Comments on: What is a 529 Plan?

By: Nickel

Nickel — Tue, 28 Apr 2009 19:38:55 +0000

Yes, anyone (including adults) can be listed as the beneficiary. Even yourself.

By: Allison

Allison — Tue, 28 Apr 2009 18:58:36 +0000

I know I am a couple posts late but I had a question. What if I am going back to school for a MBA? Can I save money for myself in a 529?

Thanks!

By: DDFD at DivorcedDadFrugalDad

DDFD at DivorcedDadFrugalDad — Sat, 25 Apr 2009 11:09:05 +0000

Nice write up.

I would be careful not to overfund– especially in the child’s name or your own. It may have a negative impact financial aid apps . . . many recommend putting it in grandma’s name.

By: BuffetFan

BuffetFan — Fri, 24 Apr 2009 22:30:05 +0000

Don’t fund the 529! Not until you’ve funded your IRA. You have more options with the money in your IRA later. You may even want to pay more into your mortgage before funding the 529. You will not loose money paying off a debt and will save money on interest. Otherwise the debt will be waiting for you forever.

You child may get financial aide, scholarships, or decide not to go to college. There’s a lot of risk in funding the 529 when you try to withdrawl from it.

By: DebtGoal

DebtGoal — Fri, 24 Apr 2009 22:19:44 +0000

One of the biggest mistakes I see families making is funding a 529 plan while holding non-mortgage debt, like credit card balances. This approach doesn’t make any financial sense. It’s much more effective to focus on paying off most types of debt first before socking away for a child’s future education. There are just too many frugal options for getting kids through college – including low interest government loans, grants, scholarships, financial aid programs like work-study, and budget community college.

By: Dave

Dave — Fri, 24 Apr 2009 19:42:49 +0000

Be wary of the word “guarantee”… Alabama (my state) is currently in a tizzy over this very issue. The state PACT (prepaid affordable college tuition) plan was basically the same thing (or may have actually been a 529, not sure) and the people who signed on from the beginning were “guaranteed” that their tuition would be 100% covered.

Fast-forward 20 years, with skyrocketing tuition rates and a plan manager who ran the fund a bit too loosely, and you have a budget crisis akin to the Social Security mess — people who paid in may not get back what they were promised.

One remedy that has been proposed is to cap tuition rates at state schools for those who have invested. But that shifts the burden onto everyone else who found their own way to pay for their kids’ college, because the schools will just raise their rates even higher. I haven’t heard of any other proposals so far.

Either way, there’s going to be a lot of ticked off people in this state in the near future.

By: GM

GM — Fri, 24 Apr 2009 14:50:55 +0000

I wish the government could create a simple plan like the IRA where you can open a plan similar to a 529 in any brokerage and trade any security.

The fact that states offer it and its management is outsourced to another company all lead to fees which could be retained by the investor.

By: Bob

Bob — Fri, 24 Apr 2009 13:20:35 +0000

Why do 529 plans restrict my investment choices. When opening an IRA I can choose any fund to invest..why not the same for 529s?

By: the weakonomist

the weakonomist — Fri, 24 Apr 2009 12:34:46 +0000

529s are a great tool. I’m still a few years away from having kids, but I’m having the grandparents set of 529s for them whenever they are born. The wifey and I will make contributions as well, and that way we won’t have to stress about paying for school.