college savings for kid

[Anonymous]

I'm going to start putting away money for our two year for college.

I've been looking at 529 options. But I've also read on another forum that IRAs can be used for college savings.

What should I look for in selecting an account for my child's college savings and can anyone recommend a particular program?

[Anonymous]

First question - what state are you in?

Second - how much per month do you anticipate being able to put away?

[Anonymous]

and how much are you saving already for retirement?

[Anonymous]

IRAs can be used for college savings, but if from your account and too young, you will pay the penalty. 529s are still the best vehicle, especially if you start now when your child is young.

[Anonymous]

We are in MD. We just received a windfall of money. So we won't be contributing monthly just yet, but I want this money put away for her.

[Anonymous]

i'm interested in this as well, have looked into the two md 529 plans (pay off 4 yrs college vs the other plan). not sure which direction to go

[Anonymous]

If you are not already maxing out your ira, that's always a good first step as any contributions can be withdrawn penalty free from a Roth. If you do not have an emergency fund yet, I bonds accumulate interest guaranteed to keep up with inflation and are tax free when redeemed for college expenses. The limit is 10k per social security number and they can't be redeemed in the first 12 months from purchase.

I would not personally recommend saving in 529s until I was maxing out Roths and had a cushion of three months expenses.

[Anonymous]

Anonymous wrote:If you are not already maxing out your ira, that's always a good first step as any contributions can be withdrawn penalty free from a Roth. If you do not have an emergency fund yet, I bonds accumulate interest guaranteed to keep up with inflation and are tax free when redeemed for college expenses. The limit is 10k per social security number and they can't be redeemed in the first 12 months from purchase.

I would not personally recommend saving in 529s until I was maxing out Roths and had a cushion of three months expenses.

What is this maxing out Roths? I didn't realize there was a dollar limit. We save only in 401(k) plans and nondeductible IRAs.

[Anonymous]

The limit on Roth IRAs is $5500 per person. If you're not working you can use spousal income to qualify. I'm pretty sure this limit applies to non-deductible tIRA contributions, too, and any excess is penalized on your tax form.

An interesting thing about non-deductible tIRAs: as long as you don't have deductible contributions making things complicated, you can roll them over to a Roth, even if your income is too high to qualify for a Roth directly. You just pay income tax on any earnings. It's called a "backdoor Roth" and is perfectly legal.

[Anonymous]

Anonymous wrote:The limit on Roth IRAs is $5500 per person. If you're not working you can use spousal income to qualify. I'm pretty sure this limit applies to non-deductible tIRA contributions, too, and any excess is penalized on your tax form.

An interesting thing about non-deductible tIRAs: as long as you don't have deductible contributions making things complicated, you can roll them over to a Roth, even if your income is too high to qualify for a Roth directly. You just pay income tax on any earnings. It's called a "backdoor Roth" and is perfectly legal.

Huh. The limit for 2013 for nondeductible IRAs is $5,000, I thought, and $6,000 for my over-50 spouse. So it's the same for Roths as for non deductibles. Thanks.

[Anonymous]

There is one limit for all IRA contributions-- it is the same whether you put it all in traditional, all in Roth or split it between the two.


We had a lump sum from a house sale that we ended up using part of to purchase a 4 yr prepaid contract at UMD. My guess is we could have done better in the market but we like the security of knowing that much is covered.

[Anonymous]

You may want to consider making monthly contributions over the next year or so of the "windfall" amount to take advantage of dollar cost averaging.

[Anonymous]

It went up to $5500 this year, $6500 for the over-fifty set.

[Anonymous]

Anonymous wrote:There is one limit for all IRA contributions-- it is the same whether you put it all in traditional, all in Roth or split it between the two.


We had a lump sum from a house sale that we ended up using part of to purchase a 4 yr prepaid contract at UMD. My guess is we could have done better in the market but we like the security of knowing that much is covered.

do you know how this lump sum to UMD transfers to private or out of state colleges (if they choose a non-UMD school)? The explanation on the maryland website wasn't very clear.

[Anonymous]

We did the Maryland Prepaid and are glad we did it. We have a little one but with the cost of tuition at least we know that we have tuition paid for at a Maryland school if we cannot do more.

They will pay out a lump payment to either a private or out of state school. They base the amount on the current amount of tuition that year that you are going.

After the market crashed and we know people who lost everything, including college funds, we are hoping that at least this is safe.