529 Plans Explained // BEST College Savings Plan // How to Pay for College
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- เผยแพร่เมื่อ 30 ก.ค. 2024
- What's the best college savings plans? If you're wondering how to save for college and aren't sure where to start, then you'll love this video! (you might also like ➡️WHEN to REBALANCE your 529 Plan: • When to REBALANCE Port... ). In this video I also discuss some of the differences between contributing to a college savings 529 plan, college prepaid account, Educational Savings Account ESA, or one of the custodial accounts (UTMA or UGMA). If that is what you're looking for then this video is for you! I also share all the different and best ways to save for college as well as some alternative ways to pay for college such as going to a community college for 2 years then transferring your credits over to a university, deciding to go the Trade School route, working through school, applying for scholarships & grants, and/or living at home to reduce your expenses while in school.
Hope you like the pro-tip at the end and find one or two financial nuggets!
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Timestamps / Chapters
0:00 - Intro
2:27 - How to PAY for College
5:25 - Educational Savings Accounts (ESA)
7:02 - Custodial Accounts (UTMA & UGMA)
9:32 - College Pre Paid Accounts
11:46 - College 529 Savings Plan
16:31 - PRO-TIP!!!
18:19 - How Much Should I Save for College
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ABOUT ME 👇
I've been involved in people's financial decisions for 15+ years (7 yrs Real Estate experience & 8+ yrs as a former Financial Advisor)...I now bring the financial successes, mistakes, failures, and best financial habits/tips to you through these videos.
My mission is to bring Financial Awareness to the forefront of your daily decisions so you can: improve your quality of life, increase your net worth, and grow upon your financial literacy. My videos are a reflection of my real-world experience as a real estate investor, stock market investor, student of finance, entrepreneur, and of course...my experience as a Former Financial Advisor.
This channel allows me to share my passion for personal finance, stock market investing, real estate investing, and entrepreneurship. I produce content that I would want to watch, and because of that, I give 100% effort in every video that I make. I also believe in complete transparency and open communication with my audience.
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DISCLAIMER: I am not a financial adviser or a certified public accountant. These videos are for educational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. I am merely sharing my opinion with no guarantee of gains or losses on investments.
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➡️WHEN to REBALANCE your 529 Plan: th-cam.com/video/MxbcQm2GeuA/w-d-xo.html
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You mentioned you can’t open a 529 Plan account until your baby is born due to not having a social. You can make the 529 Plan your own individual account, and have the beneficiary be yourself. Once your child is born, you can just change beneficiaries to he/her. It’s essentially the same kind of account if you were to open the individual account with your child’s social. That’s what I did 👍🏻
@Honcho Allen - Truth be told, I didn’t think of that prior to making this vid & somebody told me afterwards. Yes, great idea! Awesome that you were smart enough to think to do it…in hindsight I wish I would have included that in the video.
Hey, thanks for checking out this one…hope there might be others within my content library that are also of interest to you. Cheers, boss!
That’s what i have done. I am the beneficiary looking to transfer it to my kid one day
Awesome! Sounds like you’re ahead of most…including myself. Love that you executed on this idea! Nice!
LOL! love the last bit! no more sleepy, sleepy! lol
I was just going to comment that how I appreciated this video and couple of other videos I watched today for the first time on your TH-cam Chanel. I subscribed to your channel. Then I also saw the comments to this video and how you wrote back to each commenter with responses to their question! This is community work, very impressed with this type of attitude!!! Not growing up in USA and having a junior in HS, I think we were at least lucky to have heard about 529 accounts while my son was in middle school. At least we saved some money for his future. Now I am trying to find out what extra I can do for his and our future. The idea about buying a rental, and using the room money for mortgage was not something I have heard before, so thank you! I will keep that in mind.
@Demet Albayrak - Thank you so so much for your kind words - really makes my day! :)
...yeah, I enjoy hearing questions and stories of others & respond to try and help as best I can. You are doing a great job to learn more about how to make smart, wise financial decisions for you & your family by researching YT videos and reading...keep up the great work! If you continue that effort of learning you'll grow smarter every day. Good job! Appreciate you...cheers!
Great video Kyle. A lot of great info!
@Caleb Martin - Hey thanks, man! Hope it's helpful as you guys map out your game plan for your little ones. Appreciate you taking the time to watch the video...cheers, boss!
