New York State 529 College Savings Plan for Our Son

Last month, I created a plan to save $5,000 a year for my son’s college savings. With a 10% CAGR, a contribution of $5,000 per year should grow to $250,000 in 17 years. At that time, I didn’t know what was the best investment vehicle for this plan. After a lot of research, we finally took the plunge last night and opened a New York’s 529 College Savings Plan (Direct Plan). Our son is not due until this December, so we started the plan under my wife’s name (owner) with her as the beneficiary and myself as the successor.

Piggy bank
Photo from morgueFile

Can we start saving even before our son is born?

The answer is yes! I first learn about this trick from Trent’s “A Prenatal College Fund?” We can start 529 Plan at any time and later change the beneficiary as long as he or she is a member of the family. This will ensure that we can enjoy the New York State tax deduction this year without worrying about our son’s exact birth date. This made me wish I had started this a few years ago.

Why did we choose the New York’s 529 College Savings Plan?

I have been looking at various options, such as:

But none are as appealing as 529 college savings plan. Although, New York’s was not the best 529 plan, we felt that it was good enough; and the advantages for local residents are just icing on the cake. Here are some of the things that we liked about 529 plans in general, and New York’s in particular:

You can find upromise.com/content/programInfo/features.html”>more information about New York’s 529 Plan on their site.

Here are some related links:

Pinyo
Pinyo is the brain behind Moolanomy personal finance blog and a few other web sites. If you like this article, please subscribe for free daily email updates.

All posts by Pinyo

Get Free Email Updates

emailLike this article? Enter your email address and click "Subscribe" to get the latest articles sent to your email for free. Your email will only be used for this daily update and you can unsubscribe anytime.

Click here to learn more about this free subscription

7 Comments

  1. gravatar
    Money Blue Book
    October 12, 2007, 9:19

    Pinyo
    I don’t have kids but after much comparison I think unless you want complete freedom in your investment options or want to grow funds for possible private school usage, you’re correct, 529 plans are much better than Education IRA’s.
    -Raymond

  2. gravatar
    Pinyo
    October 12, 2007, 9:46

    Raymond – Good point! Since we are planning to save only enough for public school (~$250,000), 529 will work just fine. If we wanted to save for private school (~$400,000), then we may have to also use Coverdell ESA as well to make sure we reach our savings goal.

  3. gravatar
    Eric
    October 13, 2007, 7:53

    I had no idea you could start saving before you had kids. I hadn’t even really thought about it. We don’t have kids yet, but it’s pretty likely we will in the future. If you start a 529 before you have kids, and for whatever reason you don’t have kids (or your kids don’t go to college or whatever), how does that work? Can you take the money back (with or without penalties?)

  4. gravatar
    christianPF
    October 13, 2007, 8:19

    This is cool. I didn’t know about getting the tax deductions before the child was born, so this is something for my wife and I to talk about now.

  5. gravatar
    Pinyo
    October 13, 2007, 15:29

    @Eric – neither did I until recently; however, it’s not a big deal because I was focused on our retirement savings which is more important than college savings anyway.

    If you don’t use it you can give it to someone considered a member of the family, e.g., defined in this 529 FAQ.

    You can take the money out, but there is a 10% penalty, and some states (e.g., NY) that give you tax deduction will also ask for that money back as well.

    @christianPF – If you haven’t maxed out your retirement options, then this is a good next step (assuming one of you will be going back to school, or are planning to have a child).

  6. gravatar
    FMF
    October 15, 2007, 4:37

    Thanks for posting my piece! ;-)

  7. gravatar
    Make Friends, Earn Money
    May 18, 2008, 3:48

    thanks for the links to money guy have just being checking these out, I’ve not come across this before.

Please share your comment:

Comment Rules:
Constructive criticism is fine, but if you're rude, I'll delete your comment. Please use your PERSONAL name or initials and not your business name or URL, as the latter comes off like spam and I'll most likely delete your comment. Have fun and thanks for adding to the conversation! Here's our comment policy and guidelines.


Please do not use the name of your site or keywords.

7 blogs that link to this article:

If your trackback does not show in 24 hours, please resend to this trackback URI.

  1. Weekend Roundup - Fall is Here Edition | beingfrugal.net
  2. Sunday Morning Link Love - On the Road | I've Paid For This Twice Already...
  3. Blog Review: Moolanomy at Financial planning tips and Roth IRA conversion planning for those in their 30s and 40s
  4. 15 Things To Do With Your Economic Stimulus Check | Free From Broke
  5. The Dave Ramsey Baby Steps: Everybody’s a Critic | Frugal Dad
  6. Reader Question #3
  7. Moolanomy- An Interview With a Personal Finance Blogger | Good Financial Cents

Banking and Investing

Your Credit Score

Best Credit Card Offers

Ask the M-Network

What's hot on PF Buzz?

Relevant Articles From Other Sites

Sponsored Links

Work From Home
Important Notice: I am NOT a financial professional and no content within this website should be considered financial advice. Please consult a certified financial expert before attempting any of the ideas described in this website. Please read the Disclaimer for more information.

Archives By Year

2007, 2008, and 2009

Personal Finance Blogs

A-F, G-L, M-R, and S-Z.
NETWORK
Proud member of the
Moolanomy Answers
Do you have a financial question? Join Moolanomy Answers today, ask your question, and get your answers. Sign up before July 15th for a chance to win iPod Shuffle!
Close