Is a 529 Plan right for me?

Now that we have covered what a 529 Plan is let's address the natural concerns with a 529 looking out ~17 years from today:
1. Undergraduate college is free, my child got a full scholarship or my child has ZERO interest in going to college:

• I can use the money for myself, my spouse, move it to another child, move it to a family member (very loose rules here...basically I can move it from my child to HIS/HER: sibling, mother, father, aunt, uncle, child or first cousin). I can even do one of those semester-at-sea deals or study-abroad deals for myself and spouse.
• In the extreme worst case I pay the 10% penalty and pay federal/state taxes on the EARNINGS. And if you did your state's 529 plan and got the state income tax deduction on your contributions going in they may want that deduction back.

2. Now, is a 529 the right choice for ME? In other words, is this the best place to put my money?

• You know what they say on airlines right? Put the mask over your face before putting it over your child's face.
• Student loans are CHEAP. Personal loans are expensive. Better your child take out student loans than you eating welfare turkey out the can ~17 years from now.
• If you are like most folks today who waited to have children then the age 59.5 is much closer than you would want it to be. At that age, access to your 401K, IRA, and Roth IRA comes into play. Sooo, with that said...

3. Accounts to fill BEFORE you do a 529, IN descending ORDER:

• 401K up to employer match - FREE EFFING MONEY! Always take this first. If your employer matches your contributions up to X always contribute up to X. DUH!!!!! Pre-tax going in, tax-free growth, taxed (without penalty) coming out after you are 59.5 years old.
• HSA - I personally think this is the best account ever made. Pre-tax (even pre-payroll taxes) going in, tax-free growth while in, tax-free coming out for medical expenses. If you have a child then medical expenses come with the territory.
• Roth IRA - After-tax money going in, tax-free growth, and tax-free coming out after age 59.5.

Tax return choices...

If you are one of the lucky few out there who will be blessed with a big tax refund and would like to know what are some of the best options during a recession like economy then here are some top choices:

1. Shore up your short term reserves
Normally, this would be #2 but in an economy like the current one, having some reserves is a pretty good idea. How much you say? Personally, 3 months salary works for me but many experts recommend 6 months. My personal favorite for this would be ING Checking where you can get a free $25 just for opening and funding an account with a minimum of $250. That's an instant 10% by my calculations not to mention the 2% APY on a CHECKING account.

2. Pay off any high interest (>3%) debt
Assuming you have short term reserves, paying off high interest debt is always the BEST thing to do. I mean, it doesn't take much sense to see that if you are earning 5% (before taxes) on your investments but paying 8% in interest that you are losing the fight. A beatdown to be exact.

3. Continue to fund your retirement
More specifically, continue to fund your (401K, Roth IRA, Roth-401K, IRA, etc) accounts. As always, if your employer matches your 401K contributions you should contribute the minimum to get the maximum employer match. Free money is free money. With regards to fund selections it is always recommended to find low cost broad index funds and I continue to receive the best service with a wide array of low cost choices from Vanguard.

4. Adjust your withholdings
Yep, if you don't want a repeat of getting your own money back next year interest free you may want to adjust your witholding. Ideally, you want to shoot for break-even ($0 refund/owed). In the situation where I must lean one way I prefer to owe the IRS a SMALL amount than having them owe me. Hey, last I checked they don't pay interest.