North Florida Nesties
Dear Community,
Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Has anyone enrolled in Florida prepaid college plan
We just started looking into this, and have four days to lock in 2010 rates and wondering if anyone is enrolled
Re: Has anyone enrolled in Florida prepaid college plan
Yes, we enrolled Mungee and were able to lock in the 2009 rates, I believe. We opted for paying it off in 5 years rather than taking the full 18 years. It's a lot more expensive per month, but it's what DH wanted to do.
How is it that my BABY is going to be 3?
BFP-2/25/11; 8 Wk U/S-3/25/11-No HB, measured 6.5 wks; D&C
Did you decide on the 4 year university?
I'm not sure. :::Feels slightly ignorant about our investments
:::
How is it that my BABY is going to be 3?
BFP-2/25/11; 8 Wk U/S-3/25/11-No HB, measured 6.5 wks; D&C
We are planning on it but are still trying to figure out how to fit it into the budget. We may have to do the 2-2 plan. I am hoping they could still use this on a 4 year if that is where they decide to go. It won't pay the full amount but it will be some money towards it. I need to call and get some more information.
According to the FAQ's if your child goes to an out of state college you can transfer the money or if they don't go to college you can get a refund with a $50 cancellation fee.
I'll have to look at the tax implications then and see how the growth potential compares to a regular 529.
Just wanted to add that my grandparents did the 2 + 2 plan for me and my sister when we were born and we both ended up going to a university all four years. It was still flipping sweet to have the bulk of it paid for. I think it ended up being about 75% of tuition and fees and our Bright Futures scholarships paid for the rest.
My parents did it for me, but not my brother. I seem to remember them saying they could get their money back if they did it for him but he didn't end up going to college. But as Madisen alluded to, it wasn't a very good return on your money if you didn't go to a florida college and got the money back at the end. Really, though, I could be completely wrong, this is just what I remember my parents saying like 10-15 years ago.
But for me, who went to UF with prepaid and scholarships it was excellent. Prepaid paid for tuition so my scholarships could cover room and board. I was able to graduate with no student loans.
My Ovulation Chart
I am glad to hear we would be able to do this. My parents paid for part of my college but I got student loans for the rest. I figure as long as we have some money put away it is better than none.
Interesting article going over prepaid 529's and regular state sponsored 529 plans. Bear in mind it's from May 2009:
http://www.savingforcollege.com/articles/prepaid-529-plans-at-riskPrepaid 529 woes: Bail out or sail on?
By Melissa Ezarik
Find 529 plans in your state
Select state: AK AL AR AZ CA CO CT DC DE FL GA HI IA ID IL IN KS KY LA MA MD ME MI MN MO MS MT NC ND NE NH NJ NM NV NY OH OK OR PA RI SC SD TN TX UT VA VT WA WI WV WY
You can also search by type, name, program manager, or investment manager.
In the sea of college savings choices, prepaid tuition plans ? allowing parents to lock in future college tuition at current prices at in-state public institutions ? have been seen as pretty sturdy and safe.
But are they? Recent headlines about some states' plans suggest otherwise.
Alabama's Prepaid Affordable College Tuition program, or PACT, reportedly lost nearly half its value between fall 2007 and spring 2008. State officials blame the market downturn for hurting the program just when it reached its peak for making benefit payments. Although participants believed their investments were guaranteed, they learned this isn't the case. Unless legislators act to save the plan, the Alabama PACT will run out of money.
Plans in other states - such as Tennessee, South Carolina, West Virginia and Washington ? are also in severe trouble financially. Plans that are expected to meet their current obligations still need to make adjustments to ensure they can survive in the long term.
Low-risk premise
There are different prepaid models, but the basic concept is that plan administrators invest the money paid in advance by participants and then pay the college or university the full tuition amount at the time, says Mary G. Morris, executive director of the Virginia College Savings Plan. The individual has locked in their costs, but the program is responsible for paying current tuition," she says.
"The prepaid 529 is a great risk transference device," says Andy Davis, executive director of the Illinois Student Assistance Commission, which operates the College Illinois 529 Prepaid Tuition Program.
Most standard state-sponsored college savings accounts differ from the prepaid plans by offering more flexibility in how much money can be saved and at what pace, and in college choice. The prepaid accounts generally offer locked-in tuition at in-state public colleges and universities.
Both have grown over recent years. The College Board, using data from the College Savings Plans Network and the National Association of State Treasurers, says there were 11 million 529 accounts in 2008, up from just half a million in 1996. In most of those years, prepaid-plan assets have been smaller than standard college savings plans, and in 2008 only 12 percent of all 529 funds were in prepaid tuition accounts. In some states, however, prepaid plans are popular, accounting for more than half of 529 assets in Alabama, Florida, Kentucky, Mississippi, Pennsylvania, Texas and Washington.
