Comments on: IRS Increases Flexibility of 529 Plans

By: Sean

Sean — Fri, 09 Jan 2009 17:15:17 +0000

Thank you David, I would indeed like to speak with you further if possible? Can I leave you my e-mail? I have additional concerns and preferences such as one concern would be if my daughter was to receive a scholarship can I put the money elsewhere,(other children or back in our pockets) and I would prefer to bo in control of this account and be able to view and monitor its status, are these possible?

By: Ron

Ron — Fri, 09 Jan 2009 03:45:10 +0000

Hi David:

I definitely would like to talk to you further, because I’m in the same boat. My daugher just turn 4 and I need to put away some money for college, but really don’t know which route to take; 529 or IRA Eduction fund. Please give me some advice?

By: David

David — Thu, 08 Jan 2009 01:29:14 +0000

Sean,

If you want to talk about the pro’s and con’s of your options regaring 529’s drop me a note. I am an independent financial professional who works with people on developing plans for funding college educations but more importantly I have 3 kids of my own and understand.

Essentially, with a newborn – starting with $5,000 will be a great advantage to you.

Number one you are starting early – most people don’t.

Number two you plan on a regular savings plan – most people don’t.

Number three – you don’t want to throw your money away – through a poor choice in investment methodology – most people aren’t aware of all their options.

You are definitely on the right track. consider going to the web to access the other options – such as Collegesave.com – where you can find more information regarding the costs of colleges around the country – financial aid issues, etc…

Since your time horizon is over 15 years and this is specifically for college – you most likely will want to utilize a 529 plan.

The key reasons are diversification via mutual funds, investment choices in different asset classes, potential deduction from state tax – depending upon your state laws and the plan in your state, and most importantly the ability for the investments to grow federally and potentially state tax free if utilized for your families college education – according the the 529 code.

In other words – 529’s have definite advantages – they do have drawbacks – but for the situation you described – I believe the advantages outweigh the drawbacks. You simply need to understand which 529 plan will be best for you. There are many to choose from as you are not limited to your home state’s sponsored plan and several have excellent investment options currently for different risk tolerances and some have restrictions you should consider.

You certainly couldn’t have picked a better time to get started – since the markets are trading near a 5 year low – there is a good possibility of growth over the next 15 years.

Feel free to respond if you want to discuss in more detail.

By: Bob

Bob — Wed, 07 Jan 2009 23:14:34 +0000

If you want a low-risk return keep you money in a bank saving account or a Government money market account. Low risk..Low return…sleep well at night. Depending on the age of the child you could invest in a 529 plan but risk will increase based on your asset allocation or the percent you invest in the stock market. A Coverdell account is another tax-deferred option versus a 529 account. You have greater investment flexibility but their is a $2,000 annual limit on deposits and an income limitation. Avoid loaded funds.

By: Sean

Sean — Wed, 07 Jan 2009 22:10:29 +0000

Can someone please assist me with deciding on an education investment for my newborn daughter? I am totally unknowledgeable of these plans (i.e. 529’s, I series bonds, etc.) Here’s the deal- My wife and I have $5000.00 saved to open a college account and want to deposit $100.00 to $500.00 monthly until she decides to pursue college, however I’m being encouraged by my mother purchase a bond and my bank to open a 529 and some investors that say I should look into ICA’s through Edward Jones. Can anyone help me, I just want low-risk returns with the account controled by myself and my wife, thats all I know. Any info. will help, thank you

By: Bob

Bob — Wed, 07 Jan 2009 19:43:52 +0000

Why not allow transfers at least once per quarter? The IRS restrictions limit investment flexibility which continues to be a negative when considering a 529 plan.

By: Mark Kling-- Burr Ridge, IL.

Mark Kling-- Burr Ridge, IL. — Wed, 07 Jan 2009 16:29:45 +0000

Good recommendation and we did start the Bright Start 529 So we put the entire 20,000 investment over the past year.For the tax write off for married couples,etc. So we’ll see how it goes? Any recommendations as to management,etc.i was just planning on one of my financial guys looking into it. If there are better out there we can always start something else this coming year with as good a write off, correct? Do u recommend diversifying that way.? Thaxn

By: Babu

Babu — Wed, 07 Jan 2009 16:17:19 +0000

Thanks for the tip. This is very nice change and good to know. I am planning to open accounts for my kids and I was worried about that limitation.