General discussion - Mom and Dad Esq.

I agree with credit this, VM.

Who knows anything about the different college savings schemes and can explain to a financial idiot what the differences are? In the alternative, who knows of a good website that can do this? The grandparents want to give some money to the kid to invest for him and I need a place to put it. Thoughts?

-T(financial idiot)L

[Tyrone Slothrop]

Originally posted by TexLex
I agree with credit this, VM.

Who knows anything about the different college savings schemes and can explain to a financial idiot what the differences are? In the alternative, who knows of a good website that can do this? The grandparents want to give some money to the kid to invest for him and I need a place to put it. Thoughts?

-T(financial idiot)L

I looked at this not too long ago. Here is an article from the San Francisco Chronicle about 529s.

And here's an article from Morningstar in May about some 529s:

• Five 529 Plans with Stellar Investment Options
  
  This quintet of savings plans offers solid funds and flexibility.
  
  by Paul Herbert | 05-03-04
  
  Parents and grandparents might feel like pulling their hair out when choosing among 529 savings plans. They may find that their home state provides a meaningful break on April 15, but that its plan may charge too much in management fees, or in pesky administrative charges. Or perhaps it does not provide enough flexibility, or it is run by a program manager that has failed to put its shareholders' interests ahead of its own profits.
  But while all of these elements are important, no evaluation of a 529 plan is complete without scrutiny of its investment options. In some cases, a state's plan may be cheap for both in-staters and outsiders, and offer significant tax breaks to its residents, but lack either sufficient breadth in its investment lineup or high-quality investment options.
  
  Thus, before deciding where to open a 529 plan, investors should find satisfactory answers to two questions: (1) Does the plan offer investment options that are either structured to ensure proper allocation to stocks, bonds, and cash as a beneficiary nears matriculation, or does it offer enough a la carte options that I can do so myself? and (2) Does the program present me with enough offerings that are proven standouts within their asset classes on the basis of strong investment performance, expert management, and reasonable costs?
  
  As we've written in the past, asset allocation as a child or grandchild nears college age is a key issue. Some plans don't become significantly conservative over time, leaving open the possibility that a downturn in stocks could wipe out gains just before they're needed. Other plans simply don't give you enough options to design your own allocation. (This is a fair criticism of the plans offered by TIAA-CREF, one of the nation's largest program managers.) Finally, at least one plan leaves its managers so much flexibility that savers can't easily determine what their plan's actual allocation to stocks and bonds is at any given time.
  
  It's just as crucial to know whether a program offers topnotch funds. You can't count on state treasurers to have done the necessary due diligence to ensure that a 529 plan offers the best managers. Some seem to have chosen firms with local ties over those with the best investment vehicles. Fortunately, you can turn to tools such as the Morningstar Rating for funds and Fund Family Score to help determine whether a state has gone with heroes or zeroes. Furthermore, you can determine if a manager has done well by its shareholders by checking our Fund Industry Investigation Update table.
  
  After evaluating plans on such measures, we've come up with a list of five that stand out from the rest. Note that the managers of these plans also run programs in other states. If the investment options for the different programs featured many of the same investment choices, we decided to highlight the one with the lowest costs. We indicated the other states in the capsule discussions below, as their residents might reap tax benefits from keeping their college-savings money close to home.
  
  Alaska--T. Rowe Price College Savings Plan
  This plan offers a reasonably crafted age-based plan and four stand-alone offerings. The age-based offering devotes about 30% to stocks when a beneficiary is about ready to enroll in college. That's a bit aggressive, but you can augment that with the stand-alone fixed-income option, T. Rowe Price Spectrum Income RPSIX, one of the top multisector bond funds. Standout funds such as T. Rowe Price Blue Chip Growth TRBCX and T. Rowe Price Small-Cap Stock OTCFX are also holdings of the age-based plan. Other states with plans managed by T. Rowe Price: Maryland.
  
  Delaware--Delaware College Investment Plan
  One of three plans managed by Fidelity Investments, this one offers a fine mix of a suitable age-based option and quality stand-alone vehicles. The age-based portfolio places about 25% of assets in equities when a beneficiary reaches age 15, which we find reasonably cautious. The portfolios feature topnotch offerings such as Fidelity Dividend Growth FDGFX and Fidelity Short-Term Bond FSHBX. Plus, the fund offers three static portfolios for do-it-yourselfers. Other states with plans managed by Fidelity: Massachusetts, New Hampshire. Advisors and their clients should note that Fidelity also offers a broker-sold plan with New Hampshire.
  
  Nebraska--College Savings Plan of Nebraska
  Union Bank & Trust's program offers just about everything but the kitchen sink. It features four age-based portfolios, six target portfolios, and 21 individual funds. And rather than relying on the offerings from one manager, Nebraska's program offers a menu of solid funds from Vanguard, Fidelity, T. Rowe Price, and PIMCO. As the 529 industry evolves, investors may find more states taking the best-of-class approach to structuring investment options. Texas' advisor-sold plan, which features managers from Marsico Funds, Montag & Caldwell, PIMCO, and Wellington, is another strong a la carte plan.
  