Program challenges
"We have an actuarial deficit," because projected earnings weren't met, says Morris. "I think every state's program, except for Florida, has that (situation), given the current market volatility."
Anyone who's running a prepaid tuition program, says Davis, is challenged by a pair of universal facts:
"Your liabilities continue to grow, and your assets and allocations have in many cases been significantly negative. That's a challenge," he says.
Consumers are primarily concerned about what states will do to ensure promises are kept.
"Sadly, it does not appear that any assurances are forthcoming from even the highest levels of state government," says Lee Rosenberg, Certified Financial Planner and co-founder of ARS Financial Services in Long Island, N.Y.
"The states' inability to cover the shortfall puts the entire plan at risk," says Steve Bloch, Certified Financial Planner and managing partner in MHB Financial Group in Redondo Beach, Calif.
Rosenberg calls the uncertainty about prepaid plans "an enormous disappointment for parents who were astute enough to plan for their children's college educations by locking in the cost of future tuition and fees."
Financial advisers who believed in these plans are also experiencing a huge disappointment. "Of this we were sure: There is death, taxes, and increases in tuition," Rosenberg says. "Having a way to cap these costs by investing upfront made perfect sense."
Plan checkup
As with any investment vehicle, "parents and students should understand fully what it is they're buying into," says Justin Draeger, vice president of planning and development at the National Association of Student Financial Aid Administrators Guaranteed rates of return, risks, and plan payouts are key terms and conditions to comprehend.
In Illinois, and perhaps elsewhere, says Davis, plan administrators are required to post a statement of investment returns on the plan's Web site each month. Therefore, that's one place to dig.
Ask specifically what kind of guarantees are in place, says Morris. "In Virginia, we have a statutory guarantee ? an appropriation in the state budget could be used as an interest-free loan to the plan, if it were ever necessary.
"You have to ask questions, look at your contract and understand what you bargained for," Morris says. "Some states have a full guarantee, and some states have no guarantee."
Institutional bailout?
In some plans, the risk lies with the state's public colleges and universities rather than the plan itself. Take the Massachusetts U.Plan Prepaid Tuition Program, which is structured differently from most prepaid programs and includes private universities as well. In this kind of plan, "the schools agree to accept prepaid dollars in place of full tuition," says Bloch.
In light of the current economy, other programs, such as the Texas Tuition Promise Fund, are moving to this model. That plan launched in September 2008. (In 2003, new enrollment in Texas' first prepaid plan, which now falls under the name Texas Guaranteed Tuition Plan, was suspended after rapid tuition increases put the program fund in financial trouble.)
When it's the school that "takes the haircut" if plan investments don't keep up with tuition increases, Bloch says, "the plan itself probably has a lower risk of total failure." In his view, schools are typically better prepared than the states to respond to a shortfall.
Plans help themselves
Meanwhile, prepaid plan administrators are examining their long-term investment plans and projected rates of return in conjunction with the pricing to participants, for example, to help ensure adequate funding.
"There are a lot of moving parts, and (our) job is to keep an eye on those moving parts," Morris says. "The one thing that is certain is that every state with one of these programs takes it very, very seriously and will do everything they can to honor their commitments."
Administrators also must keep in mind what Rosenberg calls the elephant in the room. "Because of the current economic climate, high unemployment, and jitters about the benefits of these college tuition programs, there has been a decrease in new deposits," which he says could mean a shortage of money to release to parents for tuition.
Getting out of a prepaid plan
Not surprisingly, people in state plans such as Alabama's PACT are questioning whether they should cancel their contracts and remove their money. Officials there respond that it's certainly an option, but suggest giving the state time to work through the situation.
Both options exist elsewhere, too. "If you decide to make a change, there really don't have to be any adverse tax consequences because you can roll over into another 529 program," Morris says, adding that most states allow it. Rolling over to a different state's program could also be an option, although there may be state tax consequences.
As for removing funds completely, depending on the circumstances, any earnings would be taxable and subject to a 10 percent penalty, similar to an IRA withdrawal, she says.
Speaking of IRAs, if the plan is really in trouble, pull the money out, pay the penalty and move it into a Roth in the child's name, says Tracy Foote, author of "The Kid's Roth IRA Handbook." Just keep in mind that large sums can only be moved a little at a time ($5,000 in 2009), and only a child with some earned income can qualify for a Roth.
Don't be too scared of media reports, Davis says. "What are important are not the headlines so much but the specifics of your situation. Be an informed consumer," but provided your program is sound, "I don't think this is one of the things (to) lose a lot of sleep over."
