IS a 529 Plan Right for your situation

529 College Saving Plans

529 Plans for college saving. There are numerous questions about saving for college. I believe that for many people the best ways to save for college are not in a 529 Plan. Many State plans have produced DISMAL results.. Previous news reports in the Columbus Dispatch have detailed poor performance in the Ohio plan even before the recent Market meltdown. Many states plan participants tend to invest in age based formula driven plan options with less risky products receiving a greater percentage of the funds as the students get closer to College age. That is a good idea but it may not be enough. With a 40% loss or more some plans are not likely to have enough time to fully recover before the funds are needed. She also adds that many families have had to cut back on funding the plans because of tight budgets in general.

It is important to continue saving something every month even if it is only $25 a pay period. You cannot alter investment allocation for existing funds in the plan more than once per year. Even though you may not be able to reallocate the existing funds you can immediately allocate the new contributions however you wish.

529 Plans have high funding limits. You can actually set aside $250,000 for your childrens education Tax free. Unfortunately if your children do not use the funds you will get penalized when you withdraw the funds. In some ways using a ROTH is better but the maximum contributions are much lower. You also have much more investment or savings flexibility with the ROTH