for the financial gurus

[Brett Hartwig]

My wife and I want to start a college savings plan for our 1 1/2 year old daughters. I understand each state has its own 529 plan. In Illinois I am looking at the BrightStart plan. We would have approximately $100 a month automatically taken from the checking account and sent downstate to the BrightStart account where it is invested in various funds for us. My question- it was suggested to me by someone to check into the John Hancock Freedom 529 plan out of Alaska also. Anybody know the difference? Any suggestions from parents putting money away for their kids' college future? Any advice would be helpful.

 

[Scott Doughtie]

Clark Howard is a financial guru and consumer advocate here on Atlanta radio that is also nationally syndicated. One of his specialties is researching the state 529 plans. He ranks the following states as having the best plans:



Utah

Iowa

New York



His complete rankings can be accessed from the link below.

 

[WXMotorSports DecalsPartsAccs]

I use Fidelity Investments for my 529 Plan.

 

[Brett Hartwig]

so what makes Utah, Iowa, or NY's plans any better? I do not understand.:blink:

 

[Jason Sundown]

I livein NY I put my newborn in the 529 suggested by my bank. I also signed up for Gerber life insurance about $15.00 month which he ends up getting if we never use it when he is about 20 yrs old and then it just keeps growing until he wants it. It helps pay for medical procedures that your medical plan wont cover. The 529 plan also gains from you shopping too. from place that have a sign up that donates to the college fund.

 

[Richard Kolb]

I was told that college savings should be done after all your retirement planning is done. You can always borrow for college but you can't borrow for retirement.

 

[Johnny O]

I know a guy, when each of his kids was born he put a down payment on a rental house. Rent pays the mortgage with maybe a little left over.

Then when each kid starts college, he sells a house that's nearly paid for and uses the money to pay for college.

Just a thought.

 

[Jerry Johnson]

I live in Texas but I ended up investing in the Ohio 529 plan. That was three years ago. Back then I had reduced my choices to between Ohio and New York. If I was doing it all over again I would probably choose the New York plan. It is always consistently been a top pick and seems to be well managed. Regardless of the plan you choose I believe that you are making a very sound financial decision for your daughter. I work with too many clowns who are not willing to make the sacrifice for their kids, but would rather spend the money on toys for theirselves.



Jerry

 

[Jenn D]

I don't know. I'm with r1ch999999 on this one. My parent's didn't set up a college fund for me and I am happy for that. If anything it made me work 10 times harder to keep up my academic and athletic success. I was always taught that I should go to college, but was also understanding of the fact that I would have to earn it. Sure, my parents helped a little, but I also paid them back on my own accord because I felt that this was my choice to go to college.



Which brings up a good topic - what if your child chooses not to go to college? [disclaimer: I am not passing judgement on any individual person's child...] I don' t know enough about 529 plans, but is there a backup plan? Can the parents retrieve their investment if the child chooses not to attend a higher eduction? or could this potentially be used later as well, a retirement plan that wasn't being counted on?



Sorry for my rambling. I am sure someone can decipher what I'm trying to say.

 

[Jenn D]

Also, out of curiousity.... Will those of you who have this plan set up for your children tell your children about it? Or will you let them think that they need to earn it and when they do, surprise them with this "investment" that you've spent their lifetime building.



I am sure there are no right or wrong answers. Each person knows what is best for their situation. However, I'm intrigued.

 

[Scott Doughtie]

I will let my son know when he is old enough to understand what it is. I made setting up a 529 plan for him a requirement of of each parent during my divorce. However, the ex has seen fit not to set one up for him nor contribute any funds to an education plan of any sort. So, that may be an issue to discuss with him as well when paying for the education comes up short.

 

[Don Tomczak]

I live in Utah and we also have a state administered 529 plan for school, but my work (Qwest Communications) also offers a joint triditional 401K and 529 plan administered by Smith Barney. I put 22% in the 401k )the max I get 100% match on) and 15% into the 529 (also the most and still get 100% match) both are deducted pre-tax. My Work also matches on Series E Savings bonds. I get a 100 bond each pay period (my 25 and thier 25 pays the 50 required to buy it) I am by no means an experit, but I figured that between the wife and I, we can survive on the rest of my check and all of her check. I am not sure how you sit, maybe find out if your work offers some kind of advice program, thats how I figured out what to do.

 

[TomT]

Can the parents retrieve their investment if the child chooses not to attend a higher eduction? or could this potentially be used later as well, a retirement plan that wasn't being counted on?

You won't loose anything, it's just that you will be taxed when you remove the money.



I got in on the one in Texas about 6 or 7 years ago. (It's no longer listed because they quit taking on new investors). It's done quite well.

 

[Thomas Rogers]

If a child chooses not to go to college the savings, and earnings, can be transferred to another child or even a grandchild without penalties or taxes.



If the parent liquidates the account, as TomT says, and uses it for non-educational expenses, then they have to pay taxes on the earnings, and potentially pay penalties that vary by plan.



TJR

 

[Thomas Rogers]

Jenn D, regarding your question, my wife and I have three children. We are saving through a PA state 529 plan. We are on-track to have saved enough to pay for about 1/2 of each of our children's college education assuming they attend top 4-year universities...in other words, we will kick in a little over 2 years for each child.



Each of our children know this (oldest almost 14, youngest 6). They each understand that if they want to go to school it will mean part-time jobs during college, full-time jobs when out of school, no Spring-break trips, and likely college loan debt.



My wife and I have also counciled our oldest on the financial sense that attending a 2 year community school and then transfering makes, and how if he went that route it could mean much less debt, more spending money for them and a general easier time financially. We have discussed the pros and cons of being a transfer student. We have had this discussion with our oldest because part-time jobs, cars, dating, and more expensive "toys" are looming large in his future.



So, to answer your question, I say make your kids aware. Make it sort of a "contract" between them and you. Let them know what you are doing for their future, and what you expect from them, now, and while in school to make their college education a pleasant reality.



TJR

 

[Bill V]

JohnnyO, I've heard of more and more peole doing that--with some even taking it a step further: The house that they buy is near a college campus that the parents think is the most likely location that their kid will go to college. Then, instead of selling the house before college to pay for school, they sell the house after college to pay off any loans--and they have a place to live during school that basically amounts to free rent.