July 17, 2014
College 529 Plans: a Video Primer
In this video, the president of a Boston-area community bank explains the fundamentals of 529 college savings plans, which most state governments offer.
Bob Mahoney recently put both of his daughters through college with money he’d saved in 529 plans. While it can be difficult for many parents to scrape together the money, he said 529 plans provide some hedge in the future against the ever-rising cost of a college education.
Mahoney suggested starting small and contributing, say, $1,000 or $5,000 each year and also asking grandparents to put money into the 529, in lieu of giving toys and other gifts.
As he explains in the video, the advantage is that 529 plans are free of federal and often state taxes on the investment returns earned while the future student is growing up.
One disadvantage is that they require parents to make difficult decisions about how to invest the money they’re saving. Mahoney’s advice is to avoid high-flying stocks and to approach 529s as one would approach 401(k) investing. And, like 401(k)s, low-fee funds also make sense for 529 plans.
Excellent summary. One of the issues with 529 is that even the lowest cost plans are still high costs all things considered. Also there are problems with target date funds, as the changes in their asset allocation vary widely across plans. However, it takes a lot of flaws to overcome the tax advantage
As a BC alumni, I agree on the importance of college and saving for college. Come learn more about 529 Plans at the training seminar on 9/15/2014 at the JWMarriot Orlando. http://www.529conference.com