529 Plan and College Savings

Archive for July, 2007

Question: Is there a limit on how much you can contribute to a 529 Plan a year?

I want to contribute to my childs college education while deducting my total income for the year. I want to invest close to $20k this year. Is this possible, or is there a cap in the 529 Plan? Maybe another plan that will allow as much as $20k per year, similar to the 401k plan?

Answer: 20k spent into your IRA, you can gain 10% or more on your returns, and you can actually go to your bank and get an equity loan on the IRA at a 5% rate, and still make 5%…. and your not limited to what you spend the money on your IRA vs 529 you can only spend those money on school related for your kids.

think of it this way, you rack up 200k in the 529 Plan for your kid, if you have 1 kid, you may not be able to use it all… what happens then? you will take the money out and get penalized severly in taxes vs if you had invested that money in the roth IRA of 200,000 and you take out the 150,000 for school, and you can do whatever you want with that 50k and not be penalized… or go with the plan i suggest, which is put the money in your IRA or variable life insurance, and then when its time for your kid to go to college, get an equity loan at a good rate, dont take money out of your IRA, instead your IRA will still snowball and take out slowly to pay the monthly payments needed to pay on the loan…

just to let you know, this information is provided by my financial advisor, and i personally think its the best plan…