Friday, September 08, 2006

529 Plans

While I'm still not sure that a 529 plan is right for me, it is a good plan for a lot of people. One of the most difficult parts of it is trying to figure out the best plans. Savingforcollege has a ranking system for all the 529 plans giving them 1 (lowest) to 5 (highest) caps. This might be a good place to begin your research of 529 plans.

In other 529 plan news, many people were wary of them because the federal tax deduction was set to expire in 2010 and while most people felt that it would be renewed, there was always a chance that it wouldn't be. This is no longer a worry as the Pension Protection Act of 2006 makes the tax benefits for 529 plans permanent.

2 comments:

Anonymous said...

I have a 3 year old and I would like to start saving for his college.Can you explain why you have not opened a 529 account.Your assest allocation says
Cash: $2623.44
I-Bond: $1035.60
ING Bank Account: $321.92
Antique Collectibles: $5.00
529 Plan: $0
IRA: $0
Upromise Account: $37.50
BabyMint Account: $0

and most if not all are in taxable accounts.You talk a lot about saving for college on your blog so I was wondering why nothing is invested in the 529 Plan.Also can you tell me who pays the tax on the interest for the taxable accounts that you currently have.

financial baby steps said...

The plan was to invest in Japanese collectibles where my uncle has a lot of knowledge, but that has changed with his return to the US. I'm now discussing with my uncle where to place the money.

We have avoided the 529 plans thus far because of 2 main factors

1. The limit that they must be used for educational expenses.

2. That they would be in my name and thus might limit the amount of finanacial aid I would qualify for.

My uncle currently pays the interest since the savings is in his name. It is an unusual situation where someone outside the direct family is doing the college saving, but if it is kept in his name, then none of it will be counted toward the financial aid calculations.

I will be deciding where to place the money and our next steps by the end of this month and can elaborate more on my thinking then.