  Utah--Utah Education Savings Plan Trust
  This is arguably the best plan around. It offers six stand-alone and three age-based investment options. The stand-alone options range from a very conservative offering that places 100% of assets in a money-market fund to a vehicle on the bold side that features a diversified mix of large-cap, small-cap, U.S., and international stocks. The most conservative of the age-based offerings devotes only 10% to equities when a beneficiary reaches age 13, which is very cautious. And the most-expensive offering costs just under 43 basis points, making this the cheapest plan around. Other plans managed by Vanguard: Iowa, Nevada, New York, and Virginia.
  
  Virginia--CollegeAmerica 529 Savings Plan
  The country's largest plan, CollegeAmerica, is run by American Funds, and is sold through financial advisors. The plan's investment lineup is made up of stellar options such as American Funds Washington Mutual Investors AWSHX, American Funds Capital Income Builder CAIBX, and 19 other funds, each of which is available on a stand-alone basis. The fund's age-based plan is also quite cautious, with 70% of assets devoted to bonds and money-market instruments when a beneficiary turns 13. The funds have been very popular lately, which has made asset bloat a concern, but to date the firm has managed growth well.
  

[Tyrone Slothrop]

Originally posted by Flinty_McFlint
I do have to think about the Flintette's 1 yr. b-day party, and I have some questions for you all. First, who is supposed to be invited? Family yeah, friends with kids, yeah. But I don't think I should invite any friends w/out kids--won't they be bored? I would be. Or is the birthday party aspect of it just a ruse. I don't want my childless friends to feel compelled to come and give a gift to a kid who won't even acknowledge them, except to perhaps smile and/or drool on them. Ms. Manners, please help.

We made a big deal out of L'il Ty's first birthday, and it was a total bust. He was overwhelmed by the attention, etc., and let's just say there were not a lot of good opportunities to take pictures. Other birthdays have been more fun.

[viet_mom]

Originally posted by Tyrone Slothrop
We made a big deal out of L'il Ty's first birthday, and it was a total bust. He was overwhelmed by the attention, etc., and let's just say there were not a lot of good opportunities to take pictures. Other birthdays have been more fun.

Hmmmn. Well, all the books say the same thing - do it simple because the child will be overwhelmed. A test run is always good if possible - like talking the child to someone else's b'day party. Viet Babe loves a loud, crowded, zoo-like environment with people running around (heck, I take her to concerts - she loves it) so the crazy parties work for her.

On another note, I'm interested in the thread about how to entertain adults during the parties. At least where I am, the parties don't last that long that you'd worry about that. The adults are basically happy to have their torsos back without kids clinging to them, grab noshes and chat with fellow parents as the kids go nutso.

Thanks for the advice about the neighbors Credit This and Tex Lex. I don't have any of the neighbors phone numbers or last names but I've been approaching them when I see them to extend the invitation for the party.

[baltassoc]

Originally posted by TexLex
I agree with credit this, VM.

Who knows anything about the different college savings schemes and can explain to a financial idiot what the differences are? In the alternative, who knows of a good website that can do this? The grandparents want to give some money to the kid to invest for him and I need a place to put it. Thoughts?

-T(financial idiot)L

To answer more broadly than Ty, there are three main types of college savings programs.

First are the 529 plans Ty mentioned. Money placed in the plan grows tax free, at least until the sunset date 2010. They work much like a 401k plan that offers a variety of mutual funds: you put money in the account (although it's not withdrawn pre tax), and then its allocated among one or more funds.

Almost every state has a 529 plan, and many have several. Recent controversies have arisen over high fees associated with some plans, especially ones that have specific tax advantages for residents of a particular state. Since you are blessed to be in a state that makes state income tax considerations pointless, you can cut through a lot of the analysis and go straight to the lowest fee plans. Having looked at this a lot last year, I'd suggest looking at the Alaska T.Rowe Price plan and the Utah Vanguard plan, with the difference being whether you favor an actively managed fund or an index. Personally, I have money in the T.Rowe Price Maryland plan, into which I contribute just enough to take full advantage of the Maryland state tax break ($2000 a year) and the T. Rowe Alaska plan, into which I deposit the grandparent checks (it has somewhat lower fees). I considered the Vanguard plan strongly, but frankly I'm already getting mail from enough different financial companies.

The second option is prepaid tuition plans. This is where you "buy" a semester of tuition at your local state school at today's prices, and the state will let you kid attend (assuming s/he gets in, not that you're worried about that) in X years. Usually, you can invest more or less than a semester, and its just prorated. There is also a consortium of private schools that have a similar scheme. The advantage is that if school tuition outpaces investment returns, you look good. However, the limitations really seem restrictive to my view.

The third option is a Coverdale IRA. This works like an education specific Roth IRA (contributions are post tax, but income is tax free), but it has some additional restrictions from a 529, the three main ones being caps on annual contributions ($2000), the fact that couples earning more than $160K a year can't contribute and the fact it can't be transfered from one beneficiary to another. One big plus is that the tax advantages are not currently scheduled to sunset.

The best web resource on all these options is:
http://www.savingforcollege.com/
It breaks down all the different 529s, plus has info on the other two types of plans.