Posted May 29, 2009
More about saving for college, the Clark Howard way:
http://www.clarkhoward.com/news/education/preparing-for-college/clarks-529-guide/nFZS/
Clark's 529 Guide
Clark's list of the best 529 plans for college savings
comment
favorite
A 529 Plan is the best way to save for your kid's college. But first remember my rule: you shouldn't save a penny for college unless you are already saving the maximum you can for your own retirement. College can be paid for with grants, loans, scholarships and work. Retirement happens only if you have saved the dough.
College savings plans -- known as 529 plans -- allow you, a relative or a friend to put money aside for a child's college education. The plans grow tax free and are spent tax free for eligible college expenses such as tuition, books and fees. If your child doesn't need the money, it can be transferred to any other child and spent tax free. If your child qualifies for a "free ride" full scholarship for college, you can withdraw the 529 money and use it for anything and just pay tax on the earnings. If your child doesn't go to college and you just take the money for yourself, you pay the tax on the earnings plus a 10% penalty.
My 529 guide for 2010 has nothing but good news. I have added many more plans than in any prior year. You can thank our recession for that. 529 plans have become a much better deal as plan administrators have found it much harder to get parents to contribute. That has led to an old-fashioned market share war among the various plans with management fees dropping in state after state.
When you open an account, your money is invested in a pool much like a mutual fund. I recommend that you look at the investment option available in most plans known as the "age based portfolio." This lets the plan adjust to a more conservative mix of investments as your child gets closer to college age.
Here is something really confusing: Plans must be sponsored by a state even though residents of most states can put their money in any state plan. Even more confusing, a state can sponsor more than one 529 plan. Three states have 5 different plans. I have never found more than one top flight plans in any one state. This is key. When you see your state listed below, make sure you only invest in the exact state plan I show. Otherwise you could end up in a stinker of a plan. I have a direct link for you to the good plan in a state. If you just click on my link below you won't mess up and go to a bad state option.
I have two lists for you. If your state is on either list, choose it, because there may be state tax benefits that would make it a wiser choice for you. However, if your state is not listed or you do not qualify for your state tax benefits, put your money in Utah, Iowa or New York. They are my 3 favorite plans in the country because of extremely low costs. First among equals is Utah, the nation's finest 529.
Dean's List with High Honors:
These are the very best plans in the country. Put your money here if your state isn't listed in the Honor Roll.
Honor Roll:
If you are a resident of a state below, enter that plan to get state tax benefits and/or lower expenses offered to residents.
MOST - Missouri's 529 College Savings Plan
(invest only in Vanguard options)
(invest only in Vanguard options)
(invest only in Vanguard options)
Oregon College Savings Plan
(invest only in Vanguard options)
Which investment do I choose?
Most 529 plans allow you to go into an age based portfolio. I like that. The money for your child is adjusted into more conservative choices as your child gets closer to age 18.
Or consider a Coverdell. The Coverdell account allows you to save money for college or private school grades 1 through 12. The money is spent tax free like a 529 account as long as it's used for education. Coverdells limit your contribution to $2,000 per year. Rather than needing a state sponsor you set up your Coverdell wherever you wish: at a bank, a broker, an insurance company, a credit union or a mutual fund outfit. My first choice again would be a low cost mutual fund company. The huge advantage of the Coverdell is the use for private school. The disadvantage is you have to choose and manage your own investment choices.
One caveat here about Coverdells: Parents won't have the tax-free haven of the Coverdell education savings account to pay for private school after this year. The tax break will be sunsetted at the end of 2010 unless Congress steps in with a renewal, which is unlikely. So you should probably consider emptying your account to pay tuition now before the year is out. If you normally pay per semester, pay upfront for a full year.
You can also look at the excellent and versatile Independent 529 plan. You prepay tuition at participating colleges' current prices. If your child decides to attend another school, you simply get the return (profit or loss) on your contributions through the years.
So, how do I buy them?
529 plans must be sponsored by a state. All 50 states have plans that are managed for them by stock brokers, insurance companies or mutual fund companies. Most money going into 529s is getting there through what are known as "intermediaries." That means commissioned sales people, stock brokers, financial planners, insurance agents, etc. If you put money in this way you will pay large commissions as high as 5.5% to have your money put aside for your child. That means each dollar instantly becomes 94.5 cents. In addition, many plans have gigantic management expenses that destroy your child's savings. Those expenses are as high as 1.5% or higher.
I recommend that you buy 529 plans direct without commissions and buy low cost plans only. The list above is my honor roll of plans. These are all top plans that are all of equal value and promise. I've listed them in alphabetical order to make it easier to find your state. If your state is listed, buy its plan as you may get a state tax benefit as well. If your state is not listed, don't buy your state plan. Rather pick one of these low cost ones. Most of the low cost plans are run by the nation's two lowest cost financial houses, Vanguard and TIAA-CREF. Remember, with their plans you pay no commissions and management expenses around .50% to .80%.