Tips on how to evaluate a 529 college savings plan

• Avoid large fee plans by doing your own research and selecting your own 529 plan
• Look for a direct-sold (nonbroker) 529 plan.  Broker sold funds do not guarantee better earnings, you may in fact end up getting less after paying investment fees.
• Review the eligibility requirements and read the fine print!
• Make sure you are able to pay the minimum contribution.
• Evaluate the investment options and make sure the program offers options that meet your investment objectives.
• Compare management and account maintenance fees.
• Check for limitations. Read the fine print!
• If you are dissatisfied with your 529 plan, you can always swtich to another plan by changing the beneficiaries ont he account!  This can be done once every 12 months.
  

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Shopping for a 529 college savings program

What exactly is the right balance of risk and profit when you're saving for your child's college education? It all depends on how much time you have and how much you have to invest, but for everybody, the clock starts ticking once your child is born. Unlike retirement where you have decades to save, you have a mere 18 years until they graduate high school and start college to scrape together whatever you can. Start shopping early to save yourself the worry and heartache of uncertainty.

How to Allocate Assets for College Savings at Morningstar




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The more you save, the more you earn... in Chicago

It seems that Monetta, an investment comapny in the Chicago area has set up a new program for its Monetta fund shareholders to save for their children's college education. The initial and monthly investments are very low, but the plan gives earnings of 2.5 percent of the shareholder's account value.

Read more about it at businesswire...

businesswire

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College Savings Account - 529 College Savings Plans

Besides investing in a Coverdell ESA account, there is another popular alternative to saving funds for college.  A 529 Savings plan is offered by either your state or an institution of higher education.  Withdrawals and earnings from 529 savings plans are generally tax free as long as the withdrawn funds are being used for "qualified educational expenses" like books, tuition, room and board, and supplies.  Contributions may also be partially tax deductable depending on your state.  One of the greatest strengths that a 529 plan has over a Coverdell ESA is that there are no income based restrictions on contributions.  Another strength of 529 plans is that many plans are managed for you.  So if you don't have to worry about the risk of wisely investing your funds if you're not a savy investor, all of this will be taken care of for you.  However, as with all investments, there are risks associated with 529 plans.  Your best bet is to request information directly from you plan's administrators.


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Saving for College - Is a Coverdell ESA the best option?

Like an IRA, a Coverdell Educational Savings Account allows annual non deductible contributions. The funds in the account grow tax free and qualified distributions are also tax free. This may sound like a great way to save for college, but there are some catches.

• Contributions cannot be made to an ESA once the beneficiary turns 18.
• All funds in an ESA will have to be disbursed to the designated beneficiary by the time she turns 30 or the withdrawals will be subject to income tax and the 10%. Another technique is to rollover the account to another beneficiary who will have to be a family member.
• The maximum contribution limit is $2000 annually. Excess contributions are also penalized if they are not withdrawn before the end of the tax year.
• Distributions are only tax free if they're used for qualified educational expenses, otherwise a 10% penalty and income tax will apply to any gains that were withdrawn from the account. Double dipping and also claiming deductions such Hope and Lifetime Learning credits for the same educational expenses is not allowed.
• An ESA is considered to be an asset of the account custodian so this will not have a large negative impact on financial aid.
• For now, it is possible to make tax free withdrawals from an ESA and claim Hope or Lifetime Learning credits in the same year. This may change by 2010 though.

Paying rent for a new apartment with skylights and a jacuzzi is not a qualified educational expense! See the IRS publication on qualified educational expenses and distributions. Click here

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