Great video! I learned something new with your Pro-Tip! Will definitely keep that in my back pocket when my kids get closer to going to college.
One other point to make for those who put money into an in-state 529, you should think about the value of the tax deduction. I am in NY (high tax, HCOL) and the value of that deduction is a 7% ROI for literally putting money into a different account. So it's tax-deferred growth + 7% immediate return on investment. Seems like a no-brainer.
@Larry’s K- Cup PODcast - Absolutely! I think I mentioned that in the video, but maybe didn’t highlight it enough possibly...solid point and I agree! Appreciate you, boss!
This was so organized and truly spoke to my Type A structured personality. Thanks a bunch! Tons of gems.
@Ashley Moore - Thanks boss lady! Glad you picked up a few gems. Appreciate you...cheers!
@@Financial_Awareness You are welcome. The only addition I was hoping you'd add to the video was a small piece on Roth IRAs used for College Savings as well. I'm torn between 529 or ROTH or doing both. I'm starting a tad late. Children are 6 and 4, I learned about these things this year, so when you know better you do better, so I'm trying to hit the ground now.
@Ashley Moore - Better late than never! You’re not starting late at all. I just had a financial coaching call with parents last week...their kid is about to graduate college with a 4.6 GPA...got accepted into 5 schools...just now wondering how to pay for it...THAT’s starting late.
As far as Roth goes, it was intentionally left out of the video for a reason. Just because it can be done, doesn’t mean it should. You can get a loan for college...can’t get a loan for retirement. Keep retirement funds FOR RETIREMENT. Keep college funds for college. Just my opinion.
@@Financial_Awareness Good points. Thank you! I was feeling like I dropped the ball and that really sucked because I'm a planner. Lol.
This is a great informational video! I’m going to be a new parent soon and grew up in a paycheck to paycheck household. Now I’m doing as much as I can to learn how I can put my daughter in the best position. Thank you!
@JP - That is awesome to hear! Congrats on joining the ranks of parenthood...might be the most energy-draining endeavor, but well worth it. I’m super happy for you!
Appreciate you taking the time to invest in your knowledge/financial planning by checking out this video...let me know if there’s other topics you’d like to see a video on. Cheers, boss!
Great video! I made the decision to enlist in the AF to avoid college. More so, my single mom on section 8/govt assistance couldn't afford it. Fat forward 27 years and I retired with an AA, BA, and an MHR. I used TA for each degree and transferred my GI Bill to my wife who completed her BS with that. For our son, we're hopeful he can land some scholarships and benefit from the money we spend on private school. If not, I'll be 58 when he starts so we will cash flow his first year and then dip in to my retirement funds if we need too.
@Rob Urb - Thank you for your service, Rob! Appreciate you and I’m sure your son does as well. Sounds like you’ve got it mapped out pretty good. Nice...Cheers boss!
Your awesome! Just subscribe! Keep it up!
@Sammie.is.AMAZING - Sammie, you're amazing! Thanks boss! Cheers
this was such a great video ! Do you mind putting the links to those calculators please?
@Yvonne Albert - Thank you! I’m sorry if they are not in the description of the video. Pretty sure I used calculator.net for the calculators. I’ll update the video description so it’s easier to find them. Thanks!
One of the coolest intros I’ve seen 😂
@Unorthodox Savings - Thanks, Joe! Those are two great people and I’m super happy for them. Hey, hope you saw my “pro-tip” at the end...it’s right up your alley man! Appreciate you, boss! 👊🏻👊🏻
intro got me choking on coffee
Hi!! Thank you for your videos, I watch them all. I haven’t be able to find answers for the following questions.. maybe you can help me:
1. What happened if my child wants to study abroad? (And I have the 529)
2. My child wasn’t born in USA, but I’m legally living there, (also in case that I have 529) and we leave the country. What happen with the money?
3. Their grandparents aren’t USA citizens, can they contribute?
4. Could a foreigner (not living in USA) access and a similar account like 529 because they want for their kid to study within USA?
@Blance Villa Alva - Wow - so awesome to hear...thank you for your time and supporting the channel. ...I’ll give it my best shot...
1 - There are universities outside the United States that allow you to spend 529 funds on tuition for studying abroad.
