My sister and brother both attend college and this week they received their tuition refunds. Since my mother has told us numerous times that paying for college is our responsibility, we’ve tried to get as many grants and scholarships possible.

While I attended college on a mix of financial aid grants and scholarships, so far my siblings have been able to pay without resorting to loans (learning from my mistakes has some benefits).

Whenever I received money while attending school, I was in the habit of saving some of it and spending the rest frivolously. Looking back, I wish I had been more prudent with my money. It would’ve put me in a much better situation and I could’ve taken significantly less loans out.

That being the case, I wanted to share some better ways to use your tuition refund, or any other windfall.

Start or build up your emergency fund

If you haven’t done so already, establishing an emergency fund can be a smart move. Just because you’re in college doesn’t mean you won’t have emergencies. Keep your money in a high yield savings account to help it gain interest while you attend school.

Many college students have low necessary expenses, so even a small tuition refund can be a big help. Each semester, you can grow the fund with your refunds. An added bonus is that, when you graduate, you’ll have a bit of cushion to help you transition to the “real world.”

Pay off your credit card debt

I listed this second because I think an emergency fund is vital. If you’re like me, however, you probably have a couple of credit cards with balances on them. Instead of waiting, use the refund to pay down your debt. I’m all for using the debt snowball method, as knocking out those low balance debts can be a huge boost.

Unless you have a regular source of income and can handle them responsibly, you should then hide your credit cards. If you’re looking to build your credit history, consider setting up a small recurring payment ($40 or less) and pay it off every month.

Invest your money in an IRA

If you’ve saved some money and have no debts, you’re in a very good position. You should consider putting some of your tuition refund away in a Roth IRA. The benefit of a Roth IRA is that, while you pay taxes on the money before you put it in, you can withdraw funds without taxes or penalties once you’ve reached age 59-1/2 and held the funds in the Roth for at least five years.

I don’t think many college student get this much back, but I should mention that the annual contribution limit is $5,000 ($6,000 if you’re 50 or older). Since you’ll be starting young, you’ll also gain the advantage of compound interest. Let that compound interest to work in your favor by investing for your long-term future.

Set aside some money for fun

You’ve worked hard, so it’s not a bad idea to splurge a bit. Remember, though, to set a limit and keep it. For example, put aside some money in a savings account for a summer trip. That way you can have a wonderful experience to remember without worrying about debt. It’s really up to you as to what you consider fun.

Any other thoughts?

My view is that you should do whatever you can to establish good habits as early as possible. After you graduate, you’ll be thrilled that you started off on the right foot. If you’re still in college, you should apply for as many scholarships and grants that you can. Sure, it takes some work, but it’s well worth the effort.

For those of you that are out of college, if you could go back, what (if anything) would you change?

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Earlier this week, we talked about the value of a “high end” college degree. Today, I wanted to follow that up by highlighting this list of the five lowest paying college majors…

Lowest paying college majors

1. Social work
2. Special education
3. Elementary education
4. Home economics
5. Music and dance

Rounding out the top (bottom?) ten are: drama, leisure studies, philosophy, art, and audiology. I’ve gotta say, the contents of this list aren’t all that surprising.

Maintaining perspective

Something to keep in mind here is that there’s more to life than money. If you’re passionate about something on this list, then by all means you should pursue it. Just be aware of what you’re getting yourself into, and set your expectations accordingly. If you seem destined for a low-paying vocation, you might want to re-think that high cost education.

Another important point is that lists of this sort are based on overall averages, so nothing is set in stone. Some people will end up making a lot of money regardless of their major, and others… Well, not so much.

Source: “College Majors Handbook” via MSN

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This is a guest post from Neal Frankle of Wealth Pilgrim. If you like what you see here, please consider subscribing to his RSS feed.

Have you ever wondered if it makes sense to spend big bucks on an undergraduate education? Some time ago, I read another blogger’s post explaining why college is worth the cost.

The value of education

This particular blogger’s logic was interesting and unique — he calculated the added income received as a result of having a fancy degree versus what the student could have earned with the money in alternative investments. After all, spending money on college is an investment and should be evaluated as such. Right?

He found that you (or your child or grandchild) usually do well by biting the bullet and spending the money. Let’s say, for example, that it costs you $200k to go to college. As a result of attending college, let’s further assume that you earn an additional $25k per year for the rest of your life. He argues that it’s a hands-down smart investment.

