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Thread: anyone know anything about 529 plans?

  1. #1
    God/dess Gynger's Avatar
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    Default anyone know anything about 529 plans?

    I'm looking into one of these for my daughter, I have a big chunk to put in for her, but the information I have been given hasn't been all that helpful.

    Just wondering if it can be withdrawn at any time or is this something that has to sit for a number of years?

    THanks.

    Gyn


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    Senior Member stitch132's Avatar
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    Default Re: anyone know anything about 529 plans?

    I have money in 4 different 529 plans.

    As a starting point, I suggest you look at http://www.savingforcollege.com/ if you haven't already. The site is run by Joe Hurley, whose book on 529 plans I also recommend.

    The advantage of a 529 plan is that earnings grow tax free, and can be withdrawn tax free at any time if used for educational expenses (which includes tuition, books, room and board, etc). So it's somewhat like a Roth IRA in that respect. If you withdraw money for non-qualifying expenses (e.g. to buy that car) then you pay income taxes on earnings plus a penalty (currently 10% but there have been proposals to change this to something higher). So a 529 plan is not a good idea if you don't ultimately spend it on educational expenses.

    An advantage in some states is that contributions to your own state's plan are tax deductible against state (not Federal) taxes. This is true in New York (for example) but not in New Jersey. Apart from this, there's no reason to choose your own state -- pick the one with lowest expenses or whatever suits you. (I have money in the Ohio plan, though I've never even been to Ohio!)

    If you have questions, the board at http://www.savingforcollege.com/ is a good place to post them. (Probably even better than stripperweb.com)
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    God/dess Gynger's Avatar
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    Default Re: anyone know anything about 529 plans?

    Thank you so much, you just answered my main question! Thanks for the links too! Most helpful!


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    Default Re: anyone know anything about 529 plans?

    Gynger, you may want to think about setting up a trust for her. Scorpio and I have a trust for Makayla set up that if she wants to go to school, she'll get enough money each semester to pay for her classes, books, etc (all necessary and needed expenses for school), it'll also give her x amount of dollars per SEMESTER to use for activities (where she'll further her knowledge of budgeting and planning financially). If she goes to a local college and lives at home, then she'll only get enough money to pay for books/classes...but she won't get a "stipend" for playing with.

    If she decides that she does not want to use her trust for college, then we will not allow her to touch her trust until she turns 30 years old.

    I like it better than the 529. The 529 is very limited and as much as you want your child to go to college, some kids just would rather not do that.

    Good luck!

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    God/dess Gynger's Avatar
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    Default Re: anyone know anything about 529 plans?

    Hubby and I have been toying around with that idea VG as well, a trust... we're doing the whole roth IRA right now, trying to get me finished with another certification then off to graduate school and then getting ready for him to retire, and we've got some extra money floating around each month, so we wanted to do something for the kids.. I had the idea of a trust, but we were advised to go with a 529 plan, so I may have to look at the trust a bit more...

    Hope all is well with you! Congrats by the way


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    Veteran Member Lacy Luck's Avatar
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    Default Re: anyone know anything about 529 plans?

    Searched for 529 and bumping.

    Has anyone set up a 529 for their kid? Any advice on sorting through plans? I'm also reading up on savingforcollege.com but its so much better to hear from real people. Also considering a trust as mentioned above.

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    Senior Member Nikatrina Fury's Avatar
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    Default Re: anyone know anything about 529 plans?

    I would like to mention that not every 529 will give you the greatest tax deductions. There are various ones to choose from, some better than others. Good to do your due diligence.
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    Banned Melonie's Avatar
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    Default Re: anyone know anything about 529 plans?

    lots of 529 plan discussion, as well as discussion of alternatives, in this thread --->

    From a purely personal standpoint, I'm also inclined to favor the establishment of a trust over a 529 plan if the total amount of money involved will be 'significant'. The reason, of course, is that ... like IRA's and 401k's and other gov't sanctioned tax favored plans ... 529 plans involve putting money in today based on a set of rules and assumptions which could be changed by the gov't at any point in the future, long before it's possible to withdraw money out of the plan without penalties.
    Last edited by Melonie; 09-05-2014 at 06:36 PM.

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    God/dess Zofia's Avatar
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    Default Re: anyone know anything about 529 plans?

    I set up a 529 when my daughter was born. There are limits on how much can be contributed before you run into the gift tax. However, tuition payments are exempt from the gift tax, so for some taxpayers, it is better to pay tuition directly and invest for children through different vehicles.

    When I set up my daughter's 529, I didn't think I'd ever be in the position to worry about the gift tax. Now, I've made my maximum contribution for the next five years and I've got gift tax considerations. So, I've basically started investing differently for her. Of course, after I pay her college expenses through the 529 plan, I'll pay her tuition directly.

    Z

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