2 - The money within the 529 legally belongs to you as the owner of the account. Your son is named beneficiary. So, if you leave the country the money will remain invested with the broker/institution where it is invested until you decide to take action and use/spend/liquidate the account. If you use the funds within the 529 for non-higher-education-related-expenses then there are penalties and taxes involved...so you may want to hedge your bets and consider opening a normal investment brokerage account to contributed if you feel that may happen.
3 - I can confirm that Grandparents are able to contribute to the account regardless of citizenship, but the funds have to be deposited with US dollars...if you are not already funding the account by the maximum gift amount of $15,000 then one option could be they give the money to you and then you deposit it into the account...this shouldn’t be an issue as long as you stay within the $15,000/yr max limit...if you go over then you’ll need to arrange the contributions differently than I’m describing.
4 - It is my understanding that a foreigner to the USA is not allowed to establish and contribute into a 529 account.
Hi, let’s assume that we overfund tune 529 account or the child does not want to attend college, is there a way to transfer said money to the child’s ira account or something similar to that? Or the only way is to change the beneficiary to another child/niece/etc?
@Rafael Reza - As of right now there is no legislation/law/rule that allows for 529 funds to be rolled over into an IRA - so that option/answer is "no." Yes, you can change the beneficiary as you noted in your comment.
You can transfer 529 funds into another 529 account or keep them in and change beneficiary and/or the account owner. If you pull the funds out and do not spend it on any 'qualified higher education related expenses' then you'll owe a penalty + pay income taxes.
Now, if there is enough capital gain / dividend / profit in the account to more than pay for the penalty & taxes...then if they don't go to any higher education (which actually does include trade schools) then there is a thought that you would "at least get your principle investment back" with wayyyyy less profit, but still....these accounts are really geared towards education expenses after high school.
So, bottom line, don't fund these 529 accounts IF you FIRMLY believe your child will NOT go to any college / university / trade school after high school. Hope all that helps. Cheers, boss!
I’m Hispanic my 17 yrs old will 1st generation attending college...I’m hoping she’ll do trade school ( 2 yrs Only, since she’s about to start a running start program through High school to get her AA degree same time she’ll get High school diploma) I’m trying to save at least $20,000 how much do I need to contribute into 529 monthly? Or what route should I take since I only have two yrs left to save? ( my income is $38,000 a year, single mom)
@Angela P. - Hi there! You must be so proud of your daughter...wow! First generation moving on to higher education...incredible. My mother never went to college and she was the first of her family to be born in the U.S. So I like to think of my success as part of my grandfather’s plan to move his family out of Germany during some of their not-so-good parts of history...your future grandchildren will have so much of an incredible start to their life from all of your sacrifices. Well done. Be proud.
Knowing your income amount is great (thank you for sharing), but I’m not fully aware of your budget and how much you’re able to save. With a two-year time horizon before you’ll begin liquidating money from a 529 it isn’t prudent to take such a risky investment asset allocation because of the stock market goes down in value (hypothetically speaking) 24 months from now you’ll have potentially lost some of that hard earned money you would have saved into the 529.
Just simple math ($20,000 divided by 24 months) is $833/month. Even with a 10% rate of return you’d still have to save around $750/month for 24 months to arrive at $20,000 in a couple years and I’m fearful that just might not be in your budget abilities on $38k/year.
Best bet you could do, honestly speaking, is to help encourage your daughter to look for scholarships, discuss scenarios on how she can work through school, and for you to save cash and try to pay off any of your debts to free up your own cash flows in order to possibly help her cash flow some books and food expenses while she attends her two-year college program. There’s just not much that can be done with only two years from an investments perspective (and given your income). Sure, there might be some really speculative investments out there, but I would not recommend you put your money into something that speculative/risky without being an accredited investor. Hope some of that was helpful! Like I said though, you should be super proud! I’m sure your daughter is amazing and I’m thrilled you watched my video and commented. Thank you kindly for taking the time. Cheers!
Thank you, this was a great explanation! What happens with 529 if the kid decides not to go to college,or gets sholership? What's the penalty for taking out the money? Thank you
@Danijel Tomic - Thanks! You've got a couple options:
1). Transfer the 529 funds to another one of your children or eligible family member...you can do this by simply changing the Beneficiary named on the account...which will keep YOU as the account owner over the funds.
2). Liquidate the 529 account entirely. This will result in owing Federal income taxes (and possibly State income taxes) on the gains within the account and potentially a 10% penalty. However, this 10% penalty could be waived on funds withdrawn that are equal to the amount of scholarships received (and/or due to death/disability of the designated beneficiary).
