ESA or 529?

iVillage Member
Registered: 01-12-2008
ESA or 529?
7
Wed, 04-11-2012 - 10:55am

Okay, so I finally adjusted our federal withholding. I'm sure I'm going to have to make more adjustments, as according to the calculator it had me switch from Single to Married. We would still get an estimated tax return of around 2K. so I know I will adjust again.

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iVillage Member
Registered: 12-31-2010
Wed, 04-11-2012 - 1:01pm
At this point in your financial life it is time to get a planner. Would you diagnose your child's illness yourself? No, you would go to a doctor, a professional, right? This is an investment and a planner can help you sort out the right plan of action.
I used a mix of both, but mostly 529 prepaid tuition and that worked for me. My SIL is doing the same. The prepaid 529 is great if you know what state your kids will be attending school in- in our family all our kids attend in Michigan because we did and there are some great schools here. Right now you can purchase one year of tuition room and board for $16k, for a high school sophomore. I am paying $19k for my son who is in college, so that is a 5% return on your investment that is guaranteed. ($3000 difference, divided over 3 years.) And if college goes up even more, it is a better return. I purchased these credits over time for DD and ended up with a 50% return on my investment overall.
Some people have not like certain 529s invested in stocks as they have not performed as well and actually have lost money when it was time for their kids to attend college.
Issue is that the gains from the 529 are tax deductible (well until 2011, but they hope to extend that,) but again, maybe not for those making higher amounts - we pay in full and get screwed on deductions.
You choose the investments with an ESA, which can be in a bank CD if you choose, and you don't need a money manager like you do in a 529 plan.

Again, lots of options, but I really think seeing a financial planner might be a good route as they can digest all the variable that apply to these accounts and help you sort through them. This is not your emergency fund, it is an important investment and you want as much information as you can get that is applicable to YOUR situation.

-Marie
#Marie
iVillage Member
Registered: 01-12-2008
Wed, 04-11-2012 - 1:37pm
Thanks Marie. I am looking for a financial planner. I did go to DR site and he had two for the local area to recommend.
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iVillage Member
Registered: 07-24-2001
Wed, 04-11-2012 - 2:01pm

If you are following DR, then this means you would be on step 4, right?

So do you have a fully funded EF, no debt and a plan in place (and money going toward it) for retirement?

iVillage Member
Registered: 01-12-2008
Wed, 04-11-2012 - 4:42pm
Our EF will be fully funded in the next couple of months. Planning for the next steps does take some time. I do have life insurance, and retirement funds already, I've been at this a while. You can read more on my update and question post. :-)

And for Marie suggesting a FP I believe she is right on, even if she is heading into the field herself. As someone who knows NOTHING about investing, and has a different financial situation as everyone on this board, DH military and deploying, third child on the way heck DR even says to seek personal advise. It doesn't mean that I'm not going to do my own research, and look at things myself. One thing I have learned being military is to use your resources, even if I have to pay a FP $75 an hour, but I should end up gaining so much more it is worth it. All the books say to find the best return, well how do you do that?

I also don't believe that Marie would suggest that everyone get a FP. I'm further a long in my journey than most on here, at a younger age, and have smaller children. I'm in a GOOD position to save minimally for my kids college and get the most on my return, but I DO NEED assistance on this step.
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iVillage Member
Registered: 04-16-2008
Wed, 04-11-2012 - 4:50pm

You may want to check what kind of financial planning you could get for free at USAA first before springing the money for a planner.

iVillage Member
Registered: 07-24-2001
Wed, 04-11-2012 - 6:19pm

I'm glad to hear that you are as far along in this journey as you are.

iVillage Member
Registered: 12-31-2010
Thu, 04-12-2012 - 9:41am
Bumbling -
Please note that I knew Nessie's background and they have done a great job so far. She is farther along than most, and we are now talking investments here. That was the point at which I looked and got advice from planners as I knew that college funding was going to be a large investment over time and I wanted to do it right, as it meant a lot to me for my daughter to go to college. Recently a lot of people have stuffed money in state 529s and lost a LOT of money, right when their kids were about to attend college - not good at all, after years of investing, so this can be ground to get good professional advice on.

I have always believed in planners, which is why I am still looking at that path. I also think that there are a lot of really BAD apples out there, which is another reason I want to go down that path, to really help people and be a service to them. My goal is to have a practice that helps women, women live longer in general and tend to look for advice (just note the make-up of this board.) I also want to help women that have gone through hardships like divorce or medical issues - target audiences that are not going to be as lucrative as the physician or yacht owner - but I do not identify with those people.

I am not doing planning yet, just looking at it as a possible path. But I have had a planner most of my adult life and have done well. My DH didn't, lost his son's college investment, bought an annuity because someone said he should and lost half the value in that, and for making twice what I did most of his working life, has only about 3/4 of what I have in retirement savings, and this was a smart man, who did "investing." Hmmm

I agree with meeting with 3 planners and finding the best fit, and also checking them all out with the Federal trade commission and using CFPs. Rules have gotten far stricter with this profession in recent years, which is a good thing for consumers.
#Marie