Wednesday, September 28, 2005

On Yeshiva Parents and 529s

A 529 (for those not in the know) is a savings plan, designed to help people save money for future college expenses. There are certain tax-benefits involved with 529s that make them very attractive.

Of course, most people send their children to public school, and so might have money to set aside for 529s. Most Yeshiva parents (who want to send their kids to college), on the other hand, probably do not put money into 529s - largely because the cost of the Yeshiva itself is very large and does not leave much money left over for college savings. (Of course, folks like Heshy [who believe that there shouldn't be any Jewish doctors, dentists, lawyers, etc.] have no need of a 529).

I'm not really looking to start a rant on Yeshiva costs here - we all know that Yeshivos do have expenses to meet. What I'm really looking for is advice and ideas. For those of you who do manage to squeeze a couple of extra dollars into the 529s every month, how do you do it. I know, of course, that a automatic withdrawl solution might be best, but, truth be told, things are tight enough as it is now.

Of course, I'm funding the 401(k) that I have. I'm following the old adage "there are programs to help finance your kid's education, but there are no programs to finance your retirement," meaning that the 401(k) comes before the 529. So, for the moment, the kids' college accounts are empty.

So, for those of you who are putting away extra money in a 529 (or similar) plan, please share your success stories. How did you do it while still paying Yeshiva tution for a kid (or multiple kids)? What sacrifices did you make to do it? Are you happy with your investment so far? Do you think you'll meet your investment goals? And are you paying full Yeshiva tuition? :)

The Wolf

13 comments:

Anonymous said...

I believe an education-IRA, and a Roth -IRA, for education and retirement should be first, and then a 529, 401(K).
The former are tax-free, while having a small contribution limit, the latter a much larger limit, but you will pay taxes.

der blatt said...

how about tuition vouchers

Still Wonderin' said...

Forget the 529. Just send your kids to Brooklyn College. After all those years paying yeshiva tuition, paying CUNY will be a breeze.

Anonymous said...

Hey Wolf--If you are good with credit (i.e. you pay your balance off every month), than I suggest you check out the MBNA Fidelity Investments 529 College Savings Plan card. The card gives a 2 percent (yes, 2 percent) reward on ALL purchases and deposits the reward money into your 529 plan at the end of each quarter. We are putting away over $500 a year into our 529 by just spending the money we already are spending.

Of course, like I said before, if you get this MBNA card you must be good with credit. I try to maximize the savings by placing literally everything I can on the card. It might seem silly to charge a buck purchase at the grocery store to some, but I look at that purchase I was going to make anyways as $0.02 more cents that will go into our account and hopefully grow and grow.

You will have to find some money to start the college savings plan, I believe (maybe you could divert $1000 from your 401(k) to fund the Fidelity account initially without any management fees.

Also, sign up for UPromise at www.upromise.com. Even if you don't think you will benefit greatly, at some point you might earn $50 (by buying what you were already going to buy) and in the small print I believe that it says that you can pull out the money in cash if you don't like your UPromise money to a Vangaurd 529 Plan.

Goodluck.

Anonymous said...

I should make a disclaimer to my post above that I have no kids in school. I guess this should drive home the point that the best time to save is while one is single and newly married. Unfortunately, in the frum (and non-frum) world it seems that many don't start saving until it is too late. So, my message to all the singles and not-yet-tuition paying parents, start saving NOW. Get a head start or your will fall behind.

BrooklynWolf said...

Der Blatt,

Firstly, of course, tuition vouchers are currently non-existant. So suggesting vouchers is kind of like suggesting that I grow a money tree in my backyard.

SW,
They could certainly do worse than Brooklyn College (my wife and I are both Brooklyn College grads).

Anon,

Wouldn't diverting money from a 401(k) to a 529 (or any other non-retirement or non-tax-deferred account) trigger a early withdrawl penalty?

The Wolf

Still Wonderin' said...

Wolf -- NO disrespect to BC intended. I, my wife, siblings, siblings-in-law, parents, and dozens of friends are all BC grads. My point is if BC is in your kids' future, why sweat about $$? Worry when they decide to go to law school.

Coco said...

I think that Wolfie would like to have enough money put away to finance his kids' education regardless of where they want to go. It's about helping them to follow their dreams right? And based upon the latest post, at least one of them will want to go to the school with the best zoology (or maybe even veterinary?) department that will accept him.
You really should talk to a professional financial planner about setting long-term goals. They know best and they can lay out all of the options for you with the pros and cons.

Anonymous said...

Wolf--When I said "divert" I really should have written that you should lower your retirement withholding for the time it takes to get up to $1000 so that you can open the Fidelity 529 Account. Then (assuming you are good with Credit and pay your balance monthly), you should sign up for the MBNA Fidelity Investments 529 College Savings Mastercard and use it for your purchases. You will get 2% of your purchases placed into your linked 529 account and years from now the gain can be withdrawn without tax when it is used for college.

Of course, when you lower the amount withheld from your paycheck from retirement, you shouldn't lower it below 5% since you don't want to loose your employer's contribution to your retirement plan.

This is my suggestion on how to put away money that you don't have after day school tuitions.

BrooklynWolf said...

Coco,

I certainly know that in the end, we're going to have to deal with a financial professional. I was simply looking for advice from other yeshiva parents on how they do this while juggling multiple yeshiva tuitions. :)

Anon,
That's an idea, but to be honest, I'm not so sure that I'd be able to keep up with it, and if I don't pay off the balance just once, then it "yatza scharo b'hefsaido" (I've lost more than I gained).

The Wolf

Anonymous said...

Wolf-You are certainly correct that you could end up loosing what you gained if you fail to make payment. That is why I added the caveat about being very good with credit.

However, any young posters without children in school should really consider establishing a 529 and using this credit card (if they are good with credit, of course). With the day school/yeshiva tuition as it is, it is absolutely imperative to start saving money even before marriage (if fact, I can attest that that is the best time to save).

BrooklynWolf said...

Ah, you're so right.

So, where were you when I needed you 18 years ago? :)

The Wolf

Anonymous said...

In the 4th Grade I believe. I ould have given you the same advice back then (I had already done my first tax return in the 2nd grade).

Maybe I should start my own blog and share some financial information and tax information!