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    529 College Savings Plans

    I have been saving for my daughter's college since before she was born (currently 16 months old). I have enough to start an account at a broker like eTrade or Ameritrade, but just recently did some research on our state's 529 College Savings Plan (Ohio).

    Any thoughts or suggetions? I am seeking aggressive growth, even though I have time on my side.

    Also, I know the contributions reduce taxable income, but is it just for the state or federal too?

    Thanks in advance!

    #2
    529 contributions do not reduce taxable income (although you may get a break on your state taxes, you'll have to check).

    What does happen is the investment earnings are tax-free if withdrawn for legit college purposes.

    Comment


      #3
      The Ohio 529 plan is not that bad and gives you a variety of investment choices. On top of that it has some tax advantages you would not receive in a private account. Contributions to any of Ohio's 529 plans of up to $2,000 per beneficiary per year are deductible in computing Ohio taxable income, with an unlimited carryforward of excess contributions. Contribution deadline is December 31. With the volatility in the market I would research and pick some funds offered in the 529 with a good history (solid manager and how they handled drop in 2001-02) and use dollar cost averaging by investing regular amount every paycheck instead of just a once a year contribution. My opinion only.

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        #4
        I read an article in Newsweek a couple years ago, a father gripping that his daughter had saved all her life for college. They had little money and he was so proud of her.

        But the money she saved kept her from being eligible for grants she could have received if she hadn't saved a penny. So in a sense she was penalized for being such a good kid.

        I've given all I can to my kids without paying gift taxes this year, so I'm considering 529s for my grandkids. But I certainly want to investigate this matter first. I'm not going to give them money for college if it only keeps them from getting grants.

        If I keep it myself, it won't cause that problem and I can give it to them when they need it.

        Peter

        Comment


          #5
          Originally posted by peterinwa View Post
          I've given all I can to my kids without paying gift taxes this year, so I'm considering 529s for my grandkids. But I certainly want to investigate this matter first. I'm not going to give them money for college if it only keeps them from getting grants.

          If I keep it myself, it won't cause that problem and I can give it to them when they need it.

          Peter
          Peter,
          For the purposes of financial aide, money in a 529 plan is considered an asset of the account owner. If this account is for the grandkids and you set it up with you being the account owner, the money you saved would not enter into the FAFSA equation.

          Comment


            #6
            I hadn't done any homework yet when I saw this topic and posted.

            I thought the grandkid would be the account holder... that I was giving it to them at the time it went into the 529 account.

            Thanks.

            Comment


              #7
              Originally posted by peterinwa View Post
              I hadn't done any homework yet when I saw this topic and posted.

              I thought the grandkid would be the account holder... that I was giving it to them at the time it went into the 529 account.

              Thanks.
              Peter,
              Generally the child is the beneficiary. You really should look into a 529 plan. It solves a lot of problems with putting money aside for kids to use for college money. One is that for gift tax purposes, it is considered a completed transfer. If your beneficiary decides not to attend college, you have lots of choices. You as the account owner can cash out the account and take the proceeds (you pay taxes and penalties on the earnings.) You can change the beneficiary. You can even change the account owner, but then you give up control.
              Last edited by Like2Plan; 08-21-2007, 06:43 PM.

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                #8
                Kiplingers has had some good stuff on 529's.

                Everything You Need to Know About 529s - Kiplinger.com

                The Best 529 College-Savings Plans - Kiplinger.com

                Comment


                  #9

                  Also, check out Clark Howard's 529 Guide

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