Save for retirement first before even considering saving for college. Calculate how much you need to save to reach a reasonable retirement goal (a 40 year old with no retirement savings should be saving about $1,200 per month for the next 25 years! And yes, this is just an example so see a financial planner and figure this out first).
Some state 529 plans are allowing conservative investments (like FDIC-insured CD's) but forget this as an alternative if you have more than 5 years before college either starts or ends. This will most likely not meet your desired goal.
Due to the recent market meltdown, 529 plans are also allowing investors to make more than one investment change per year and now allowing two changes per year. Another bad idea. Being able to make regular portfolio adjustments is just another opportunity for you to over-manage your account and lose sight of the long-term goal.
Besides, as Joe Hurley from www.savingforcollege.com states "...Anyone who really wants an investment change can get around the restrictions simply by coupling the investment change with a beneficiary change..." (for example, change the beneficiary to another child or yourself, make the investment change and then change the beneficiary back). Forget it though. It is unwise. Keep a long-term perspective and stay the course.
The 529 pan has tax benefits, yes, but if you have not saved enough for retirement then you should plan, instead, to either borrow (reasonably) for college costs and pay the remainder out of your current cash flow at the time college begins. How? By living off less than you make now and being prepared to fund college within your spending plan.
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.