College options

[lucas]

Hi,

I'm currently funding our 2 children 529 funds, $5K/year which maxes out our max state deduction of $10K/year.  We just had a 3rd and I was going to just tag on another 5K/year for that one.  We won't get the extra state tax deduction for that 5K, but I figured it was the best option available given the tax fee growth and withdrawals.

Does this sound about right, or is there a better tax advantaged option I may be missing out on?

[jfoxcpacfp]

That's about it unless you also want to contribute $2k/child to an ESA (Education Savings Account). Same tax-free growth, more flexibility as you can use the funds for elementary and high school. You are subject to income limitations but it is easily bypassed by gifting the $$ to the child (or another relative) for them to contribute.

[consultpsych]

If you do fund more into a 529, think about which State you want to go with. They are not equal, and the main reason to go with your own state over one of the better plans (Utah and NY are favorites of many) is for the deduction.

WCI has a good blog post on this.

My own plan is to contribute to the Vermont plan to maximize the state income tax credit, but then for any additional contribution use the NY plan. Will probably also roll over from Vermont plan to the NY plan yearly.