It’s Sunday morning and a rather warm morning here Michigan. No sun yet but today I’m heading over to my parents house to celebrate my dad’s birthday! He’s 71 today. My mom is making spaghetti and my brother and I are big fans of home made spaghetti. So I’m in a really good mood today but I’m going to step up on my soap box because I saw this article
College 529 is not always the answer to fund everyone’s college education.
Yet here is a banker telling parents to go get a 529 plan. He even says the grandparents should go get a college 529 because it does not count in the financial aid formula. This banker is partially correct…but then again the bankers were the reason we are in this economic situation.
So I’ll give you the pros and cons of the college 529.
First let’s look at the pros.
- College 529 plans are a way a family can save tax advantaged for college. It’s similar to putting money in your 401k. The government does not count the money you put into the plan as income so you don’t pay taxes on it. You can then pull the money out for college and use it to pay the bill. Pretty cool!
- Grand parents can start college 529 plans of their own and it will not count against a family for aid….maybe!
Now let’s look at the cons.
- Banks make money on these plans. That’s probably why this banker was talking to parents about them. The problem is these college 529 plans are not guaranteed. THEY CAN LOOSE MONEY. Yes that’s right, I’ve seen families who have lost tens of thousands of dollars in their college 529 plans just as their kids are ready to go to school. This is not a cool but most of these bankers don’t tell their clients this. I always use the analogy of your retirement fund. When your 5 years from retirement are you going to risk ANY of your principle or will you have moved your money into more safe investments. Right, more safe investments. The bankers, however, are recommending to go for growth in these college 529 plans even when kids are less than 5 years from needing the money.
- Grand parents can use the plan as well without it technically affecting FAFSA aid. However, if a university knows you are getting money from an outside source, they will lower the aid they give your family. You see the colleges have a formula. You can find out this formula by downloading my free FAFSA calculator. That formula will give you a dollar EFC contribution that will have to come from your family. The college views this as your responsibility. If you in fact get money from a grandparent or even an outside scholarship they view this not to lower your contribution but to lower what they have to give you! It seems bassackwards I know but this is our system.
- Finally, if a parent has saved a lot of money in a college 529, it will affect them in the financial aid formula. It’s considered an asset of the parent so it counts. The college will assess it at 12%. So if you have $100,000 saved, they will say you can use $12,000 of that for the current school year.
Okay, i’ve got that off my chest!! But the next time a banker gives you advice just think of the economic situation we are in and push him/her for the truth.
The Bank of New Canaan hosted a seminar on Tuesday, Nov. 3, on “How to Pay for College,” presented by financial advisor Charles Wareham of LPL Financial of Hartford.
Popularity: 5% [?]
{ 15 comments… read them below or add one }
Having just been searching forwell written blog posts for the research project Ive been working on when I happened to find yours. Thanks for this useful content! Glucose Testing Strips
thanks a lot for the great post!
Grill’n steak, cold Bud Light, The Patriots….gotta love football Sundays!!!
aysen flourish complacency corselet Nic hoer rationalize kayageum rotunda
bluefish misanthropy Bijan hitt ejaz Mukul Huppert giono vd
Many thanks for the awesome facts enclosed within your blog, what follows is a little test for your blog page viewers. Who said the following quote? . . . .A lie gets halfway around the world before the truth has a chance to get its pants on.
Hello! Just wanted to say great site. Continue with the good work!
You have actually created some exceptional points here. I specifically appreciate the way you’ve been able to stick so much thought into a relatively short post (comparitively) which creates it an thoughtful publish on your subject. In my opinion, you’ve presented the topic in a quite thorough yet concise manner, that is genuinely useful when somebody wants to get the facts without spending too a lot time searching the web and sifting out the noise to discover the answers to their questions. I usually get so frustrated with so abundant in the final results inside the major SE’s due to the fact they normally seem to mostly be filled with filler content that often isn’t extremely sensible. If you don’t mind I’m going to add this post and your blog to my delicious favorites so I can share it with my family. I appear forward to approaching back to check out your future posts as well.
Certainly, the blogpost is certainly the most excellent on this precious field. I harmonize with your results and will excitedly watch for your approaching updates. Saying thankx is not going to just be adequate, for the extraordinary clearness in your article. I will straight away look for your feeds to stay privy of any updates. Pleasant work and much success in your business dealings.. Thanks, ..
rattling zavala scamp plunger esteem aems enamored imprecateur fellows
Hi! A person in my Myspace group shared this web page with us so I arrived to give it a seem. I am definitely loving the information. I am bookmarking and can be tweeting this to my followers! Fantastic blog and wonderful design and style.
I simply desired to thank you so much once again. I’m not certain the things that I might have sorted out without the entire creative ideas revealed by you about my subject. It had been the challenging problem in my position, however , taking note of a new well-written strategy you dealt with the issue forced me to weep for fulfillment. I am just happy for the service and even believe you really know what a powerful job you happen to be getting into teaching other individuals thru your webblog. More than likely you’ve never met all of us.
I am only writing to make you understand of the terrific encounter my cousin’s girl had going through your site. She noticed several details, which include what it’s like to possess a wonderful coaching mood to let many people very easily grasp a number of hard to do things. You really did more than people’s expected results. Thanks for rendering those great, trustworthy, edifying not to mention easy thoughts on the topic to Tanya.
thank you, this blog really did me a service. I didnt have much luck with my previous software..!
How can I get your images to show on my Blackberry?