plans is obviously what you are going to be basing your decision off of.
1. First and foremost make sure you research fees. There are plans out there that will change you annual fees and have high expense ratios for the investments and there are a lot that don't. So make sure you find one that doens't have fees.
2. The investment options from company to company will vary. This is important because obviously management style and performance along with fees will vary.

I would look at a couple different companies plans since you are in no way tied to the Kentucky plan and find the one that has low fees and good investment options.

Ltlabner
01-31-2008, 04:12 PM
While good plans, and an interesting way to offset future education costs, my advice is to only fund a 529 plan IF....

1) All your other debts except a home are paid off
2) Your 401K is fully funded
3) You have a ROTH IRA or other simular investment plan fully funded
4) You use a Upromise program in lue of cash deposts until items 1, 2 and 3 are completed

While noble to want to help your kid's education, some folks overlook that the cost of retirement *could* vastly outweigh the cost of education. While (very) expensive, you could fund a childs education via a combination of loans, grants, current income and the childs work if push came to shove. Whereas if you don't save enough for retirement you are generally screwed. Throw in the vast amount of intrest that would accrue over say 30 years of working towards retirement versus 18 years of saving for school it would be foolish (IMO) to save for the schooling in priority to your retirement.

Yachtze's advice about using the Upromise or simular progams to recieve a benift on items you already purchase anyway is a great way to put money in the account without interfearing with a retirement plan. Combined with the 529 tax benefits, that makes a lot of sense.

This is just a long winded way of saying don't go overboard with putting money into a 529 or neglect your current debts or future income needs while maxing out a 529plan. Not saying don't save for your childs education, just be smart in how you go about doing it.

BuckeyeRed27
01-31-2008, 04:24 PM
This is just a long winded way of saying don't go overboard with putting money into a 529 or neglect your current debts or future income needs while maxing out a 529plan. Not saying don't save for your childs education, just be smart in how you go about doing it.

Fantastic advice.

Just wanted to add on that if you do decide to go ahead with a 529 a lot of companies have credit card deals worked out that will pay back more directly into the 529 than UPromise pays back.

Unassisted
01-31-2008, 04:48 PM
This is just a long winded way of saying don't go overboard with putting money into a 529 or neglect your current debts or future income needs while maxing out a 529plan. Not saying don't save for your childs education, just be smart in how you go about doing it.In financial matters the same logic applies that you hear flight attendants give in their safety message. "Make sure your oxygen mask is in place before assisting others with theirs."

15fan
01-31-2008, 04:52 PM
What Ltl said.

Here's our take:

* Our household income precludes us from receiving tax benefits from enrolling in the Georgia plan. Thus, there's no incentive for us to stay local w/ the GA plan.

* We're in good shape debt-wise, as well as retirement-wise.

* Our 529 isn't intended to sock away enough to pay for 4 years of Harvard, Stanford, or MIT. Instead, we're striving to cover a little more than half of 4-year tuition as an in-state public school student, or perhaps year one of a private education. $50 / month every month and that's it.

Having said that...

Utah Utah Utah Utah Utah Utah Utah Utah, and Utah.

One nice thing about a 529 is that it makes for a great gift-giving answer when Great Aunt Gertrude, Uncle Jose, or Granny & Papa want to do something for the kiddo's birthday/Christmas/Easter/First Communion/Bat Mitzvah, etc.

"The kiddo doesn't really need any more toys or another sweater...but we have a 529 plan set up for her. If you'd like to go that route, we'd be happy to give you the information."

MrsHammer
01-31-2008, 05:04 PM
Thanks for all of the advice everyone. Looks like we should do more online research and meet with a financial advisor before making a final decision.

15fan
01-31-2008, 05:12 PM
Looks like we should do more online research and meet with a financial advisor before making a final decision.

Always a good idea.

Just make sure your advisor doesn't have a vested interest in pushing a particular investment instrument (ie, get a commission) on you.

BuckeyeRed27
01-31-2008, 06:22 PM
What Ltl said.



Having said that...

Utah Utah Utah Utah Utah Utah Utah Utah, and Utah.

"

Utah's plan is through Vanguard. They do charge a yearly maintence fee, although their expense ratios are low because their underlying options are index funds.

I don't like fees to have an account so I would keep looking past Utah. I also don't like index funds and they aren't even giving you a very good expense ratio on those.

Heath
01-31-2008, 06:27 PM
For Ohio it was less than $25 a month.

I won't do it until our credit card bill is paid and my student loans are paid.

oneupper
01-31-2008, 06:49 PM
Some great advice here. Here's my little bit: Don't mess around with Upromise.
Although they sell it to you as a college savings program, it's just a rewards/rebate program. You don't have to put the Upromise money into a 529 Savings Plan.

And it doesn't amount to much. I've been pulling out my Upromise card at Publix and CVS for 4 years now and have accumulated the grand sum of $18.81, which I expect to get in a check in about 3 or 4 months. It's a Joke.

You can accumulate more if you register your credit cards with Upromise and go to certain retailers...but you're probably better off just getting a rewards credit card (not a Upromise one)