529 College Savings Plan

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luuma
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Joined: Sat Dec 10, 2011 2:04 am

529 College Savings Plan

Postby luuma » Mon Nov 24, 2014 9:46 am

Hi,

It's benefit enrollment period at my current job. One option is putting pre-tax money into a 529 college savings plan. Has anyone done this for themselves? Can I do this for law school? It almost seems too good to be true, to save so much tax money and put it towards school. I don't want to ask at work for obvious reasons...

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Tiago Splitter
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Joined: Tue Jun 28, 2011 1:20 am

Re: 529 College Savings Plan

Postby Tiago Splitter » Mon Nov 24, 2014 10:20 am

luuma wrote:Hi,

It's benefit enrollment period at my current job. One option is putting pre-tax money into a 529 college savings plan. Has anyone done this for themselves? Can I do this for law school? It almost seems too good to be true, to save so much tax money and put it towards school. I don't want to ask at work for obvious reasons...

Some states may offer a small state-tax deduction, but otherwise 529 contributions are made on an after-tax basis. The benefit is tax-free growth, but that won't help much if you've only got a year or two to let the money grow.

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ggocat
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Re: 529 College Savings Plan

Postby ggocat » Mon Nov 24, 2014 10:20 am

I did it for myself. I think it is a good option particularly if you get a state income tax deduction. But I started mine a few years before law school in 2006, and then DAT MARKET CRASH. If you're going to need money in the near future, it's best to avoid risk. So consider that when looking at 529s and the fund options. Also the management fees (and possibly admin fees) will be higher than vanguard. Luckily you're in law school for 3 years so there is some play for when you can cash out.

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Tiago Splitter
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Re: 529 College Savings Plan

Postby Tiago Splitter » Mon Nov 24, 2014 10:22 am

ggocat wrote:I did it for myself. I think it is a good option particularly if you get a state income tax deduction. But I started mine a few years before law school in 2006, and then DAT MARKET CRASH. If you're going to need money in the near future, it's best to avoid risk. So consider that when looking at 529s and the fund options. Also the management fees (and possibly admin fees) will be higher than vanguard. Luckily you're in law school for 3 years so there is some play for when you can cash out.

Remember that your growth is tax- and penalty-free only if the money is used for educational expenses. Student loan payments are not educational expenses, so you can't just load up on loans and then pay it all off when you graduate.

I agree there is no point in using the 529 if it's for a short period of time.

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luuma
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Re: 529 College Savings Plan

Postby luuma » Mon Nov 24, 2014 12:33 pm

Seemed too good to be true. I thought it was pre-tax deposits like FSA or commuter expense. :|




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