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MONEY magazine taught me something useful

January 2nd, 2014 at 10:08 am

I have been a subscriber to MONEY magazine for years. I enjoy the human interest pieces, the stocks section is pretty over my head.

But last night I think maybe my subscription gave me my first real good advice.

The article was a little over my head. So maybe I interpreted it wrong.

It was about 529 plans, and being a new mother, this was a good read.

ok, it helped me determine that my home state of GA has good rates on 529's (helpful).

But most helpful was reading that if I invest $6k a year from the babies first year till college- we should be able to cover almost all of 4 years in state tuition, fees and board!

6k seems very do-able considering it will eventually pay for one of my daughters largest life expenses. That seems a little cheap. I probably read it wrong. But it seems like an achievable goal. To invest $6k a year with an eye towards being able to pay almost all my child's college costs.

So husband and I have decided to ask our financial adviser to set up a 529 for baby- and every January he will move our mandatory IRA deduction to the 529 account. It averages about 5k a year and we can make up the remaining amount. YEA! Feeling accomplished.

4 Responses to “MONEY magazine taught me something useful”

  1. creditcardfree Says:

    What are you investing IN? A 529 is the type of account, but depending on rates of return you may earn more or less. And depending on the investment you might have high fees. Do your homework! And don't get me wrong. Saving for college is a good idea, although I would put getting out of debt AND fully funding retirement before college since you can't borrow for college.

    There are also Coverdale accounts for college. Make sure to compare the pros and cons of both types.

  2. ThriftoRama Says:

    6k sounds about right. However, we usually put in the yearly max in our 401k, which is 2k per kid per year. Then, anything else we put into a ROTH IRA. In the roth, you can use contributions to pay for college expenses without penalty, then if you don't need that money for some reason, it can stay in your account and you can use it for retirement. Not sure if I'd put all my eggs in one basket if I were you. The 529 also counts against financial aid, whereas if I understand correctly, the Roth does not. Food for thought!

  3. Jenn Says:

    I'm a proponent of 529 plans, and I contribute to 5 of them every month for my kids. (after maxing the 401k) My oldest is in college now, and boy, am I glad we saved! It wasn't nearly enough to cover everything, but I cash flow some of the tuition too. (And hoping that'll help the taxes for 2013 - we'll see) While it 'counts' against financial aid, it counts as a parental asset instead of a kid's. So if you apply for financial aid - and ideally you won't - Uncle Sam would want you to pay 5% of parental assets for college. Which wouldn't hurt you, because that's what you saved the money for!

    Definitely do your research though. You can choose ANY state's plan. I chose Utah's and it's been a great experience. Good returns and low expenses. And it's been easy to make the withdrawals. In PA, we don't pay state tax on contributions to any 529 plan. I don't know about GA.

  4. M E 2 Says:

    You CAN finance an education. You CANNOT finace a retirement.

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