A different view

As far as I’m concerned, the foregoing math is right, but the comparison is wrong — or at least incomplete. I do agree that college is an investment. It costs way too much money and takes way too much time to just be considered as an “experience” — or at least that’s how I see it.

You’ll have one set of “experiences” at an Ivy League school, and a different set of “experiences” at a less expensive state college. There’s no way of knowing in advance which will be more important, or which will have a greater positive impact.

No, the way to decide where to do your undergraduate work is to consider the extra income you could produce as a result of going to an expensive school vs. getting the same degree at a less expensive school. That’s it. And when you look at it that way, the result favors spending as little as possible on undergraduate school.

Should you pay more?

Let’s consider the facts:

The most selective — and generally most expensive — schools usually attract the brightest students. And you’d expect those bright kids to excel once they join the workforce no matter where they went to school, right?

So the real question is: Do the bright students who attend top schools earn more over their lifetimes than they would have had they gone to a less prestigious and less expensive school?

Said another way, are your lifetime earnings a result of who you are or where you went to school?

Princeton economist Alan Krueger and Andrew W. Mellon Foundation researcher Stacy Berg Dale tried to answer this question. They looked at students who were smart enough to be accepted at the top schools, but who chose to go to less selective (and lower cost) institutions.

What do you think they learned?

Smart kids who went to the expensive schools were no more successful than similarly qualified students who attended less expensive schools. In other words, the student matters. The school doesn’t.

A real-life example

Not convinced? Here’s a true story from my own neighborhood.

My daughter just graduated high school. Her ultimate goal is to work on the business side of music performance. She was accepted at NYU, Berklee School of Music, and two state colleges. NYU and Berklee both cost north of $55k/year. The state colleges cost 75% less.

A few months ago, my wife was talking with our neighbor about the situation. My wife didn’t know it at the time, but our neighbor’s two sons were recent graduates of the Berklee School of Music.

When my wife told our neighbor about our situation, she immediately asked her two sons (living at home) to come out and speak to my wife. They told her what a great school Berklee was, and how much they regretted going there. Why?

Two reasons:

First, each child was now saddled with over $100,000 in debt. They calculated that it would take 7 to 10 years to get out of debt.

Second, while they were both working in the music industry, they were working alongside other recent graduates who attended cheaper state schools. It turned out that they didn’t need the expensive college degree to qualify for the jobs they wanted.

My wife asked the boys which state college the boys’ co-workers attended. The boys told my wife that 5 out of 6 of their co-workers went to one of the state colleges my daughter was accepted to. Where do you think my daughter is going to attend?

Here’s a hint: Go State!

What do you think?

Do you think it’s worth selling a kidney to cover the cost of an undergraduate education? Why or why not?

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As a complement to this morning’s post on the best 529 plans, here’s a list of the worst 529 plans, once again courtesy of Consumer Reports. Without exception, these funds have to be purchased through a broker or financial advisor, which translates into significantly higher fees and correspondingly worse performance.

The five worst 529 plans

• Tomorrow’s Scholar (Wisconsin; Wells Fargo)
• John Hancock Freedom 529 (Alaska; T. Rowe Price)
• Franklin Templeton 529 College Saving (New Jersey; Franklin Templeton)
• Columbia New York Advisor 529 Plan (New York; UPromise/Columbia Management)
• Columbia 529 Plan (Nevada; Columbia Management)

Is your state on the list?

The good news for those that live in one of the states listed above is that most states offer multiple plans. Hopefully you’ll be able to find something more acceptable. If not, you may want to look outside your state. Yes, you’ll be giving up any possible state income tax breaks by doing this, but that’s probably a better option than putting your money into a bad plan.

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As a followup to my recent article on 529 plans, I thought I’d highlight the most recent batch of 529 plan ratings from Consumer Reports. For those that aren’t familiar with them, 529 plans are tax-advantaged savings plans that are designed to encourage people save for future college costs.

The following list of the best 529 plans is based on investment flexibility, fees and expenses, and 2008 performance. While it’s tough to learn much from performance during such a dismal year, some plans have clearly been holding inappropriate allocations. For example, one of Utah’s age-based portfolios, which is targeted at students over the age of sixteen (i.e., with just 1-2 years before they need the money), was so heavily weighted toward stocks that it lost over 26% last year.

