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Today Money financial expert Sharon Epperson joined us for a live Web chat Wednesday to answer your questions.
Here’s one of her answers to questions from the live chat. (See below for the full Q&A and video of Sharon’s TV appearance this morning.)
Amey asked:
“I just had a baby (4 months). I want to start saving money for him but not exactly sure of the best place to save. I was thinking about the 529 savings plan but I wasn't sure if it HAD to be used for college. Of course I'd like him to go to college, but what if he doesn't. What happens to that money?”
Sharon replied:
“You are so smart to start saving for his education NOW. 529 college savings plans are great ways to force you to save for college - but you must use those funds for qualified higher education expenses or pay a penalty fee when you withdraw the money. It's like a 401k or IRA in the sense that you can take the money out without penalty if it's used for its intended purpose - otherwise you pay a penalty. The good news is that even if your child does not go to college, the money can go to another beneficiary -- you, another child, family member, friend, anyone. If you're not sure if your child will go to college, hedge your bets. Put some money in the 529 plan and some in a Roth IRA. You can use the Roth IRA for your own retirement or use the contributions you've made to the Roth college if needed. Actually, Roth contributions can be taken out at any time TAX-FREE, making them another great way to save.”
Here’s the full chat archive and Sharon’s TV appearance:
If you have a question for our TODAY Money experts, submit it here.
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Leave a Comment:
Sure... and watch the stock market tank just when you need to get the kid in school.... 5 years ago I took advantage of the PA Guaranteed Tuition Plan.... you buy credits based on community college, state college, private college... and you own the credits. (there is no guarantee on the money.. but what the heck....)... My grand daughter who is now 4 has 96 credits purchased for the "state school system".... Credits started out costing $220 per credit hour... and now they are about $260 or whatever... but she owns the credits - and she can take as many credits over 12 in a semester and still only use 12... So right now she has her tuition paid for.... I can still put in money that can be used for Room and Board.. but right now I'm working on my 2 year old grandson's. He currently has 12 credits... And they "upgrade" to any of the other school credits.... private credits are something like $1,000 per credit hour... After talking to my son and daughter in law we decided that if those colleges were good enough for them... they were good enough for Madeline. Just hope my daughter in law does not decide to become "super fertile" and have 2 or 3 more.... one more I can handle (I'm 65)....... 4 years later the 529 that they opened is less than they put in... so for me... this makes lots more sense than the stock market....
I have read about this program and others like it. You have to be careful it is not really guaranteed some states have already canceledthem or are charging the difference in the cost.
Completely agree. but at least it's not the stock market crap shoot.... and yes, they have changed the program and added additional costs moving forward... but trust me.... even penny pinching Corbitt will not stick the PA people.... he wants his job too bad!
You should have a fully funded retirement plan first. Their are loans for college. There are no loans for retirement.
529s are mostly a scam. The tax savings are real, but not if your money is dumped into any of the loser mutual or index funds. Stick with the 'guaranteed' fund, principle protection fund, or FDIC insured fund. Yes, interest is low but you're not putting your kids college savings into the ponzi stock or bond funds. If congress and Wall Street really want people to save for college, open up 529s to ANY investment. Not just the funds which Wall Street wants the dumb money to invest.
It seems that a lack of money should be allowed to prevent the next generation of scientists, engineers, programmers, doctors, technicians, and artisans. Every nations has a responsibility to make sure her citizens are supplying the nation with talent as the nation supplier her citizens with training and opportunity.