OT: start a 529 now?

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Submitted by pbnative on September 30, 2008 - 10:37am

When I got pregnant last year, I figured I'd open a 529 plan for my daughter as soon as I could. The earlier the better, it seemed. But things are such a mess right now, I'm wondering if I should just open a savings account for her. Anyone else wrestling with what to do with their kids' money? Are you taking the same approach as with your own 401k?

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I started a 529 plan for my
Submitted by FormerSanDiegan on September 30, 2008 - 11:06am.

I started a 529 plan for my youngest when she was 6 months old. Automatic payments $100 monthly. It currently amuonts to about $7700 last I looked (well maybe about 7000 after the past few weeks). The cumulative earnings today over the past 5 years is about the same as a savings account (almost zero).
But at least it has been pain-free. Never missed the 100 bucks once I started. I expect that gains going forward over the next decade might outpace a savings account.

I started a 529 plan for my 2
Submitted by flu on September 30, 2008 - 11:07am.

I started a 529 plan for my 2 year old two years ago. I wouldn't sweat it. It's gonna take awhile for her to use it.

Also 529 are fully transferable, so for instance if you decide you wanted to go back to school, you could change the beneficiary on it to yourself.

In the long run, I don't think you need to worry about it. Typically, you can pick a few safter investment choices in the 529 (doesn't have to be all stock).

Thanks for the responses! We
Submitted by pbnative on October 1, 2008 - 1:25pm.

Thanks for the responses! We decided to open the account for her, just have to decide which one. Hopefully she'll be buying low for awhile.

pbnative wrote:Thanks for the
Submitted by flu on October 1, 2008 - 2:57pm.

pbnative wrote:
Thanks for the responses! We decided to open the account for her, just have to decide which one. Hopefully she'll be buying low for awhile.

It's been awhile since I opened one. I think the one I ended up opening was Vanguard's 529 plan with Nevada (also known as the upromise plan), because of the link to upromise. Supposedly, if you register all your credit cards, supermarket cards, etc when you buy/spend certain things, a very tiny percentage goes to the upromise account.

In practice, I haven't seen any money added to the 529 account from me spending. I guess because most of the goods/services that have some deal with upromise is also considerably more expensive than no-name brands that don't do deals with upromise. For example, instead of buying a designer brand napkins (with a upromise deal), I usually just buy the Vons brand special....

There supposedly was some tax advantages if you live in a state for which 529 earnings are state tax exempt, then you would want to participate in your state sponsored plans. BUT, unfortunately, for CA, it doesn't matter.

The CA 529 plan (when I looked sponsored by Fidelity) stunk.

There's a upromise credit card that you can get that basically rebates dollars back to your upromise account. But considering that credit card's rebate amount is about 1%, there really isn't any difference if you were to do this versus get any other 1% rebate cash card, and then just deposit your rebate amount into your upromise account (with the exception that there is a minimum deposit of $100 i think to your nevada's 529 plan account). So I personally like to keep the number of cards low, so it don't have to worry about keeping track if one extra card gets lost,stolen,etc.

Imho, it's a great time to start a 529 plan for which you won't touch for another 10-15 years. But that's just me. Don't take that as financial advice.

Hey, I almost forgot about my
Submitted by FormerSanDiegan on October 1, 2008 - 3:54pm.

Hey, I almost forgot about my Upromise account. I opened it back in 2001. Just looked today for the first time in maybe 2 years and I've accumulated $238. Mostly on Gas and groceries in 15-20 cent increments. If I keep up this pace, it will buy exactly one textbook freshman year.

Re: 529
When I opened the CA 529 it was TIAA_CREF, which had decent options. I also thought they might eventually provide a tax break, which was not such a stretch of the imagination back in 2001. I should probably switch to a better plan, but I've been contributing on autopilot for so long and I'm lazy.

Illinois 529 plan was revised
Submitted by equalizer on October 2, 2008 - 12:07pm.

Illinois 529 plan was revised with super low Vanguard TOTAL EXPENSE fees of 0.20-0.23. Just a few years ago the fees in most states were 0.50-0.70. Many states add 0.3-0.4 for admin, IL charges only 0.03%!

https://www.brightstartsavings.com/OFI52...

Expense ratios only found in PDF format:

https://www.brightstartsavings.com/digit...

Wow, that's nice pricing, I
Submitted by pbnative on October 2, 2008 - 3:36pm.

Wow, that's nice pricing, I hadn't look at that plan. The worse the market gets the more I think I'll drop a nice chunk in there for her while it's cheap. Thanks everyone.

PB Native If I can make a
Submitted by Raybyrnes on October 4, 2008 - 11:29pm.

PB Native

If I can make a suggestion, Do not open the account in your name. Have your parents open he account in their name and send them the contribution. When you take this approach the 529 is not calculated in the Federal Student Aid Calculations.

My parent live in NY so I get the added benefit of getting the tax deduction for them. But this might be the best approach if yo ave a good relationship with your folks.