With that as a backdrop, here are the ratings…

The five best 529 plans

• Path2College 529 Plan (Georgia; TIAA-CREF)
• College Savings Iowa (Iowa; Vanguard/Upromise)
• Bright Start College Savings Program (Illinois; Oppenheimer)
• Mississippi Affordable College Savings Program (Mississippi; TIAA-CREF)
• Direct Portfolio College Savings Plan (Colorado; Vanguard/Upromise)

Note that, as long as you’re using a “college savings plan” as opposed to a “pre-paid tuition plan,” you’re not locked into a particular school (or even state). See my earlier article for details.

Don’t forget the tax breaks

Another factor to consider is that many 529 plans offer state residents an income tax deduction on at least a portion of their contributions. While that won’t be enough to tip the scales in favor of a fee-laden plan, it might be enough to make a decent plan look great.

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I’ve written in the past about the best 529 plans, but I’ve never really written an article explaining exactly what these plans are all about. In short, 529 plans are tax-advantaged savings plans that are designed to encourage people to save for future college costs. But there’s more to it than that…

In general terms, 529 plans com in two flavors: pre-paid tuition plans, and college savings plans. I’ve put together a thumbnail sketch of each type, below.

529 Pre-Paid Tuition Plans

Pre-paid tuition plans allow people to pre-pay for all or part of a future college education at today’s prices. Some of these plans allow you to buy “units” of tuition (corresponding either to a set number of credit hours, or a percentage of the tuition bill), whereas others allow you to purchase contracts for one to five years of tuition.

The advantage of these plans are that they are guaranteed to cover the future cost of education. A major disadvantage is that they are targeted toward public colleges or universities, and are typically limited to state residents. Beyond this, pre-paid tuition plans cover only tuition and mandatory fees, though some plans offer a room and board option, or let you use excess tuition credits for other expenses.

529 College Savings Plans

College savings plans allow an account holder to save and invest for future college expenses on behalf of a beneficiary. The account holder can choose amongst a number of investment options including stock and bond mutual funds, money market funds, and age-based portfolios.

These plans are similar to Roth IRAs in that there are no federal income tax benefits, but withdrawals are tax free as long as you use them to cover qualified expenses. Qualified expenses include tuition, fees, room and board, textbooks, and computers (if required).

The contribution limits on these plans are very high, generally in excess of $200k total, and they are also more flexible than pre-paid plans in that you’re not locked into a particular school (or even state). The primary disadvantage is that there is no guarantee that your investments will cover the future cost of a college education.

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This is a guest post by Nate of Debt-free Scholar. To learn more money saving college tips, consider subscribing to his free RSS feed.

Most college students cannot pay for college out of pocket. Therefore, they must apply for loans or financial aid. Because financial aid is basically free money, all students should apply for it before considering loans. Today I will discuss six common mistakes that people make when applying for financial aid.

1. Not applying – As obvious as it may seem, many college students never even apply for financial aid. They simply assume that they could not get it. However, nearly everyone can get at least some financial aid. For example, even families who make more that $100,000 can get financial assistance. The American Council on Education estimated in 2006 that 1.8 million low- to middle-income families did not even file the FAFSA (Free Application for Federal Student Aid). They also estimated that 1.5 million of those same families could have qualified for a Pell Grant. Always apply for financial aid, chances are you will get some aid.
2. Missing deadlines – Because if can be worth thousands of dollars, you would think that all students would file the FAFSA as soon as possible. Surprisingly, many families wait until the last minute. That is a big mistake! If you miss the FAFSA deadline, you will not qualify for financial aid! This is a big deal. File your FAFSA as early as possible. Make it your goal to be the first person in the whole nation to submit your FAFSA. Even after you’ve met the FAFSA deadline, you will still have more deadlines to meet. Every school, for example, will have a their own deadlines and requirements. Make sure you meet them. Set yourself a deadline two weeks before the real deadline. That way, if you miss your first deadline, you still have some time before the final cutoff point.
3. Paying for something that is free – For what does “FAFSA” stand? It means the Free Application for Federal Student Aid. Therefore, if any website wants you to pay them for help you with the financial aid process, they are most likely trying to rip you off. The basic rule of thumb for financial aid is “If you have to pay money to get money, it’s probably a scam.” Avoid paying anyone for help with the FAFSA. Instead, get free online support or call your local college – they are normally more than happy to help.
4. Forgetting scholarships – While you are busy filing your FAFSA, do not forget about regular scholarships. Hundreds of thousands of dollars are available in scholarships. Find a good free scholarship search like Fast Web and start applying for scholarships. Just like the FAFSA, make sure you meet all the deadlines and be very wary of paying money for “scholarship help”.
5. Living like you have a rich uncle - Even if you get lots of scholarships and other financial aid, you are most likely still going to be short of cash. Do not live like you have tons of spare cash. If, like most students, you must take out a student loan, you want it to be as small as possible. College is the time for frugality. If you live cheaply in college, you might be able to live more expensively after college. Every time that you want to buy something extra ask yourself, “Do I have to get this now, or can it wait until after college?” Obviously, some extra spending is understandable, but try to be frugal.
6. Ignoring federal loans – If you do have to get a student loan, apply for federal loans before you consider private loans. Normally, federal loans have much lower interest rates than private loans. Unfortunately, federal loans have lower borrowing limits that private loans. Federal loans amount to an average limit of $4,000/year. The first year you can only borrow about $2,000, but by the last year you can borrow about $8,000. For a good comparison of federal loans vs. private loans, read this article by Business Week.

