I’m nearly 28 years old. Don’t have kids or anything and won’t anytime soon. I want to start something conservative for their college and related expenses now though. This won’t be the only means of funding their education- just a portion. I’m thinking it’ll cost a whole lot more than mine did, so every bit will help. Is there anything even worth the trouble with the CPI going up so much? This is money that I’ll be using much earlier than when I retire, so it will need to be somewhat aggressive and not just some kind of bond or savings account that won’t even keep up with inflation. However, I don’t want to be playing around with this money on anything high-risk either.
I’m thinking the only way to get into something lower risk that’ll be worth it is to throw money into something to lower my current taxable income, so I’m making money on the front end of it instead of just looking at the finish line. I can defer compensation into a 457 or 401k and also lower my taxable income by putting $ into one of these education savings accounts until I’m into considerably lower tax bracket after my normal deductions, right?
My cost of living is lower now than it ever will be again (until I’m retired). Shouldn’t I avoid as much tax and hoard up as much as possible while I can most easily afford it?
Am I thinking wisely here or am I missing some things? Just brainstorming a lot of this at this point.
Can anyone give me their thoughts or experiences with stuff like
Coverdell ESA’s and other accounts created specifically for such a purchase?
Second the 529 plan. My son’s grandfather set one up for him and everyone on both sides of the family contributes right now. I think in less than 1 year we already have 6K in it. By the time he goes to school, he should be set. We are also looking into the prepaid tuition options.
Mark
Mako 262 Twin Yammaha F200s
Yeah, but do you consider a dog to be a filthy animal? I wouldn’t go so far as to call a dog filthy but they’re definitely dirty. But, a dog’s got personality. Personality goes a long way.
“Life’s tough…It’s even tougher if you’re stupid” John Wayne
529 plans in the past were very conservatively managed, so the income that was tax-spared was also meager. Better to pay tax on a high return, than not pay tax on a very low return. Also obligates you to spend the money only on a child/grandchild’s education. It’s a simple, passive way to get you to put away money and not just spend it now on fishing gear/boats. If you like whole-life insurance, you may like 529’s. Of course in this age, it’s hard to be certain of a high return in an alternative model but I handled my kids 8 college years of expenses more like EF mentioned. If you can use the cash to avoid/eliminate any high interest debt you have now, I’d do that first. Perhaps some current 529’s offer the opportunity for higher returns than nearly a decade ago.
Of course if you charged the same $600/hr my attorney does then you can pay for college out of your monthly cash flow (I don’t think he reads CF.com).
529 plans in the past were very conservatively managed, so the income that was tax-spared was also meager. Better to pay tax on a high return, than not pay tax on a very low return. Also obligates you to spend the money only on a child/grandchild’s education. It’s a simple, passive way to get you to put away money and not just spend it now on fishing gear/boats. If you like whole-life insurance, you may like 529’s. Of course in this age, it’s hard to be certain of a high return in an alternative model but I handled my kids 8 college years of expenses more like EF mentioned. If you can use the cash to avoid/eliminate any high interest debt you have now, I’d do that first. Perhaps some current 529’s offer the opportunity for higher returns than nearly a decade ago.
Of course if you charged the same $600/hr my attorney does then you can pay for college out of your monthly cash flow (I don’t think he reads CF.com).
529’s have come a long way in the last few years. They are all managed by mutual fund families, and offer you the ability to invest in a number of ways. First, you can design your own portfolio utilizing the available funds, which run from conservative Money Market to very aggressive International Emerging Markets funds. Second, if you don’t want to try and be an expert in fund picking, you can just choose an asset allocation model, again running from conservative to aggressive, or something in between. In this case, the fund manager(s) set up the portfolio for you, and manage it to the risk you’ve selected. Thirdly, you can have the assets managed based on your child’s age. For example, if your child is 2 today, the portfolio will be aggressively managed, but as they get older, it is automatically rebalanced to get more conservative the close
Both my kids have 529’s managed by my CFP and have done very well until recently, but still ahead of the game. Alex won’t need his for another 8 years, so we have time to rebound from this downturn. It’s kinda funny hearing a 10 year old complaining about a down stock market cause it’s wrecking his college fund, kinda not! Also, be sure to let all the relitives know about it and how they can contribute to it on bday, xmas, and such.
If i am not mistaken, you are not married, nor engaged and you are talking about “kids”…
Is there something that you need to tell us Phinnagin? Should I be buying some blue cigars or some pink ones? Maybe what we should be talking about here is birth control…
Just kidding. Check into the 529, but you likely have to have a benefactor’s name on there. I don’t know how this works if you don’t already have a kid. Go to Fidelity’s website or something and read the stipulations, etc.
If i am not mistaken, you are not married, nor engaged and you are talking about “kids”…
Is there something that you need to tell us Phinnagin? Should I be buying some blue cigars or some pink ones? Maybe what we should be talking about here is birth control…
Just kidding. Check into the 529, but you likely have to have a benefactor’s name on there. I don’t know how this works if you don’t already have a kid. Go to Fidelity’s website or something and read the stipulations, etc.
You are right. I will have to follow EF’s plan until there is a benefactor. I will just keep buying bottom fishing tackle. That fishery is going to booming in 25 years if the SAFMC keeps up all the good work. [sarcasm]
You are right. I will have to follow EF’s plan until there is a benefactor. I will just keep buying bottom fishing tackle. That fishery is going to booming in 25 years if the SAFMC keeps up all the good work. [sarcasm]
Luke 8:22-25
Phin,
You can always start one today with yourself as the beneficiary, and when/if you are lucky enough to find someone willing to bear your children,(I don’t know you so I can’t reliably give you odds on this happening:smiley:), you can then change the beneficiary to them. I’m also a CFP, and have used this strategy for some of my clients without children who have had the foresight, like you, to plan way ahead. Although these accounts, like most others, have suffered downturns recently, hopefully those with young children will have plenty of time to rebound, and those with older children would have been conservatively invested, and should have been somewhat insulated from this mess.
“Curiousity killed the cat, but for a while I was a suspect." Steven Wright
Maybe what we should be talking about here is birth control…