3). Roll the dice and liquidate the funds during your child's college years and use the scholarship funds for other purposes. Some scholarships are directly tied to tuition, but some are also just cash scholarships to be used for various college expenses.
4). From a legacy perspective...do nothing. Keep the funds in the 529 growing tax-free and wait for your child to have a child of their own. At which time you could simply change the beneficiary from your child to your grandchild and have most/nearly all of their college expenses taken care of before your future grandchild turns 10 years old.
I've heard many parents say they'll do #2, but personally speaking, my wife and I plan to do #4. We are emotionally allocating our monthly 529 contributions towards education for future generations of our family...whether that is just our two daughters OR our two daughters and their future kids.
Thanks for checking out this video. I hope some of the vids across the channel have provided you with a financial nugget or two to help you along your investing / financial planning journey.
Cheers, boss!
@@Financial_Awareness Thank you again!! Definitely appreciate you reaching out to explain my questions. This is Definitely something I will consider and keep as available options. Thank you and keep them awesome videos coming.
How did you get a return rate of 7%? Is this leaning more conservative? On these plans I don’t see anything about a return rate all I see are “yearly performances”
When putting together financial planning scenarios you do need to make some calculated assumptions. When using calculator.net’s investment calculators I usually plug in an assumed rate of return…it is just that…an assumption, not a guarantee. So yeah, the lower the assumed rate of return you use the lower the risk you need to take to accomplish your goal.
If you have a portfolio of positions you could pay someone to run a Monte Carlo analysis for you and your positions, but folks most just use an assumed rate of return when making assumptions on future performance. One of my oldest videos is about asset allocation and risk…I’ll admit it isn’t one of my best videos, but I do a decent job of discussing this.
Cheers! Thanks for checking out the Chanel! Thank you!
I have another question. What can you do when you are in a country what doest have scolar ships. The colleges are starting from 10.000 to 64000. How much should i set aside for my daughter. My dad and my old aunt is also saving for her. Per week 2 euros and my dad i think 20. How much should i set a side at least for her.
@Davy van Loo - Tough to pinpoint a specific amount you should be saving when your target range is so wide. If possible, narrow your goal down to a specific number and then simply reverse engineer those numbers to what you should be saving today. It's just math, but it only works if you are more specific in your target/end goal. To answer your question, I'd say....save/invest what you can within your budget constraints without sacrificing from your other financial goals...that is a great place to start. Something is better than nothing.
I don't know how old your daughter is, but assuming she is 8 years old and you have 10 years to save then you'll take a financial goal - let's say 20,000 total - and sprinkle in some inflation over that 10 year period...that means your goal of 20,000 (in today's dollars) is really 26,878 in 2031 (assuming 3% flat inflation each year). To arrive at apprx. 27,000 in 10 years you'll need to save 165/month (assuming a 6% average rate of return). If you're more of an aggressive investor hoping to get a better rate of return then you'll need to save less. If your family is saving 28 Euros/month then you'll need to save the difference to get to a total of 165/month...soooo 137/month from you.
Hope that was helpful and that you were able to follow the math. Let me know if you have follow up questions. Appreciate you taking the time to watch the video....cheers, boss!
@@Financial_Awareness she is 3 but they go to college with 16 or 17 years old
@Davy van Loo - Nice! Then you have plenty of time to save. Speak with your spouse regarding what your best guess at the future cost (based on your goals & how much of college/university you want to cover) and use some investment calculators to reverse engineer how much you should be saving with a 13-14 year time horizon. Calculator.net is a nice place I like to go to for easy / quick calculators.
@@Financial_Awareness The problem is here is the year money for one year increases with 400 euros each year. I dont know what it will increases in the next 10 years. But we are sure enough. I dont want her to borrow money for her college.
@Davy Van Loo - Understood. Then take a good look at your current financial goals and see if there are adjustments that can be made within your budget so that you can throw more money towards this college savings goal.
Working through college is also an option that many choose.
Just curious - if we set up a 529 but my son gets a full ride scholarship. What happens with the funds?
@Kayla Trausch - Great question. Short answer: nothing happens. Funds remain invested, beneficiaries do not change, and you remain in control of the account.