Obviously, these are only a few of the mistakes that can be made.

What mistakes do you think are the most dangerous?

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With Tax Day officially behind us, I thought I’d put together a list of things to do with your tax refund. Remember… Your tax refund isn’t some sort of magical windfall — it’s your money, and you worked hard for it. Do something smart with it.

1. Start an emergency fund. If you don’t have an emergency fund, consider opening a high-yield savings account and depositing your windfall for a rainy day. While it might not be enough to create a full-fledged emergency fund, it’ll be a good start. And if you already have an emergency fund, consider adding to it.

2. Pay down your debt. Whether it’s credit cards, an auto loan, or a student loan, you need to get that monkey of your back. So add your windfall to your debt snowball and keep on digging.

3. Invest in yourself. Use the money to cover tuition for a course about something that interests you, or which increases your earning potential.

4. Prepay your mortgage. Send your windfall to your mortgage lender. You’ll realize savings over the life of your loan, and you’ll own your house outright sooner than expected.

5. Refinance your mortgage. While refinancing your mortgage to a lower rate can result in substantial savings, you typically need to bring some cash to the table. In this case, your tax windfall could be just what the doctor ordered.

6. Fund your IRA. Did you know that you can have the IRS direct deposit your refund into your Roth, Traditional, or SEP-IRA? While it’s too late to arrange for that this year, it’s never too late to write a check to your IRA custodian when your refund arrives.

7. Invest in your children. Start a college fund for your kids. Whether it’s an Education Savings Account (ESA) or a 529 plan, there’s no time better than the present to get started.

8. Support your favorite charity. Not only does making a charitable donation help a worthy cause, it’s also deductible on next year’s taxes.

9. Add it to you “sunny day” fund. While emergency funds are all well and good, everyone needs a bit of fun and games every now and then. Why not set some aside for a future vacation or some other special expenditure?

10. Adjust your withholding. Last but certainly not least, you should consider adjusting your withholding so you don’t end up giving the government an interest free loan during the upcoming year.

If you have any other suggestions, please feel free to share them in the comments.

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I’ve written previously about what I think are the three best 529 plans, so I listened with great interest when Brian Preston covered college savings during a recent episode of the Money Guy podcast. During this episode, Brian talked about his favorite 529 plans and also listed seven of the worst plans according to Morningstar.

For reference, I previous picked the following three as my top choices:

Illinois BrightStart Savings (Link)
Ohio CollegeAdvantage 529 Savings Plan (Link)
Utah Education Savings Program (Link)

Click through to my original “Best 529 Plans” post to get details as to why I like these plans. In short, they all feature Vanguard funds and have dirt-cheap fees.

Next up, we have the Money Guy’s favorites:

Utah Education Savings Plan (Link)
New York 529 College Savings Program (Link)
Alaska College Savings Plan (Link)
California Scholarshare 529 Plan (Link)
Georgia’s Path2College 529 Plan (Link)

First, you’ll notice that the only overlap between our lists is Utah. While there’s nothing particularly bad about the balance of his favorites, their fees aren’t quite as low as in the plans that I picked. Like Utah, New York is a Vanguard plan. In contrast, Alaska and Georgia are T. Rowe Price plans, whereas California features Fidelity funds. I should also note that he’s partial to Georgia because that’s where he lives, and he gets a state tax break.

