New York State 529 College Savings Plan for Our Son
, on October 12, 2007
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.
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:
- 529 college savings plan,
- 529 guaranteed prepaid tuition plan,
- Coverdell Education Savings Account (formerly known as an Education IRA),
- Roth IRA,
- Traditional IRA,
- U.S. Government Series EE Savings Bond,
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:
- We can start with as little as $25 — we started with $100
- We can automatically contribute via electronic funds transfer (ETFs) — we will be contributing $425 per month
- We can claim New York state tax deduction up to $10,000 per year
- Our money grows tax deferred, and withdrawals are exempt from federal income tax and New York state income tax, as long as they’re used for qualified higher education expenses
- The total annual fee is relatively low at 0.55%; investment expenses are included
- New York’s has a good selection of investment options from Vanguard — although I wish the selection includes some international investment and REIT in the mix
- We can use the money outside of New York
You can find more information about New York’s 529 Plan on their site.
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About the AuthorPinyo
is the owner of Moolanomy Personal Finance
and an entrepreneur with over 20 years of business experience. He has a strong appreciation for business management, investing, and wealth building. He has written for many online publications, including American Express and U.S. News.
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