How to handle 529
Posted: Mon Aug 06, 2018 10:36 am
Hi folks,
We're considering the possibility of sending kids to a private school. Because 529s can now be used for private school tuition, this brings up some interesting questions.
We're planning to put money away a few years ahead of needing it, both as a trial run to see whether we can afford it, and to build up some buffer.
I haven't been particularly keen on 529s for college, because of (in general) high fees, poor investment options, locking up the money for a very long time, and only being able to deduct the gains rather than contributions. Also they don't fit in with a PP, and I'd like to be flexible about what our long-term savings are for. Maybe they are in fact worthwhile for college; I'd be glad of a discussion of that too.
Now that 529s can be used for elementary through high school tuition, I'm considering using them as a vehicle for shorter-term savings. Basically, instead of putting the money in a high-interest savings account for use in a few years, I'd put it in a cash 529 vehicle, which would then grow tax-free.
I'm focusing on Utah because they have the lowest fees and the best investment choices. Utah's cash vehicle (they call it "FDIC Insured") consists primarily of deposits in Sallie Mae Bank. Its current one-year return, net of fees, is 1.98%. That's pretty good, and if the spreadsheet I whipped up is correct, it's equivalent to 2.75% in a taxable account. Way better than the 1.8% I get at Marcus.
https://my529.org/performance-returns/
Another way to look at it is this: since the primary purpose of saving now is to simulate paying for school, and since when school comes we'll pay for it out of income, this could be considered long-term saving rather than short-term saving. It would end up being used for college or possibly the very end of high school. Would it make more sense to take more risk with this? They have age-based funds as well as a 70/30 stock/cash and a 20/80 stock/cash. Or should I just do a savings account to maintain maximum flexibility?
Pretty much in any case, this would be a VP of some sort. I don't believe there's any 529 that allows gold.
What are others here with small children doing for college savings?
We're considering the possibility of sending kids to a private school. Because 529s can now be used for private school tuition, this brings up some interesting questions.
We're planning to put money away a few years ahead of needing it, both as a trial run to see whether we can afford it, and to build up some buffer.
I haven't been particularly keen on 529s for college, because of (in general) high fees, poor investment options, locking up the money for a very long time, and only being able to deduct the gains rather than contributions. Also they don't fit in with a PP, and I'd like to be flexible about what our long-term savings are for. Maybe they are in fact worthwhile for college; I'd be glad of a discussion of that too.
Now that 529s can be used for elementary through high school tuition, I'm considering using them as a vehicle for shorter-term savings. Basically, instead of putting the money in a high-interest savings account for use in a few years, I'd put it in a cash 529 vehicle, which would then grow tax-free.
I'm focusing on Utah because they have the lowest fees and the best investment choices. Utah's cash vehicle (they call it "FDIC Insured") consists primarily of deposits in Sallie Mae Bank. Its current one-year return, net of fees, is 1.98%. That's pretty good, and if the spreadsheet I whipped up is correct, it's equivalent to 2.75% in a taxable account. Way better than the 1.8% I get at Marcus.
https://my529.org/performance-returns/
Another way to look at it is this: since the primary purpose of saving now is to simulate paying for school, and since when school comes we'll pay for it out of income, this could be considered long-term saving rather than short-term saving. It would end up being used for college or possibly the very end of high school. Would it make more sense to take more risk with this? They have age-based funds as well as a 70/30 stock/cash and a 20/80 stock/cash. Or should I just do a savings account to maintain maximum flexibility?
Pretty much in any case, this would be a VP of some sort. I don't believe there's any 529 that allows gold.
What are others here with small children doing for college savings?