Now for the Morningstar list of the worst 529 plans:

Alabama Higher Education 529 Fund (Van Kampen)
Arizona PF 529 College Savings Plan (Pacific Funds)
Arizona SM&R Family College Savings Program (SM&R/Alger)
Nebraska AIM College Savings Plan (AIM)
North Carolina National College Savings Program (Seligman)
North Dakota College SAVE (Morgan Stanley)
Wyoming College Achievement Plan (Merrill Lynch)

Finally, a word to the wise… Many states have multiple plans, so be sure you’re getting the one that you want.

[Source: Money-Guy.com, 10/08/2007]

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A reader recently wrote in with the following inquiry:

I am looking to pay off a student loan of just under $22,000 and saw that I can borrow from my IRA to pay for school without incurring the added 10% tax penalty, would this also apply to paying off a student loan? This is a private loan not federal and my rate is around 10%, it’s adjustable. What do you think I should and can do?

The ability to use IRA funds to pay for Qualified Higher Education Expenses (QHEEs) without incurring the 10% penalty is described in Chapter 9 of IRS Publication 970. As far as I can tell, the Qualified Higher Education Expenses don’t include student loan repayment. Rather, qualified expenses include things like tuition, mandatory fees, books, supplies, equipment, and room and board. Based on that, it seems that you can’t use IRA funds to pay off your student loans (at least not without incurring the 10% penalty).

The one obvious exception to this is Roth IRA contributions (but not earnings), which can be withdrawn at any time, for any reason, without penalty. Note that I’m not saying this is a good idea, I’m just saying that it’s possible.

Also, just to clarify something from the original question… You’re not really “borrowing” when you take a qualified distribution. You’re making a withdrawal, and the only way you can put the money back in (short of sticking the money back in within 60 days) is by making regular contributions, which are subject to annual limits as well as income restrictions.

Of course, I’m not a tax expert, so it might be a good idea to run this stuff past a pro before acting on it.

This article is part of my Money Q&A Series.

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Last week I asked for opinions on the best 529 plans. In short, we’re looking for a plan, and we’re not enamored with our in-state option. As it turns out, I was mistaken when I said that we exceed the income limits for deducting contributions from our state taxes. Upon further investigation, it seems that they’ve changed the law, and they do allow for a deduction regardless of income, but you can only deduct $2000 in contributions per year on a single tax return.

In short, this means that my wife and I would be limited to a combined annual deduction of $2000 even if we set up separate plans for all four boys. On top of thiswe’re not crazy about the investment options, and we’re also planning on saving a lot more than $2k/year. Sure, we could do $2k in state to get the deduction and then focus our efforts elsewhere, but I’m not sure that it’s worth the trouble of keeping track of yet another account. Thus, we’re looking for an out-of-state plan to hold most, if not all, of our contributions.

After reading through the responses to my original post and doing some more research on my own, I’ve identified what appear to be the three best plans for our circumstances. They are (in no particular order): Illinois, Ohio, and Utah. What follows is a breakdown of the key features of each state’s plans. Note that I’m looking at all three of these plans through the eyes of an out-of-state investor. In some cases, the account maintnenance fees may be waived or at least reduced for state residents. Likewise, there may be tax benefits for in-state investors. But since those don’t apply in our case, I’m ignoring them.

Without further ado, here are my top choices:

Illinois BrightStart Savings (Link)

Account maximum: $235,000 per beneficiary (across all Illinois accounts)
Minimum contributions: $25 initial investment, $15 minimum for subsequent contributions.
Investment options: Two age-based options (active vs. index) and four static investments options. Age-based portfolios are held at Oppenheimer Investments whereas static portfolios are held in Vanguard mutual funds.
Fees & expenses: Account maintenance fee of $10/year. Investment expenses range from 0.20-0.23% for the Vanguard funds.

Ohio CollegeAdvantage 529 Savings Plan (Link)

Account maximum: $306,000 per beneficiary (across all Ohio accounts)
Minimum contributions: $15 per investment option.
Investment options: Investments are offered through Putnam (for Ohio residents only), Fifth Third, and Vanguard. I’m focusing on the latter, which means there are three age-based options and eleven static options.
Fees & expenses: There is no account maintenance fee. Vanguard funds have a management fee of 0.20%-0.30% and an underlying expense ratio of 0.05%-0.13%.

