Question about saving for kids' college education

[Riprorin]

My kids are 9 and 6. I have about 100K in savings for college. Currently the money is in a money market account earning a meager interest rate.

I live in New York State. Up to $10,000/yr cab be deducted against my NYS tax. Maximum lifetime contribution per benficiary is $100K. While in the account, earnings are exempt from New York and federal income taxes. Withdrawals used for qualified higher education expenses are also exempt from New York and federal income tax.

The guaranteed fund option is earning 5%.

For my daughter, I have 9 yrs left to save and for my son, I have 11 years left to save.

Should I just start funneling 10K per year for each kid from my savings account into NYS college savings plan or is there a better strategy?

NYS College Savings Program

 

[Riprorin]

No financial whizzes in the house?

 

[fizmeister]

How much money do you make (what range)? What class would you be in (mid, upper mid, lower mid, etc.)?

 

[Bignate603]

I don't have alot of input but wow, that's a good amount... I think you're doing well...

 

[Riprorin]

About 100K. House is paid. No debt. Fully funding 401K and IRAs for me and my wife. Only major expense is school tuition (7K).

 

[bunker]

Have you looked at a 529 plan?

I just opened one for my 11 month old.

 

[Riprorin]

Thanks for the link. The account I was refring to in my original post is the new York State 529 program.

 

[tm37]

Originally posted by: bunker
Have you looked at a 529 plan?

I just opened one for my 11 month old.

These rock.

You also may want to start ROTH's for your kids.

 

[CPA]

Though the 529 plans are a good alternative, generally they are replete with fees, so be careful. Not sure about the NY sponsored college savings plans, but here in Texas they have gotten better as the state has opened the investment options for the plans. Used to be returns were meager.

With your amount, I don't think you would have many issues going to any plan. Your bigger concern will be the investment leeway offered by each.

 

[Riprorin]

Didn't know you could do ROTHs for kids.

My plan is to invest upfront in a good education so hopefully they'll be self-sufficent when they graduate.

 

[Riprorin]

CPA, the management fee is 0.60%. I don't have any basis for comparison. Is that reasonable compared to other state programs?

 

[CPA]

Originally posted by: Riprorin
CPA, the management fee is 0.60%. I don't have any basis for comparison. Is that reasonable compared to other state programs?

Is that the NY 529 plan? Any portion of it waived for large accounts?

 

[amnesiac]

Couple choices..

Stick the money in short term bonds,

or put some money in a 10 year annuity.

 

[Riprorin]

Originally posted by: CPA

Originally posted by: Riprorin
CPA, the management fee is 0.60%. I don't have any basis for comparison. Is that reasonable compared to other state programs?

Is that the NY 529 plan? Any portion of it waived for large accounts?

Yes, it's the NY plan. I don't think it can be waived but I can check.

 

[CPA]

Originally posted by: amnesiac 2.0
Couple choices..

Stick the money in short term bonds,

or put some money in a 10 year annuity.

That's not a bad idea either, though yields are down lately with everyone pulling their money out of stocks. You might find some decent Corporate bonds out there. The only issue is most likely the interest will be taxed.


As far as the NY 529 plan, I was trying to equate it to Texas' plans. They allow 529, but also have what's called the Texas Tommorow Fund. Basically you buy tomorrow college costs at today's value. Basically it works like a bond sinking fund.

 

[Riprorin]

I'm fortunate to be in about a 90% cash position right now. Think it's the right time to start slowly funneling money back into the market or is it premature?

 

[Riprorin]

Originally posted by: CPA

Originally posted by: amnesiac 2.0
Couple choices..

Stick the money in short term bonds,

or put some money in a 10 year annuity.

That's not a bad idea either, though yields are down lately with everyone pulling their money out of stocks. You might find some decent Corporate bonds out there. The only issue is most likely the interest will be taxed.


As far as the NY 529 plan, I was trying to equate it to Texas' plans. They allow 529, but also have what's called the Texas Tommorow Fund. Basically you buy tomorrow college costs at today's value. Basically it works like a bond sinking fund.

Another thing I've thought about is using the money to buy vacation/rental property. I guess I'll get killed on capital gains when I sell though.

 

[CPA]

Originally posted by: Riprorin

Originally posted by: CPA

Originally posted by: amnesiac 2.0
Couple choices..

Stick the money in short term bonds,

or put some money in a 10 year annuity.

That's not a bad idea either, though yields are down lately with everyone pulling their money out of stocks. You might find some decent Corporate bonds out there. The only issue is most likely the interest will be taxed.


As far as the NY 529 plan, I was trying to equate it to Texas' plans. They allow 529, but also have what's called the Texas Tommorow Fund. Basically you buy tomorrow college costs at today's value. Basically it works like a bond sinking fund.

Another thing I've thought about is using the money to buy vacation/rental property. I guess I'll get killed on capital gains when I sell though.

Real estate is hot right now. In fact, I heard on TV last night that 1 out of every 3 homes are rented/leased out! I thought that was amazingly high. Capital gains? I wouldn't worry too much about that. Long term is down to 18% for property held longer than 5 years and will probably come down even more by the time you are ready to sell.

 

[amnesiac]

Originally posted by: CPA
Real estate is hot right now. In fact, I heard on TV last night that 1 out of every 3 homes are rented/leased out! I thought that was amazingly high. Capital gains? I wouldn't worry too much about that. Long term is down to 18% for property held longer than 5 years and will probably come down even more by the time you are ready to sell.

Not as "hot" as it used to be 15-20 years ago, but yes, it's on the upswing. 🙂
Lots of areas that were once undervalued and sparsely populated are experiencing sudden booms which are very good for property buyers 🙂

 

[djheater]

I always thought the main benefit of 529's is that they lock in the CURRENT tuition rate. Correct me if I'm wrong.