529 Plans

Worth it? If so, what is the best firm to open an account for one?

I guess you figured out your marriage issues? Saving for kids now?

I think the fees on these things are still high. You can try Vanguard- I think the fees are reasonable and they have age based options just like a target date fund that change your asset allocation as you approach college:

https://personal.vanguard.com/us/content/Funds/Funds529AgeBasedJSP.jsp

I believe contribution are made with after state tax income and all cap gains and distributions are exempt from fed and state. So sounds like a pretty good deal.

For my newborn nephew. I’m going to be a good uncle.

What? My uncles never set up funds for me… even though they are all millionaires…

My aunt got around, maybe you can send me some stuff! :wink:

My uncles never gave me anything AND cleaned out a RE portfolio my grandfather left that was supposed to be evenly distributed. My dad never saw a penny.

Like CvM says: zumb!tches.

But payback is a B isn’t it, uncle Jorge … UH!?

Which state? New York? Each state can have a different firm running their plan. California used to be Fidelity, now TIAA-CREF. Check for New York.

Also, max out Coverdell ESA first - easy to do, $2000/year; before contributing to the 529. States and custodians get a (small) cut out of the 529, and you can use the 529 only for colleges. ESA has neither disadvantage.

Not sure if an uncle can contribute to an ESA.

Will his folks be setting up a plan and funding it as well, or are you going solo on this?

^ Sup higgy. His folks are going to be on the account, I’m just going to help them set it up and get it funded. Least I can do. He’s a fun little guy.

^ The state they live in might affect which is the best plan then, as the deductibility of contributions varies by state. I found this site very useful when I was setting up my kids’ plan.

http://www.savingforcollege.com/

I seem to recall Nevada and Utah having really good plans.

Edit: I think UPromise has some useful information on their site as well.

^ gah this is so complicated. I’ll call my broker and see what’s up. Is there any reason to use the link you posted versus say, Vanguard?

Vanguard adminsters a lot of the different state funds, but not all of them. The link provides information on all of the funds, including Morningstar ratings, tax issues, who runs the fund, etc.

I think the coverdale is the better option, but there are incorme limits.

I’ve got vanguard, luckily my state has them.

It has to be your state administered plan for it to be tax deductible I think. If you’re going to contribute it might be better for jr if its in your name. I know grandparents its that way.

When he’s in college, subtly refresh his memory about who funded his education, and that you expect nothing in return, but you would appreciate if he introduces and speaks highly of you to the craziest b!tches on campus who are willing to give BJs to some cool uncle in his 50s or so.

Admittedly, I don’t really know a whole lot about 529 plans. But in general, I don’t like the idea of college savings plans, be it 529 or Coverdell.

First, depending on the actual plan you choose, you may be stuck in some really poor-performance, high-fee funds. Second, the funds are earmarked specifically for education, and possibly earmarked for a certain individual. If you don’t use the funds for this purpose and for this person, then you are subject to extra taxes and penalties.

What if Junior doesn’t want to go to school? Maybe he wants to join the military, or do missionary work in Ethiopia. Maybe he’s a loser and a thug. Or maybe he wants to go to the local party school and major in Applied Poetry, with a minor in Alcohol and Fe!!atio Reception (on CvM’s dime, of course).

Instead, I prefer the idea of just building wealth for yourself. Take the money and put it in your own portfolio. True, it may not be tax-advantaged, but you have the ultimate in flexibility. If you want to give it to Junior, you still can (and without all the complications of proving what qualifies as an educational expense). Or if he turns out to be undeserving of it, you can give it to Mary instead. Or you can spend it at da club instead.

IMHO, a lot of people get too focused on the preferential tax treatment of educational savings plans that they forget that there are significant constraints on withdrawals, and what actually constitutes an “educational expenditure”, etc. And if you break the (somewhat arbitrary and capricious) government rules, then the penalties can outweigh any of the potential benefits. (Same is true with retirement accounts. They’re only good if you know for a fact that you can use them the way they’re intended. Otherwise, you’re shooting yourself in the foot.)

But I think your head and your heart is in the right place, CvM.

Another place you can get good information is from your local CFP.

You know–we should start a thread about whether the CFP has any benefit to anybody–especially to a CFA Charterholder.

^Respect. You know I got nothing but love for CFPs.

When I opened my first CFA book, I learned about diversification. Diversification doesn’t only extend to investment allocation, but also investment vehicles. It would be nice to put a few bucks away for my little man in a 529. The 529 will not be the only source of his education funds, but a part of it. The tax free distributions is appealing to me as well as the restriction that it’s only for education. I don’t want his parents getting wise and using the funds for rims on their hooptie.

No, no, no. I’m not saying that you should just give cash to the kid or to the parents.

You put the money in YOUR brokerage account at E-trade or Wells Fargo or wherever. Then, when Junior’s old enough to go to college, you pay for something for him. That’s what I’m saying.

But I like the idea of you saving soomething for your nephew. You’re a good man, Charile Brown.