529 savings plan? Forum

[francesfarmer]

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.

[Tiago Splitter]

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to get a state tax credit or deduction for the contributions, but sometimes you have to pay it back if the money is withdrawn too quickly.

[francesfarmer]

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to get a state tax credit or deduction for the contributions, but sometimes you have to pay it back if the money is withdrawn too quickly.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?

[RedGiant]

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to get a state tax credit or deduction for the contributions, but sometimes you have to pay it back if the money is withdrawn too quickly.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.

[quakeroats]

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.

[francesfarmer]

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!