Utah Education Savings Program (Link)

Account maximum: $319,000 per beneficiary (across all Utah accounts)
Minimum contributions: None.
Investment options: Five age-based options and four static investments options. Investment Investments are held in Vanguard mutual funds or in the State Treasurer’s fixed income portfolio.
Fees & expenses: Account maintenance fee of $4 per $1,000 invested up to a maximum of $20 per year (waived for Utah residents). Annual program management fee of 0.25%. Investment expenses range from 0.025% to 0.13% annually, except for the State Treasurer’s Investment Fund which has no additional expenses.

Since all three offer very similar investment options (and all would allow us to invest through Vanguard, our preferred vendor) our decision will turn mainly on cost. Based on that, it looks like Ohio comes out on top until you get to higher balances, at which point Illinois looks to be the best choice, with Utah coming in last.

I’m still somewhat undecided as to whether or not we should put the first $2k into our state plan to capture the tax deduction and invest the balance elsewhere, or to just forego the small(ish) deduction, streamline our investments, and put it all in one state.

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We’re in the market for the “best” 529 plan available. I’ll preface this by saying that I’m partial to Vanguard, and primarily looking at fees and investment options — I prefer making my own investment decisions on something like this as opposed to going with an age-based option. I’m also interested in identifying plans with high maximum contribution limits. I should also note that our state does have a plan with state tax benefits, but we exceed the income limits for deducting even a small portion of our contributions. Beyond that, the plan isn’t all that good, so I’m looking elsewhere.

I’ve heard especially good things about the Utah plan, which has five age-based options as well as four static options – not complete flexibility, but I can probably make do with the static options. They assess an administrative fee of 0.25% of invested assets plus $25 $20 per year (this latter fee is actually $5 $4 per $1000 invested, up to a maximum of $25 $20). In addition to this, investments are subject to Vanguard’s fees, which range form 0.025% to 0.13% for the fund combinations available. This means that the management fees will be less than 0.40% of invested assets per year, not including the $25 flat fee. Oh, and they currently have a maximum contribution limit of $319,000.

From what I’ve seen, this makes Utah look like one of the cheapest and most attractive plans, but I was wondering if anyone out there has specific recommendations as to other programs that we should be looking at…

Update: Illinois has just re-worked their 529 plan, known as BrightStart, to include Vanguard Index Funds as an option (they also have actively-managed Oppenheimer funds). Their expenses are low (a total of 0.20-0.23% for the Vanguard funds plus a $10 annual account maintenance fee) and their investment options look similar to Utah. If you’re concerned about maximum contributions, however, they’re capped at $235,000 in Illinois, considerably lower than what is available in Utah). The new plan was made available yesterday.

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Related Articles at fivecentnickel.com:

» The Worst 529 Plans – 2009 Edition
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» The Best 529 Plans – 2009 Edition
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Are you looking to reduce your high-interest credit card debt burden? Or maybe you’re looking for a ready source of cash at 0% APR? If so, then you’ve definitely come to the right place…

Below, I’ve compiled a list of current 0% balance transfer credit card offers from a variety of issuers. These cards are a great tool for killing off high-interest credit card debt. When combined with a high-yield online savings account these cards are also great for 0% credit card arbitrage. All of these cards offer 0% APR and no annual fee, and some also offer rewards and/or signup bonuses.

Discover More Card 0% on balance transfers and purchases plus rewards!	Citi Platinum Select 0% on purchases and balance transfers for plus online discounts!	Discover Miles Card 0% on balance transfers and purchases plus 12k miles!

Top 0% Balance Transfer Cards
» Discover More Card
» Discover More – American Flag
» Discover More – Clear
» Discover Miles Card
» Discover Monogram Card
» Citi Platinum Select Card (+ 0% on purchases!)

If you’re more interested in a card that offers 0% on purchases, then check out the following six cards. Note that there’s some overlap with the above list of balance transfer credit cards.

Top Cards With 0% Interest on Purchases

» Discover More Card
» Citi Platinum Select MasterCard
» Discover Open Road Card
» Discover Monogram Card
» Discover Student Card
» Discover Escape Card

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A long, long time ago in a galaxy far, far away… I signed up for a Upromise account on a whim. I knew that it would never really make a dent in our college savings, but I’m a big fan of free money, so why not?

