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  • 529 Plans

    I have been saving money in savings account all this time intending to buy a house soon; but my budget allows me to now invest into 529 plans. Could you please explain how one gets this started. Is there are any particular limit? and how far back can it be backdated - can i invest the maximum amount for 529 for the last 3 or 4 years as a lump sum now or am I allowed to invest only for this year and moving forward. Thanks so much for the input.

  • #2
    First, find out whether or not your state gives you a tax break for using the state plan.  Here's a site that will answer that question for you.  If yes, you will want to use your own state's plan.  If not, go with a good plan.  All state's plans are available.  Nevada seems to be a popular choice with low cost Vanguard fund options.

    As far as I know, you can put in up to 5 years worth of contributions, but that would be from 2016 going forward.  If you are married, that's $28,000 x 5 = $140,000 for each child without having to worry about the gift tax.  That would prevent you from contributing for the next 4 years of course.  I'm not aware of a backdating option.

    You should be able to get started pretty easily online.  Just go to the chose plan's site, sign up, and transfer your money.

    Hope it goes well, rescuebot!

     

     

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    • #3
      There are 118 plans to choose from.  They are not all created equal.  Make sure to pick a good one!!

      How?

      1. If you get a tax break in your state for contributing, use that one.

      2.  Look at Utah.  uesp.com    Low-cost Vanguard funds with DFA available also.

      3.  The contribution limits per beneficiary (who can be changed at any time) are around $400,000 per plan.  Remember that there are over 100 plans out there.

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      • #4
        Thanks a lot for that  

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        • #5
          Utah and NY are my personal favs if you dont get a home state deduction.

           

          Utah is more customizable with access to Vanguard and DFA funds and low cost (ERs 0.22-0.3 based on what you invest in).

          NY uses Vanguard funds with a slightly lower ER (0.16), but less customizable and I have heard slightly less slick website and customer service.

          If you choose another state, make sure to go with the low cost index fund option.

          If you are hands off, pick a target date fund that self rebalances and shifts towards bonds/fixed income as college age approaches.  If you are more hands on, consider a static allocation and change it yourself as the market and your needs dictate.

          IMO (others disagree), its best to frontload in the early years if able up to say 50-75% of what you think you will need and invest the rest in a taxable account.  If you have several kids you have more protection to shift unused funds to younger kids.

           

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          • #6
            Here's an article that I wrote with W. Ben Utley, CFP® (Fee-Only Financial Advisor) for Oncology Practice Management. You might find it helpful as you evaluate your options.

            How To Choose a 529 Plan

            Another great source is www.savingforcollege.com

             

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            • #7




              There are 118 plans to choose from.  They are not all created equal.  Make sure to pick a good one!!

              How?

              1. If you get a tax break in your state for contributing, use that one.

              2.  Look at Utah.  uesp.com    Low-cost Vanguard funds with DFA available also.

              3.  The contribution limits per beneficiary (who can be changed at any time) are around $400,000 per plan.  Remember that there are over 100 plans out there.
              Click to expand...


              Why, Joseph, you wouldn't be suggesting that the choice of a 529 plan might be confusing in any way whatsoever, would you?  :P
              Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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