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After reading 'College saving vs. vacation' thread, I thought to tell about our situation and hear your opinions. I'm curious if other people would agree with our decision NOT to invest in 529 plan.
We're NC residents. I'm guessing in oder to woo more parents to save with the NC 529 plan, NC starting 2007 made contibutions (up to $5k/couple) tax deductible for its residents. If used for higher education, withdrawals are Fed and state tax-free. The cheapest option would be Vanguard index funds, but expensive, I'd say (0.10% mgnt fee + 0.65% expenses).
Here are a few reasons why we think it's better to open a taxable account instead to save for our kids' education (one is 2y.o. and another on the way):
- What if my kids decide not to seek higher education? We cannot predict the future
. Yes, we know we can give 529 funds to our relatives, etc., but we are first generation immigrants here, no other family around in the U.S.
- What if they want to seek education abroad? Not every school would be covered by the 529, I think.
- Also reading another thread, someone said that when their education was paid, they didn't appreciate as much as paying with their own sweat later. I thought it's a very good reason, too. Our educations were paid by our parents in Europe, though I did earn a Master's degree in the US with my own money. We are DEFINITELY happy not to have student loans
.
- Even Vanguard, the cheapesy choice, is pricey, IMO than having a taxable account with Vanguard instead.
- Maybe kids will get scholarships
. Can anyone apply/qualify for a scholarship even when parents' AGI is $125K (sure I cannot predict future for this either)?
So, for aforementioned reasons, we decided to stay away from college accounts and their complexities. In case children decide not to go to college, we won't be penalized for our withdrawals. And if they go, we'll try to help, if they want and we feel that they'll appreciate our help.
Do you agree with our decision? Just curious to hear your insigts
. Do you invest in taxable accounts instead of a 529 plan?
Thanks so much
PS. What fund would be good (tax wise) for starting a so called 'college account'?
We already invest in VTSMX and DODGX (both taxable accounts). Should we just increase contributions to these, or would you advise some other fund (?) ?
We're NC residents. I'm guessing in oder to woo more parents to save with the NC 529 plan, NC starting 2007 made contibutions (up to $5k/couple) tax deductible for its residents. If used for higher education, withdrawals are Fed and state tax-free. The cheapest option would be Vanguard index funds, but expensive, I'd say (0.10% mgnt fee + 0.65% expenses).
Here are a few reasons why we think it's better to open a taxable account instead to save for our kids' education (one is 2y.o. and another on the way):
- What if my kids decide not to seek higher education? We cannot predict the future
. Yes, we know we can give 529 funds to our relatives, etc., but we are first generation immigrants here, no other family around in the U.S. - What if they want to seek education abroad? Not every school would be covered by the 529, I think.
- Also reading another thread, someone said that when their education was paid, they didn't appreciate as much as paying with their own sweat later. I thought it's a very good reason, too. Our educations were paid by our parents in Europe, though I did earn a Master's degree in the US with my own money. We are DEFINITELY happy not to have student loans
.- Even Vanguard, the cheapesy choice, is pricey, IMO than having a taxable account with Vanguard instead.
- Maybe kids will get scholarships
. Can anyone apply/qualify for a scholarship even when parents' AGI is $125K (sure I cannot predict future for this either)?So, for aforementioned reasons, we decided to stay away from college accounts and their complexities. In case children decide not to go to college, we won't be penalized for our withdrawals. And if they go, we'll try to help, if they want and we feel that they'll appreciate our help.
Do you agree with our decision? Just curious to hear your insigts
. Do you invest in taxable accounts instead of a 529 plan?Thanks so much
PS. What fund would be good (tax wise) for starting a so called 'college account'?
We already invest in VTSMX and DODGX (both taxable accounts). Should we just increase contributions to these, or would you advise some other fund (?) ?