College Savings Options
Hi there! I am pretty overwhelmed by the information online about 529 savings plans and where to start. I also stumbled upon CalKids - is that something I need to register for as well or would they have contacted me when my child was born if we qualified?
I'm wondering if anyone knows of a resource that very simply explains 529 options and how it works. Along with that, are all the plans the same? Is there a resource that compares and contrasts them? If you have any advice on what I should be looking for with these plans I would be happy to hear it.
Thank you!!
Nov 3, 2023
Parent Replies
Morningstar rates 529 plans each year and compiles other useful information. https://www.morningstar.com/specials/what-is-a-529-college-savings-plan Look for plans with low expenses- generally those that are self-directed instead of managed. I’ve had a good experience with age-based plans in different states, which shift to more stable investments as students get closer to college age. California offers no tax benefits for investing in the California plan so really go with any state plan that meets your needs.
Sorry I don’t have any answers. I am genuinely interested in what other advice people have to offer. I have had the same questions and I still haven’t done much. I’m in analysis paralysis mode.
I recently got a financial advisor who offered to help me setup a 529. I imagine it is a lot like picking a strategy for your retirement.
Also when I was looking into life insurance I found out I could setup one for my kids and that could be used to pay for their education. However you would probably want to consider short and long-term Tax benefits and implications.
It might be good for us to get recommendations on a good financial *planner*, different from an advisor.
We use ScholarShare529 and like it bc it’s simple and straightforward. We dump pretax dollars and can use it for school tuition and daycare. We also send out a link during baby’s bday and just request our friends/family to donate there instead of giving a tangible gift.
We set up a 529 plan for our child years ago but found Howard Clark's website helpful so wanted to pass on.
https://clark.com/personal-finance-credit/investing-retirement/529-plan/
Two things:
1) A commenter said earlier that their contributions were pre tax. That’s not possible. All contributions are post tax and then the glory of the 529 is that you don’t have to pay taxes for withdrawals that are for qualified educational expenses.
2) General guidance is to only open a 529 plan after you have maxed out other tax advantages retirement savings accounts first.