Any 529 tips or advice?

[Goldy1]

My parents said they want to open up a 529 for my new son. I don't know how much or regularly they plan to contribute. I have not read into them yet, but just wondered in general if they are a good idea etc. and how they work.
I suppose anything will help for college.

[Like2Plan]

My parents said they want to open up a 529 for my new son. I don't know how much or regularly they plan to contribute. I have not read into them yet, but just wondered in general if they are a good idea etc. and how they work.
I suppose anything will help for college.

Goldy1,
That is an awesome gift! Do I remember correctly that you live in MI?
Link to Michigan Education Trust
MET allows parents, grandparents, businesses and others to pre-purchase undergraduate tuition for a child residing in Michigan at any Michigan public university or college, including 28 public community colleges. (This is the prepaid tuition plan).


Another option is the Michigan Education Savings Program

Then, there are investment choices and expenses to consider. It looks like you can choose from prepaid tuition as well as other investment choices (no guarantees on return, though).

2008 brought to light that some states' age based evolving target funds have too much exposure in stocks too close to the time the kids are going to college. Here is a link to a recent article in the Wall Street Journal titled 529 Plans: Ranking the Best and Worst


There are couple of attractive features to the Michigan 529 plans:

Michigan Income Tax Deduction
You may also be eligible for a Michigan income tax deduction. A taxpayer is permitted a net contribution deduction from Michigan adjusted gross income for a contribution to an Account less any Qualified Withdrawals from such Account during the tax year. A taxpayer is permitted to aggregate the net contribution amount to each Account for a total contribution deduction for the tax year. Such aggregated contribution deduction cannot exceed a total of $5,000 for a single return or $10,000 for a joint return for that tax year. Amounts transferred from another 529 college savings plan are not eligible for the Michigan income tax deduction.

and

there is a Matching Grant program
"The State of Michigan may provide a matching grant (the "State Matching Grant") of $1.00 for each $3.00 of contributions made to the MESP account (up to a maximum State Matching Grant of $200 per eligible beneficiary)". (It is only for the first year of participation in the plan for children under the age of 6 and there are parental income limitations on qualifying--the form has Sept 30 2009 being the ending date of the program unless it is extended).

Link to Matching Grant Info
Link to the Matching Grant form

[Like2Plan]

Goldy1,
How is your research coming along?

[tmvijai]

Watchout for limitations

I know you are still researching. I just want you to know there are certain limitation and restriction on funding grand kids like gift taxes, generation skipping gift tax and so forth. Please ask them to check with their financial advisor.

[atomicrc11]

If your parents want to open the plan, they can open in their name and they won't have to worry about any gift taxes. They will just need to worry about any maxmimums on the 529 which I believe is only a limit of $300k in the account.

I like the plans from Utah and New York as they are both Vanguard. I live in MA so I prefer Fidelity which runs the MA 529, but Fidelity's index options cost 0.50%, which is equal to Vanguards Index options. I really feel like the best 529's are any Vanguard or Fidelity run plans. However, if you live in a state where you can get an income tax deduction, you may want to take it. For example, in NY the Vanguard 529 can be deduected from your state income tax. Same applies to the CT plan run by TIAA-CREF.

[tmvijai]

Vanguard has good returns..

I really feel like the best 529's are any Vanguard or Fidelity run plans.

I do have 529 for my son in vanguard as well under 2025 plan which is auto pilot to change the portofolio. I hope it works since there were loop holes found in this strategy. I also have coverdall plan opened for my son in a seperate fund. THats another option you can check it out but has limitation of $2000 per year.