Superfund 529 Again After 5 Years?
If y'all were to ask me about higher savings anytime before last month, I would have told you that nosotros were 100% going to open up a 529 the second our infant popped out. But as much every bit I wish I could tell you we've since obeyed our own plans, the fact is nosotros however haven't. And it's not merely because we're wearied or lazy ;)
The truth is, an itsy bitsy part of me started 2d guessing the whole "college savings" plan to begin with. I don't know where it came from, or why it's happening now after all these years of existence sold on them for so long, but a few weeks ago I got this weird little feeling that maybe – but maybe – my son would want to kickoff his own business concern one day like his dad and try and skip out on college altogether. And for the get-go time in my existence I caught myself thinking, "Huh. Would that Be so bad?"
Generation after generation of my family unit all graduating college, and hither I am nonchalantly throwing information technology out the window. Who am I??? Haha… Simply at the same time, how could I deny the power of entrepreneurship if the whole xviii years before he's ready to get out the house I'm preaching on nearly small businesses and how important they are? Wouldn't that make me the biggest hypocrite? Or do I concur the party line and make him 4 more years and And then open up the flood gates to 24 hour "impale your business!" mode? If he doesn't driblet out and start the next Facebook? ;)
I don't know what I must have drank that night, but the doubt was a creepin' in and my stomach wasn't likewise happy well-nigh it. So naturally I brought it up to the Mrs. in hopes she could shed some more light on things here (and/or set up me straight). And WOW did she give it to me! Haha…
I won't utter the words that came out of her mouth, but here were the chief takeaways ;)
- At that place'south no style in hell our kids aren't going to college – don't always mention that again.
- You don't even know if any of our kids volition fifty-fifty Like business?
- And what about those other children of ours? No college savings for them either?
- Aren't you the one always saying how higher is More than just an education? Information technology's where you lot learn about life and network and have the time of your life??
- Did I mention never to bring up non going to higher again?
Haha… man. When in uncertainty, ask the married woman! ;) I must admit it felt skilful to be back into reality though… College IS more just a degree – information technology's a part of your life for exploration and networking and just being an adult all on your ain! (For those who don't commute, at least) I wouldn't change my past for the world, and if I could wait until afterwards higher to showtime a biz, why couldn't my children too? There's no way I'd be where I am today without that caste, what the hell was I thinking??
And it's then true – odds are all my children WON'T wanna start their ain businesses, and then whether it's Infant $ in that category or some other, putting money aside for college would indeed be the smart and responsible thing to do here… Whether it'south a 529 or not (though I haven't researched those other avenues all too much, exterior of simple comparison charts).
So why a 529?
Well, everyone and their mothers just rave about them. I take yet to see a existent negative review actually, although I'm sure at that place are tons of them out there. If you don't already know what a 529 is, here'southward a good and quick recap by Trent from The Uncomplicated Dollar:
A 529 plan is just an investment business relationship with a few taxation advantages that make it very useful for saving for higher education. To exist specific, any involvement or investment income earned in the account that is then used for college education is exempt from federal taxes (and from land taxes in many locations). In some states, the contributions themselves are deductible from land taxes.
So it'southward pretty much an account where you can invest your money at present to abound and grow and grow, and then in the future y'all tin dump it out tax-free and apply it all to higher stuff. Tuition, room and board, books, etc. And if you decide to spend it elsewhere, well, you're penalized and pay a steep fee on peak of all the taxes (at least for all the turn a profit your account has made since yous opened it). It'due south pretty like to a Roth IRA from what I've seen so far – merely instead of borer it when it'due south fourth dimension to retire, you tap it for when someone needs an didactics (and you can put a lot more into a 529 than a mere $5k/year). Which sounds really good to me!
Hither are some skilful resource I've found so far on these guys:
- An Introduction to 529 Plans @ The SEC (Tedious to read, but quality data)
- Higher Savings Plan Comparison Chart @ Finra (Easy manner to compare a few of the avenues)
- 10 Things You Didn't Know About Saving For College @ The Huffington Post (A LOT more fun ;))
And here'south a list of some of the pros and cons of these 529s:
- PRO: Earnings are tax free!!
- PRO: Yous can divide up the money to more than one kid
- PRO: Y'all tin fifty-fifty apply information technology for other family members like siblings/parents/etc!
- PRO: You lot can use the money all across the country, and sometimes internationally
- PRO: You tin ever take information technology all out later worst case scenario, then but pay the ante (which sucks, but hey – at least you don't lose all your money! Which was something I didn't know almost and was the main scary factor here)
- CON: The money *has to* be used for college-like stuff – no changing your mind and splurging afterwards on something else ;)
- CON: You're banking on the idea that someone in your family WILL indeed get to college. If they don't, information technology's time to pay the piper.
- CON: Information technology'south ane more account to keep runway of and stay on top of. Rather than, say, a savings or electric current investment business relationship (though this applies to any outside account too, non merely the 529s)
v Green ones and 3 Red ones, not too bad ;) And there's also two different types of 529s too – one where you just contribute every bit you wish every month (merely like with other accounts), and so some other where you tin can actually PRE-PAY for $XXXXXX and have it all taken intendance of for whenever that magical 24-hour interval comes. Which is kinda freaky cuz yous take to follow a bit more of the rules I believe with this one, as far equally *where* the beneficiary tin can become to school and all that. But I really didn't look into it all that much – peradventure you guys take? Or are really DOING this kind?
For us, I recollect nosotros'll stick with the normal "pay every bit you go" method and encounter how information technology pans out… I have a chunk of $350 waiting from the other month when I won Mr. Ramit'southward money, so we'll kickoff there and then add a couple hundred as fourth dimension goes on until we're more comfy with a monthly stream. Unless it cuts downwards on costs or something if we have to automate information technology more than? I'll find out more virtually that in a bit… And so have nightmares of this below quote I snagged from the AP:
"Parents of a babe built-in today would accept to save $385 a month in order to afford housing and tuition at the average country schoolhouse…"
And that's simply for Ane! Imagine 2 or 3? Or seven or eight? Meliorate be some damn skillful football players! Haha… And just goes to show how serious this stuff is – you can't wait 'till the last minute.
So those are my thoughts on this 529 stuff. We're planning on pulling the trigger at the end of the calendar week with USAA (naturally), so if you have anything you lot'd similar to say to aid sway me one manner or the other, now'southward your fourth dimension to do so! Yous might be able to convince me a bit more, just it'll be much harder with the married woman ;) All I know for sure is that nosotros gotta beginning saving something, somewhere, and we gotta do it NOW. I'll need fifty-fifty more coin afterwards when it's time to invest in their little businesses! ;)
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(Photo by michaelk.sutton)
Jay loves talking about money, collecting coins, diggings hip-hop, and hanging out with his 3 beautiful boys. You can bank check out all of his online projects at jmoney.biz. Thanks for reading the blog!
Source: https://www.budgetsaresexy.com/pros-cons-529-college-savings-account/
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