Which 529 Plan should I choose?

If you have the basics down AND you filled all the prerequisite accounts already then you are ready to proceed.

Here are the top three 529 plans in MY opinion (highly-rated, low-cost and offer a good mix of age-based investment options as well as individual portfolios) when state income tax breaks are NOT taken into consideration:
1. New York's 529 College Saving Plan
2. Nevada (Vanguard) State Plan
3. Utah Educational Savings Plan

If your home state's plan does NOT offer state income tax benefits then the above 3 are probably sufficient for you to contrast and compare and find a PERFECT choice for YOU.

If however, your home state's plan DOES offer state income tax benefits then you should add it to the list of the above 3 and contrast and compare to find the PERFECT choice for YOU taking into account that there are state tax benefits to be had each year you make contributions to your state's plan.

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.

What is a 529 Plan?

What is a 529 Plan?

• A tax-advantaged account where you can put after-tax money into and it grows tax-free. The money can then be withdrawn tax-free for higher education qualified expenses.
• Higher education is undergrad college and graduate school. It is NOT high school.
• Examples of higher education qualified expenses are tuition, room and board ON campus, COMPARABLE off-campus housing, REQUIRED books and supplies, computer, and internet access.
• Examples of *NON* higher education qualified expenses are clubs fees/dues, fraternity/sorority fees/dues, etc.
• Since the money you put in (your contributions) is AFTER-TAX you can withdraw your contributions (principal) at any time without PENALTY. You will owe taxes on a pro-rata basis however. Additionally, if you took a state tax deduction on your contributions going in then naturally that state may want that deduction back.
• If you withdraw the money for a NON higher education qualified expense you will pay a 10% penalty PLUS federal/state taxes on EARNINGS (the growth on your contributions).

Cost of high living...

Funny that I write this post just after I reviewed 3 high priced steak houses. Laughable, to say the least. But it underscores the point that I am trying to drive home. And I won't act as if this was an original thought on my part so let me give you the quote that I always remind myself of constantly:

What some people mistake for the high cost of living is really the cost of high living.
- Doug Larson

In times like today, the choice is clear. However, even though the choice is clear the guts to make the clear choice and the discipline to see it through is hard to come by. And hell no I'm not talking about presidential candidates. I'm talking about cutting back on your spending and increasing your savings.

Is it safe to assume that you are still with me and you are now mentally thinking of how you can cut $50/mo and put that towards savings/investments? OK, good. I will admit that I am fighting this fight with you so don't start judging me (Mr. Want-iPhone-Ruth's-Chris) because I am already judging myself and I am not faring well. But trust, you know you don't want me to start judging YOU because I could fill this blog for a month. Go ahead, try me!

Now that we have agreed to not judge each other (smart move on your part) lets get back to the matter at hand. You know that rainy day savings that everyone is supposed to have? Well, the rain has started for some and for others the forecast isn't looking so good. I know I am not saying anything you don't already know, see, and feel all around you. But what has me apprehensive isn't the present. It's the future. You know, F-U-T-U-R-E, the place we intend to spend the rest of our lives. When do we turn the corner? When will we be able to see the light at the end of the tunnel?

Starting today, I will be making the clear choice!

PS: Of course it goes without saying that the 3G iPhone doesn't apply since it will be a NECCESITY. :)