For info on the private college prepaid tuition plan:
http://www.independent529plan.org/

Thank you Ty and Baltassoc. I heart you both. You are invited to our party.

Say I have a more than $2000 to invest...would you suggest doing the Coverdale account first and then put the rest in the 529? The Coverdale account seems to be the way to go if you qualify...but what if (heaven forbid) the kid for whatever reason does not go to college? Same with the 529 plans - can you switch them to different kids? What if you have no other kid to switch the money to? Is there any possible way the kid could ever get his paws on the dough without our say so?

The Texas plan has had a lot of bad press - and at least for a while it was closed because they were worried about funding it later, so I'm staying clear of that.

[viet_mom]

Originally posted by TexLex
Thank you Ty and Baltassoc. I heart you both. You are invited to our party.

Say I have a more than $2000 to invest...would you suggest doing the Coverdale account first and then put the rest in the 529? The Coverdale account seems to be the way to go if you qualify...but what if (heaven forbid) the kid for whatever reason does not go to college? Same with the 529 plans - can you switch them to different kids? What if you have no other kid to switch the money to? Is there any possible way the kid could ever get his paws on the dough without our say so?

The Texas plan has had a lot of bad press - and at least for a while it was closed because they were worried about funding it later, so I'm staying clear of that.

This stuff is my sister's specialty at her job (she's head of retirement funds at a big company). You should definitely pick up the phone and call her - she wont' try to sell you something from her company. Just get free advice. She helped me set up a fund for Viet Babe. PM me if you want her number. She just returned to work after maternity leave with her twins and she's real bummed!

[baltassoc]

Originally posted by TexLex
Say I have a more than $2000 to invest...would you suggest doing the Coverdale account first and then put the rest in the 529? The Coverdale account seems to be the way to go if you qualify...but what if (heaven forbid) the kid for whatever reason does not go to college? Same with the 529 plans - can you switch them to different kids? What if you have no other kid to switch the money to? Is there any possible way the kid could ever get his paws on the dough without our say so?

The first $2000 in the Coverdale question is one hotly debated by people with far more knowledge than I. I believe there's an extensive discussion of just that question on the Saving for College website.

One of the nice things about 529s is that you can roll them over to other people: siblings, grandchildren, godchildren, the cute poolboy working his way through school, etc., as long as its used for educational expenses. I believe one of the issues with the Coverdale is exactly your last question: a Coverdale goes to the kid by some age (30? 35?) no matter what, while a 529 stays under the control of the owner always (except upon death, of course, and even then it doesn't have to go to the kid).

Thanks Baltassoc and VM, I may annoy your sis if I can't figure this out myself...I told Mr. Lex I would have this all planned out by the time he got back on Mon. Gracias for the offer.

-T(grateful)L

I need to settle a rumor - that in CA siblings over 5 may not share a bedroom by law. I checked the Family Code and found nothing. Can any Californians shed some light on this? TIA!

[Mmmm, Burger (C.J.)]

Originally posted by TexLex
I need to settle a rumor - that in CA siblings over 5 may not share a bedroom by law. I checked the Family Code and found nothing. Can any Californians shed some light on this? TIA!

Man, if only the Bradys had a good lawyer.

Crap - I meant kids of the opposite sex.

[dtb]

Originally posted by TexLex
Thank you Ty and Baltassoc. I heart you both. You are invited to our party.

Say I have a more than $2000 to invest...would you suggest doing the Coverdale account first and then put the rest in the 529? The Coverdale account seems to be the way to go if you qualify...but what if (heaven forbid) the kid for whatever reason does not go to college? Same with the 529 plans - can you switch them to different kids? What if you have no other kid to switch the money to? Is there any possible way the kid could ever get his paws on the dough without our say so?

The Texas plan has had a lot of bad press - and at least for a while it was closed because they were worried about funding it later, so I'm staying clear of that.

529 plans are transferrable to anybody -- that's right ANYBODY (including you) -- although maybe it has to be someone in your family, I can't remember. So, if you wanted to go back to school for something, you could. If you had another child, you could transfer it to him/her.

I use the Rhode Island plan. I don't know why. It's what my financial planner suggested. I also have money in the New York plan, but it was really sucking for a while, and there were high fees to transfer the funds to another state's plan, so I just left it there, and it's doing much better now.

[Flinty_McFlint]

Originally posted by TexLex
I need to settle a rumor - that in CA siblings over 5 may not share a bedroom by law. I checked the Family Code and found nothing. Can any Californians shed some light on this? TIA!

Originally posted by TexLex
Crap - I meant kids of the opposite sex.

I'll pay you a dollar to post this on the FB instead, so I can answer freely.

Originally posted by TexLex
The Texas plan has had a lot of bad press - and at least for a while it was closed because they were worried about funding it later, so I'm staying clear of that.

I hadn't heard they closed any 529-type plan. The did close enrollment for the Texas Tomorrow Funds for the simple reason that once the legislature gave up control of state school tuition, they couldn't give a flat-rate quote today for fully-paid tuition in 18 years. We got in just under the wire for our first kid, at the end of 2002.