Part 21 (2/2)

Should You Transfer Your 529 Account?

Already have a 529 plan started? ItWhen 529 plans first started, some were real stinkers Fortunately for parents,fees and offering better investet better,” says respected star, which each year reports on the best and worst 529 plans ”Several years ago, h-cost messes Since then, some [lousy choices] have been spruced up and others have been shut down The i these vehicles to save for college are getting a good deal” Go to Savingforcollegeco of four graduation ”caps” or more out of a possible five, you're fine where you are For exao with the 529 plan in Iowa It's not always at the very top of ratings I see, but it's usually in the top few The Iowa plan received a four-cap rating froeneral rule of thuuard, T Rowe Price, Fidelity, and to a lesser extent TIAA-CREF, it's probably a decent plan

If you're in a plan with high expenses and live in a state with no tax breaks for 529 plans, you should accelerate your search for a new plan Your new plan will give you instructions on how to transfer money from the old plan to the new one If you want to shop around for a more optimal 529 plan-and don't want to take my advice to use the Utah plan-here are the primary considerations:Fund expenses The ed by the ed by states to adnificant, 1 percent or lower each, but they add up to a lot of lost e flat fees for opening andan account Coecoh e-based invest types of investn stocks, as well as bonds And always prefer index funds, rather than actively ed funds

State tax breaks Soh et that break Others allow you to take a tax deduction on your incooodies froovernments are nice and could be considered as you choose a plan But they probably won't h expenses and lousy fund choices

Here, briefly are non-529 options for college savings that I skipped earlier

Prepaid tuition plans With these, also called guaranteed plans, you essentially buy college credits at today's prices They're good for the saoes to school So, the return on your investe tuition costs This ood choice if you just want to preserve the value of rowing it to pay for more semesters Or, if you can't stand to see the value of your college nest egg ebb and floith stock and bond ht be best Some states require residency to use these plans And many states only allow you to pay for tuition and fees with prepaidin 2004, individual educational institutions were allowed to offer their own prepaid tuition plans The Independent 529 Plan is such an offering by a group of private colleges More infor, or 1-888-718-7878

To add to confusion, all these prepaid plans are technically 529 plans too However, most people call these ”prepaid tuition plans” and the investht be to use both an investment-style 529 and a prepaid 529

Coverdell Education Savings Account There's nothing terribly wrong with these accounts, formerly called ESAs The main drawback is you can only contribute 2,000 a year per child Otherwise, they're si is you can use thee However, unless Congress acts before 2010, contribution limits revert to the old cap of 500 per year, and you can't use the money for elementary or secondary private school

Custodial accounts These accounts are called Uniform Gift to Minors Act (UGMA) and Uniform Transfer to Minors Act (UTMA) They were the prie before creation of 529 plans in 1996 However, they have lost als vehicles, when compared with 529 plans If you already have an UGMA or UTMA, feel free to liquidate the account and put the s plan or prepaid plan, or convert to a 529 plan with the help of your accountant and the 529 plan ade-Based Plan

Most 529 plans include an option to invest all of your college savings in a single diversified ressively when children are young and e Unless you have a specific investing philosophy or don't need the o

Age-based funds automatically reallocate money to e enrollment When your children are toddlers, the h school, the s

For example, in the recommended Utah No 8 plan, Diversified-B, a toddler would have money invested this way: 56 percent US stocks, 24 percent foreign stocks, and 20 percent bonds As the child ages, e-based options in the Utah plan are fine too I like Diversified-B, n stocks It also provides finer diversification a stocks fro sound faet-date retireet date, rather than retireet-it option that is h”

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If you have a huge lurow monthly contributions, you should probably choose a more conservative allocation

Just like you can switch 529 plans once every 12 ies within a 529 plan once within a year's time So, you're only stuck with your allocation for one year, if you decide you don't like it

3 Contribute Auto savings autoular deposits in your 529 account by setting up auto account

Foret a raise or at a predeter the account with portions of such windfalls as a federal tax refund, annual salary bonus, or cash gift As you finish paying off debt, you can funneloff an autoe debt, redirect at least part of that pay your other priorities, such as paying off high-interest debt, funding retireency fund, are all under way

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Boosts to your college savings plans can co via credit cards or online shopping portals contributes ss Find details at Uproradco for four-year college expenses is a swell idea But if you really want to chop down the price tag, consider sending your child to a coe for the first two years They would then transfer to a naree diploma It's what I call the two-year, two-year plan

The cost of tuition and fees at coes is typically half of public four-year schools and about one-tenth the cost of private colleges Studies show students taking the coo to four-year schools, and earn just as et a better education in those introductory classes Courses at coht by teachers who often have real-world experience working in their fields Introductory classes at four-year schools are often taught by teaching assistants or professorsa Financial Adviser

A array of financial decisions, including many we've talked about in this book: how to build a retiree expenses, and deal with debt and insurance

For help, youa personal financial adviser That can be a great idea or a bad one The main advice: Buyer beware