5 Reasons I Started A 529 For My Unconceived Child
Personal Finance
I do not have any children, and do not plan on having any for a few years. So why did I just decide to start a New York Direct 529 plan?
1.) Management – New York’s 529 is managed by Vanguard which is my favorite mutual fund company. The plan is rated as one of the highest by most places I have read, it gets a 4 ½ Cap rating over at Saving For College which is tied for the highest out of any I am eligible for.
2.) Tax Benefits – Since I live in New York I can deduct up to $5,000 I invest in here from my state taxes. Federally my assets grow tax deferred, and are exempt from Federal Income Tax as long as it’s used for an educational purpose.
3.) Low Minimums / No Fees – I signed up for payroll deduction (aka direct deposit), which is only a $15 minimum to start the account and $15 for any future investments with no fees. If you chose to use your checking account it would still only be $25.
4.) Investment Choices with Low Expenses – There are 15 options in the plan – 3 age based and 12 individual funds. The expense ratio of all the funds lowers as more assets are added – currently it is 0.58%.
5.) Flexable – Currently I have the beneficiary setup as myself. I can change it at any time to a member of my family including my son / daughter, spouse, first cousin, or brother / sister. So if my child decides not to go to college, someone else can still probably use it so I won’t have to take the tax penalty hit.
With the recent bill enactment to make the 529 benefits permanent I decided now was as good a time as any to start it up. If I sock $15 a paycheck away for say 22 years at 8% that will give me a balance of around $21,590. Probably by then that won’t even be enough for a semester but at least it’s a start.
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I consider 529 plans better choice for college savings. There are 529 plans from almost each state and each one is different. Within state there are plans which are sold direct and in direct (via broker). Plans sold via broker contains fee (like load mutual fund). Each state plan is different in the way funds are invested in different fund families. So, it is impossible to compare each plans. Best way to find the better plan is to look for the state which offers wide variety of choices at lower cost. I consider Nebraska, New York among the best. Anyway, do your own research.
You can also use credit cards to save for college. Rewards from card will go toward your 529 plans account. List of credit cards can be found at following directory.
http://plans529.com/Directory/tabid/145/Default.aspx
For UPromise some of the discounts you have to buy through their links, but what I only really use is the automatic stuff. I have my local grocery store club card as well as all my credit cards in there and they automatically give me a % of the sale if I purchase a UPromise product.
Chuck,
Thats good info, thanks.
Btw, do you have to buy stuff through upromise to get the upromise cash back? or just registering cards with them is enough ?
Yes I have UPromise going as well. I think I’ve colleted about $29 in 3 or 4 years… but hey money is money.
Could I also suggest, if you haven’t, go to Upromise and set up a free account there. Once you register your credit cards/debit cards and grocery cards, you will start earning free money. For your 529
I make money at Mobil, East Bay (sports), Jewel (coke, welches,smuckers), McDonalds (when I buy gift certificates) and even dining out.
Don’t pass up the free dough, you already have the 529 in place!