529s

[Sheherezade]

I'm moving my kids' college savings into one of these. Does anyone have any advice? We are in Ohio, and the state's plan is well rated. It also gives us a state tax break. I'm doing research now, so if anyone has experience with this I'd appreciate your take. We do Upromise and we have this money sitting in an account waiting to be applied to our 529 ... if we had one!!

[SuzySunshine]

Angie,
I don't have any personal advice but our financial adviser said that we should start one as soon as we have children. I've done quite a bit of reading on them and haven't found any strong negatives.

[DCJenn]

My parents have one for my nephew and for Nikolai. We're going to open one for Nikolai as well. Right now his money is sitting in an INGdirect savings account (at 3% interest which is pretty good for a regualr savings account.)

Jenn

[Phoebe]

We just opened one for each child last week. We contributed an inital start-up amount and then we will contribute monthly. My in-laws have accounts for all the grandchildren. We are doing ours through DH's best friend from high school who lives in IL. We did it all through the mail and it has worked out well. I would be happy to answer any questions, I am just not sure what kind of information you are looking for.

Jennifer

[Sheherezade]

Did you go with a specific state plan, or did you go with a bank's plan? It seems there are so many 529s out there. I read an article that talked about different options and they stated that Ohio's plan was 5 star, but that Putnam had been involved in some scandal and that might affect returns. Basically, I don't know how much of a difference each fund makes -- do they have very different rates of returns? (Will I regret choosing one over the other if I don't check it out carefully?) Are the dollars in mutual funds, bonds, stocks? What happens to the money if the market crashes? I also wonder about the tax advantages and disadvantages (for us) and how it affects financial aid applications (for the kids). Clearly, I am a worry wart!! I better go ahead and do it and stop asking questions!

Yep to what Laura said. Some states offer you a tax break on your state taxes if you use a plan of your home state, some give you a break no matter what state (I think), and some don't give you a break at all. I didn't think that the OR tax break merited using one of the OR 529 plans (for performance reasons).
re: tax advantages as I understand it, you can take the money out tax free (you don't pay tax on the gains). And if you choose your state's plan and your state offers a state tax deduction, that is a bonus. If you move to a different state, you might lose that state tax deduction.
downsides -- you have to use the money for education or pay a penalty and I think it can affect your child's ability to get financial aid.

But, I'm not a financial advisor so don't take my word for it! Here is an article I found on Smartmoney:
http://www.smartmoney.com/college/inves ... y=paytoday

Here is a nice comparison chart:

http://www.americanfunds.com/college/co ... -chart.htm

There is a very good article in this month's issue of Money magazine. Unfortunately, it isn't in their archive yet, or I would have posted a link. But it tells of the many to choose from (85), the difference the same company will charge from state to state, and some that have got good background companies managing with lowest fees and what states give local tax breaks. Very informative.