For the most part, I just ignore the fact that we even an account, but every once in awhile I log in and check out our balance. This past weekend I did just that, and discovered that we have $44.96 in savings built up — mostly from . Woohoo! That’s enough money to go to the trouble of withdrawing it. What’s that you say? You didn’t know that you could just withdraw the funds rather than investing them through Upromise? Sure enough, you can do just that.

Here’s the scoop straight from Upromise:

Can I withdraw company contributions from my Upromise account without transferring them to a savings plan, and if so, how?

You can withdraw your Upromise contributions at any time during your membership. To withdraw company contributions from your Upromise account, submit a letter in writing to Upromise requesting a withdrawal from your Upromise account. The letter must state your full name and exact amount that you would like to withdraw, up to total amount available in your account, pending contributions are not eligible for withdrawal.

For the protection of our members, we require that your letter either be notarized or contain a Signature Guarantee if the withdrawal request is in excess of $200. A Signature Guarantee is a guarantee you can obtain from a financial institution, such as your bank, that your signature is yours and that it is genuine.

Withdrawal letters should be sent to:

Upromise
ATTN: Customer Care
P.O. Box 55555
Boston, MA 02205-5555

Checks are sent once per calendar quarter, so you should typically receive your check within 12 weeks of your request being received.

To make your savings work for you, you may want to consider transferring your company contributions to an investing plan for a future college student.

So there you have it… Just whip up a letter including the requested information, send it to the above address, and then wait. As long as you’re withdrawing less than $200, there’s no need to deal with obtaining a Signature Guarantee.In my experience, it actually takes quite awhile to get your check — they say up to 12 weeks because checks are sent once per quarter, and it was at least that — but the check does come. You’re then free to do anything you want with the money.

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Related Articles at fivecentnickel.com:

» Upromise $10 Signup Bonus
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Is it possible to save for retirement and your kids’ education at the same time? According to Walter Updegrave, it’s possible, but you really should prioritize instead of trying to do everything at once…

I think most people have enough trouble just saving adequately for their retirement. Throw in college education and it just becomes too overwhelming. Too often the result is that people don’t address either goal adequately, or they get so discouraged that they sometimes give up altogether, figuring it’s hopeless.

That’s why I recommend that people avoid trying to do too much and, instead, adopt a realistic saving plan that focuses on the most important goals first and then moving on to secondary ones.

He then goes on to rank things as follows:

(1) Emergency fund
(2) Stuffing your retirement accounts with as much money as possible
(3) Everything else (including education)

This is pretty sound advice in my book. As they say, you can’t borrow for retirement, so make sure that’s taken care of before you start saving for other things.

Source: CNN/Money

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Related Articles at fivecentnickel.com:

» Saving for College
» Permanent Tax Exemption for 529 College Savings Plans?
» From the Archives (September 30th – October 6th)
» The Least (and Most) Expensive College Towns
» What is a 529 Plan?
» Saving for Retirement at the Last Minute
» The Best 529 Plans – 2009 Edition
» Using Retirement Funds to Pay for College

While I’m generally against using retirement funds for anything but retirement, it’s not uncommon for people to quit their job and go back to school. And a common source of funds for this sort of endeavor is… Yep, you guessed it… Retirement accounts. As it turns out, though, not all retirement accounts are created equally when it comes to making withdrawals for various non-retirement related expenditures. For example, you can make penalty free withdrawals from an IRA for eligible education expenditures or for a first-time home purchase (although the latter is subject to a $10,000 lifetime limit).

The problem is that these same sorts of withdrawals are subject to a 10% penalty (plus applicable taxes) when you’re dealing with a 401(k). Granted, you can always take a loan from your 401(k) to get around the penalties, but the loan will likely come due immediately if you quit your job or get fired and, if you can’t pay it all back at once, the outstanding amount will be subject to the same penalties you were trying to avoid in the first place.

Another thing to watch out for is that, even if you opt to make the withdrawals from an IRA, you could face penalties if you pull out more in a given year than you actually spend. So if you’re going back to school for, say, two years, don’t pull the full amount all at once. Rather, spread it across the years or you’ll get nicked for the 10% penalty on whatever you don’t spend in the first year.

Oh, and one last thing… If you leave your job, you can always roll your 401(k) into an IRA, at which point you’re free to take advantage of the comparatively generous IRA withdrawal rules. Again, I’d personally avoid tapping my retirement funds if at all possible. But if you have to do it, make sure you’re smart about how you go about it.

