Just talked to my broker who reco’ed this site. Also, their platform has American Funds. Literature on the matter is on it’s way to my home. We’ll see what I decide. The level of red tape and loss of investment mangement ability is not something I’m a fan of. If the fees are unreasonable, I’ll punt the idea and just put some money in an earmarked fund myself.
You can invest anything in a coverdale (it’s like an IRA) and the funds can be used for any education expense. Although, I think there are income limitation but I thinnk you can make the contributions in the name of child to fall under those limits. However, this may effect him down the road when it comes to student aid as the funds will be in his name and therefore they will reduce the amount he may ultimately qualify for.
I’m trying to research this stuff now, but it’s much more complicated than it needs to be.
^ It’s like you need a Top 2 MBA even to figure out how to pay for a rusty hacksaw college degree.
Money in both a Coverdell ESA and a 529 plan is not considered the child’s (beneficiary’s) money when applying for federal financial aid as long as the owner of the account is someone other than the beneficiary, such as a parent. This works to increase the child’s potential financial aid because parents are expected to contribute only around 6% of their assets to finance college education, as opposed to the child’s 20%.
Nope. Just a CFP.
CFP > HBS > CFA
As a former advisor and someone who has completed everything in the CFP program except the actual exam…don’t go through an advisor or a full service brokerage firm. Your best bet is to go direct through your state’s 529 plan program or another state’s program if you are allowed to deduct contributions to another state’s program on your state taxes . Going through a full service broker, you will get eaten alive by commissions and fees. Comeon, you mean to tell me you as a CFA charterholder would use some a$$hole salesman to do your investing, this includes CFPs!!!
Some states allow you to deduct contribtuions to other state’s programs while others only allow you to make state tax deductions if you go through your own home state’s program, so you have to do your research. The direct 529 plan route is the best option becuase you retain yourself as the owner of the account in case your kid turns out awesome and gets a full ride and doesn’t need the cash or if they become a complete dip$hit and don’t go to college. The money is yours and they are the beneficiary if they go to college. Also, it grows tax-deferred and tax-exempt if used for college.
I would never use full service brokerage. I called a customer service rep for my discount brokerage account. Where would I begin to do research to see where one can recognize state tax deductions?
I’m starting to like the Coverdell option.
I would do a simple google search on your state’s 529 deduction statutes. The problem with a Coverdell is you can only contribute $2K to the plan per year. The only issue you run into with 529 plans is that you may run into gift tax if you exceed $14k per year.
^ Thing is I’m only an uncle. I’m not shelling out $14k a year for him. Even $2k a year is a stretch. I’ll do some more googling and see what I can find out.
For the record–I agree with you about salesmen and commissions eating you alive. And I am not a CFP, and at this point, I have zero desire to pursue it. But this is another particular case where the CFP CURRICULUM would come in handy, and actually provides real benefit over the CFA CURRICULUM. (How it is handled in practice is a different matter.)
Score one for the CFP!
Yeah, I agree with you to an extent. The CFP is very complementary to the CFA in that the CFA is very academic and focused solely on investments and portfolio management while the CFP is very lifetime financial advice oriented, covering topics on estate planning, tax planning, retirement planning, etc, which are not covered in the CFA curriculum. You wouldn’t want to trust a CFP to manage institutional money or to pick individual securities for you, but you can generally trust their personal financial advice.
The issue with the CFP is that you become an expert at NOTHING. You just attain general information, enough to refer other professionals, on the workings of Insurance, Investments, income tax planning , retirement planning, and estate planning. Through the CFA program, you become well versed in investments. Also, the other issue with the CFP is that you are legally or ethically restricted on many of the topics clients may come to you for. For example, estate planning can only be practiced by licensed attorneys. Insurance can only be practiced by licensed agents, Tax planning SHOULD only be practiced by CPAs or EAs. The CFP program alone only scratches about 1/10 of level I of the CFA program, should you really shouldn’t be messing around with individual investments as a CFP…I guess as a CFP, you can sell some mutual funds, buy some plain vanilla bonds, and advise people whether to open a traditional IRA or a Roth IRA…
What state does the kid live in? Just use that state’s 529 plan and set it up directly with the plan administrator. If the kid lives in a different state you won’t get the state income tax break for contributing, but his folks will when they do, so that would be the nicest thing to do. Otherwise, set it up with the New York plan and get the break for yourself.
Edit: Check out this site for a breakdown of tax advantages by state. If the kid lives in a state that doesn’t have income tax you can set it up in NY guilt free.
Utah 529 Plan. www.uesp.org. Why? Lowest cost 529 plan. No advisor fees. You can sign up online. They use primarily super low cost Vanguard funds in this plan. They have an age based option which I like, the “moderate age based investment option”. This choice has a diversified portfolio of Vanguard funds and it gradually gets more conservative as the kids get closer to college aged. The money can be used for any sort of education, and if one child doesn’t use it, the money can be transferred to another child (such as a younger child). The money grows tax free and comes out tax free if used for education.
Gift < $2K => 529 < ESA .
Tell the parents you’ll match their contributions up to the limit of your choice, but you won’t contribute sh!t if they don’t do the same. Otherwise they’ll spend their money in rims, ipads, and ribs, knowing the good uncle will step up when needed down the road.
^ Respect. Good call. I’ll do more homework this weekend. And I’m not going to be kicking a lot of money into it, just some to shoulder some of the tuition pain. The ESA would work well in this regard since I plan to contribute less than $2k annually.
This just in.
I’m a big DFA fan. Not so much a big fan of Vanguard.
As several folks have noted, maybe even me, some states allow you to deduct contributions to any plan and other states only allow you to deduct contributions to your state’s plan. The links I gave you provide all that information somewhere. If I remember correctly, NY has one of the better plans, along with Utah and Nevada, so if your nephew is in NY I’d say just go with NY. You can set it up right here:
moral of story - send your kid to trade school and spend the savings
http://finance.yahoo.com/news/son-isnt-going-college-happens-110048333.html