Longer answer: You can still withdraw some of the funds to cash flow and pay for some of his education...you can change the beneficiary from your son to another member of your family...you could also keep everything as-is just in case your son decides to go to grad school / medical school / law school (which might not happen via scholarship)...you could also pay some taxes/fees for not spending the money on higher education related expenses and use the money for yourself on whatever you want (not what I suggest)...OR...you could also keep everything as-is and wait for your son to get married/have a kid and then you could change the beneficiary of this account (that you still legally own) to your future grandchild. Lots of options. Hope that response is helpful...many of these I thought I mentioned in the video - so feel welcome to watch it again if that is helpful.
Hey, congrats on planning for your son's education/future and well done! Proud momma! Appreciate you taking the time to check out the video. Cheers boss lady!
@@Financial_Awareness Thank you for taking the time to respond with such a thoughtful message. I have been binge watching since I found you today haha. Good luck with this youtube channel!
@Kayla Trausch - Awe! Thank you so much! 😃 It’s been a fun experience growing the channel and I’m happy to help answer questions when someone asks. I uploaded videos religiously for a year or so and just took a break off from uploading the past couple months...about to get back at it again and am getting excited to put some ideas on camera.
Hit me up if you’ve got a question and I’ll do my best to provide some thought or at least point you in the direction to help you answer your question. 👍🏻👍🏻
My son is 12 and I want to start on today. Am I too late to start a 529 savings plan?
@MagB Pics - 100% absolutely not too late. My parents didn’t start when I was born either, but by the time my young eat was born they had gotten their act together…lol. My bottom line: something is better than nothing. So, even if you don’t have the means to save for 100% of higher education costs it will still be nice for there to be something in place for future education needs. I’d say start now!
Hey, appreciate you taking the time to check out this video and being part of the channel. Cheers!
Hi! I am new to your channel and am glad I watched you! My question is my son is 14 and I would like to open a 529 for him. How should I invest it, knowing that he will need some of it in 3 years?
@Ivy Deguzman - Well hello & welcome! Happy to have you here. Will help if I can...with a 3-5 year time horizon general financial planning principles would dictate that you should take a more balanced & conservative approach to your 529 allocation...which is good/sound advice to follow. While nobody can predict how the market will fluctuate (volatility) over the next 3 years, what I would encourage you to consider would be to keep the next semester's tuition/bills held in cash...so once you are 6-10 months out of needing to make that next tuition payment - transfer the funds over to cash within the 529 account.
Also, with that short of a time horizon, IF you plan on investing in more speculative individual stocks or more aggressively allocated ETF's/Mutual Funds then I would follow that up with taking a more ACTIVE approach to monitoring the account on a weekly basis & not to get sucked into the 'set it and forget it' mentality that your longer term positions are likely in for your retirement accounts. If you had a longer time horizon then you could be more relaxed, but since you are 3-5 years away from spending this money from your 529 then I would keep a closer eye on the funds.
Don't forget about paying off your own debt, too! If paying off a car/boat/loan of yours within the next 3-5 years means you might be able to help cash flow some of the college expenses that could be helpful as well. Keep an eye on your budget! Hey, appreciate you taking the time to check out the video...cheers!
Bruh I thought this was Johnny sins
@Aamir K. - You're not the only one...hahaha! I should start telling people he's my cousin or brother. LOL
Wow a bit too much. Focus on the subject.
@Corey Gray - Roger that boss…what subject are you referring to? Thanks for checking out the video/channel.
I was hoping it jumped into the specifics of the subject. Good advice but too much minutia. Im looking for an account for my teen but I am left navigating a bunch of proprietary and potential roadblocks when looking at which types of accounts work for us. Google is 100% commercialized trash when it comes to financial research, hundreds of results possibly thousands that railroad the user to a service: services that do not have to serve your best interests. What happened to knowledge online? Sorry but I could not get past the preface of your speech.
@Corey Gray - Gotchya. If you’re looking for a “college account” for your teen then I’d say the 529 is the way to go. However, if you’re referring to just an account that you/your teen puts money into that you want him/her to use for whatever you want then I’d just open up an normal brokerage account with Schwab/Fidelity/Vanguard…just keep it simple. Sorry this video didn’t float your boat, but it is on subject…college accounts and various ways to save/pay for college. If you’ve got more questions or are looking for something specific just comment and let me know and I’ll throw your idea on my content calendar. Cheers & happy 4th!
Thank you for your time, it's appreciated.
Happy Independence Day also!