[Source: WashingtonPost.com]

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Related Articles at fivecentnickel.com:

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» Save for College or Retirement?
» Vanguard Changes Target Retirement Fund Offerings
» Carnivals – Week of 01/30/06
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» Carnivals – Week of 04/03/06
» One Year Ago This Week (January 21st – January 27th)
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Some of my favorite places are college towns. Thus, I was very interested when I saw the results of a recent study by Coldwell Banker on the most (and least) affordable college towns in the United States. Read on for the results…

First off, here are the ten most affordable college towns, including average home prices:

1. Texas Tech University, Lubbock, TX — $164,133
2. Mississippi State University, Starkville, MS — $169,433
3. Louisiana State University, Baton Rouge, LA — $173,317
4. Notre Dame, South Bend, IN — $173,600
5. University of Tennessee, Knoxville, TN — $175,250
6. Clemson University, Clemson, SC — $176,475
7. Baylor University, Waco, TX — $178,500
8. University of Mississippi, Oxford, MS — $179,550
9. Kansas State University, Manhattan, KS — $185,850
10. University of South Carolina, Columbia, SC — $190,058

And now for the top 10 most expensive college towns — to be fair, most of these aren’t what I’d consider to be true college towns, but they are home to some pretty major Universities.

1. Stanford University, Palo Alto, CA — $1,550,000
2. UCLA, Los Angeles, CA — $1,274,342
3. USC, Los Angeles, CA — $1,274,342
4. University of California, Berkeley, CA — $1,186,500
5. Boston College, Chestnut Hill, MA — $811,525
6. Northwestern University, Evanston, IL — $674,250
7. University of Miami, Coral Gables, FL — $671,854
8. Colorado University, Boulder, CO — $546,350
9. University of Maryland, College Park, MD — $462,035
10. University of Minnesota, Minneapolis, MN — $397,133

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» Weekly Roundup – 01/27/06
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» Permanent Tax Exemption for 529 College Savings Plans?

The Senate Finance Committee introduced a bill today that would make the tax exemption for 529 college savings plans permanent. The Senate bill, which has bipartisan support, mirrors one that was introduced in the House last week. The 529 exemption is currently scheduled to expire in 2010, so this is great news for anyone with young kids that are looking for an effective way to save for college.

If you’re looking for more information on 529 plans, check out The Best Way to Save for College by Joseph Hurley, which is a great book on 529 plans. Also check out Joe’s website, Savingforcollege.com, which is an excellent online resource. Then again, you could always just call your rich uncle.

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Related Articles at fivecentnickel.com:

» The Best 529 Plans – 2009 Edition
» What is a 529 Plan?
» The Best 529 Plans, Revisited
» The Worst 529 Plans – 2009 Edition
» Weekly Roundup – 09/08/06
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» The Least (and Most) Expensive College Towns
» Weekly Roundup – 09/22/06

I just ran across an article by Suze Orman on saving for your kids’ college education. Pretty run of the mill stuff, but good advice just the same. The take home lesson is that you need to prioritize your investment needs, and that you shouldn’t rank saving for college ahead of some other critical areas.

According to Orman:

“You need to listen up here: You must take care of your other financial needs before you save one penny for your kids’ college educations. That means getting rid of your high-rate credit card debt, contributing enough to your 401(k) to get the maximum company match, saving up for a home if you don’t yet own one, funding a Roth every year if you meet the income eligibility requirement (under $95,000 for a single tax filer, $150,000 for married couples filing a joint return), and saving up an eight-month emergency cash fund. And when all of that is done, go back and max out on your 401(k) contribution and save a bit more for retirement in a regular taxable account.”

While opinions vary on issues such as the size of your emergency cash fund (eight months is on the high side of most recommendations), Orman makes a number of good points, particularly with regard to retirement savings… After all, your kid(s) can always get financial aid to help pay for college, but the same can’t be said for your retirement.

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Related Articles at fivecentnickel.com:

» Save for College or Retirement?
» The Least (and Most) Expensive College Towns
» Five Lowest Paying College Majors
» Permanent Tax Exemption for 529 College Savings Plans?
» The Best 529 Plans – 2009 Edition
» The Best 529 Plans, Revisited
» What is a 529 Plan?
» The Worst 529 Plans – 2009 Edition