529 savings plan?

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francesfarmer
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529 savings plan?

Postby francesfarmer » Tue May 21, 2013 4:33 pm

Has anyone here used a 529 savings plan for law school? I am deferring until next year and I want to take advantage of the pre-tax/tax-exempt status to save money in the interim but it just sounds too good to be true.

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Tiago Splitter
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Re: 529 savings plan?

Postby Tiago Splitter » Tue May 21, 2013 7:54 pm

What sounds too good to be true? You put in after-tax money and it grows tax free if used for education. Don't expect to get much in the way of gains in just one year, especially since the investment options are heavily regulated. Also, depending on your state you may be able to get a state tax credit or deduction for the contributions, but sometimes you have to pay it back if the money is withdrawn too quickly.

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francesfarmer
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Re: 529 savings plan?

Postby francesfarmer » Wed May 22, 2013 1:02 pm

Tiago Splitter wrote:What sounds too good to be true? You put in after-tax money and it grows tax free if used for education. Don't expect to get much in the way of gains in just one year, especially since the investment options are heavily regulated. Also, depending on your state you may be able to get a state tax credit or deduction for the contributions, but sometimes you have to pay it back if the money is withdrawn too quickly.

Ah, thank you, I was confused and thought it was pre-tax money because I had been looking at my 403(b) right beforehand.

I'm trying to figure out how to optimize my savings for next year while reporting the lowest income and the lowest assets/protected assets on the FAFSA and Need Access. Has anyone come up wih any solutions in this situation?

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RedGiant
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Re: 529 savings plan?

Postby RedGiant » Thu May 23, 2013 2:17 am

francesfarmer wrote:
Tiago Splitter wrote:What sounds too good to be true? You put in after-tax money and it grows tax free if used for education. Don't expect to get much in the way of gains in just one year, especially since the investment options are heavily regulated. Also, depending on your state you may be able to get a state tax credit or deduction for the contributions, but sometimes you have to pay it back if the money is withdrawn too quickly.

Ah, thank you, I was confused and thought it was pre-tax money because I had been looking at my 403(b) right beforehand.

I'm trying to figure out how to optimize my savings for next year while reporting the lowest income and the lowest assets/protected assets on the FAFSA and Need Access. Has anyone come up wih any solutions in this situation?


Gift $ to your parents prior to Fafsa and then have them gift it back to you during the year? That's the only creative solution I've heard, and I'm not even sure it's kosher.

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quakeroats
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Re: 529 savings plan?

Postby quakeroats » Thu May 23, 2013 2:33 am

Traditional IRAs and other vehicles that use pre-tax dollars typically let you use money in them for college expenses without penalty. All you have to do is pay taxes on the amount you take out (which will be at a reduced rate since you won't be making much in those years). From what I remember, this is all excluded from FAFSA, but you should doubt check.

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francesfarmer
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Re: 529 savings plan?

Postby francesfarmer » Thu May 23, 2013 10:40 am

RedGiant wrote:
francesfarmer wrote:
Tiago Splitter wrote:What sounds too good to be true? You put in after-tax money and it grows tax free if used for education. Don't expect to get much in the way of gains in just one year, especially since the investment options are heavily regulated. Also, depending on your state you may be able to get a state tax credit or deduction for the contributions, but sometimes you have to pay it back if the money is withdrawn too quickly.

Ah, thank you, I was confused and thought it was pre-tax money because I had been looking at my 403(b) right beforehand.

I'm trying to figure out how to optimize my savings for next year while reporting the lowest income and the lowest assets/protected assets on the FAFSA and Need Access. Has anyone come up wih any solutions in this situation?


Gift $ to your parents prior to Fafsa and then have them gift it back to you during the year? That's the only creative solution I've heard, and I'm not even sure it's kosher.

That sounds kosher as long as you are under the gift tax limit but I don't want to increase my mom's assets either! I think an IRA is the way to go... Thanks everybody!




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