529 plans?

Russ Smith

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Anybody know rules etc for doing this for a grand niece or nephew? We have a niece and nephew that both have 2 kids. One has 2 boys the other 1 boy and 1 girl. We want to open 529 plans for them but I'm not familiar.

Looking online it appears there may be an advantage to having their actual parent open the plan and then we're allowed to contribute?
 

Folster

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Anybody know rules etc for doing this for a grand niece or nephew? We have a niece and nephew that both have 2 kids. One has 2 boys the other 1 boy and 1 girl. We want to open 529 plans for them but I'm not familiar.

Looking online it appears there may be an advantage to having their actual parent open the plan and then we're allowed to contribute?

I have 2 for my boys and have helped a lot of clients set them up.

For regular 529s, the benefit of you being the participant is that you maintain control over the funds in case the parent is irresponsible or the child goes down the wrong path. You can change the beneficiary at any time if you are the participant.

They are like a Roth for education. The money you put in has already been taxed, but the growth and withdrawals are tax free provided that they are for qualified educational expenses. Some states will allow for a state income tax deduction but CA doesn't last I checked.

Whatever you do, go with an online/self-directed option, not some advised option. An advisor will just put you in an auto-pilot, age-based fund with really high advisory fees.
 
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Russ Smith

Russ Smith

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I have 2 for my boys and have helped a lot of clients set them up.

For regular 529s, the benefit of you being the participant is that you maintain control over the funds in case the parent is irresponsible or the child goes down the wrong path. You can change the beneficiary at any time if you are the participant.

They are like a Roth for education. The money you put in has already been taxed, but the growth and withdrawals are tax free provided that they are for qualified educational expenses. Some states will allow for a state income tax deduction but CA doesn't last I checked.

Whatever you do, go with an online/self-directed option, not some advised option. An advisor will just put you in an auto-pilot, age-based fund with really high advisory fees.


Thanks we're going to talk to our niece. My GF"s sister wants to do the same thing for all 4 kids so there is probably an advantage to having the parents set them up and make it so we can all contribute. One fund instead of 2.
 

Folster

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Thanks we're going to talk to our niece. My GF"s sister wants to do the same thing for all 4 kids so there is probably an advantage to having the parents set them up and make it so we can all contribute. One fund instead of 2.

Cool. They are fantastic vehicles. I'd recommend going with a big discount broker like Vanguard or Schwab. The plans will have you choose your investments when opening and likely limit changes to a couple times a year.

New funds will automatically be invested into the pre-selected funds similar to 401K contributions so most people treat it as a "set it and forget it" type of investment with age-based funds that automatically get more conservative as the child gets older which I think is best for the vast majority of 529 investors.
 
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Russ Smith

Russ Smith

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Cool. They are fantastic vehicles. I'd recommend going with a big discount broker like Vanguard or Schwab. The plans will have you choose your investments when opening and likely limit changes to a couple times a year.

New funds will automatically be invested into the pre-selected funds similar to 401K contributions so most people treat it as a "set it and forget it" type of investment with age-based funds that automatically get more conservative as the child gets older which I think is best for the vast majority of 529 investors.


Yeah I have a Vanguard account now so if that makes sense we'll see. They were talkign about doing it through Wells Fargo since both her and her sister bank there but my take is WF is probably not a great place to put it. I was suggesting Vanguard or Fidelity.

The plan is to just have money auto deposit every month. I wanted to start based on age the oldest is 8 so I think the initial deposit should be higher since he's closer to college so would need it first.

thanks
 

elindholm

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Yeah I have a Vanguard account now so if that makes sense we'll see. They were talkign about doing it through Wells Fargo since both her and her sister bank there but my take is WF is probably not a great place to put it. I was suggesting Vanguard or Fidelity.

After my experiences with Vanguard over the past year, I won't hold an account with them, period. I'm okay with holding their mutual funds through someone else, but a situation where I'm dependent on Vanguard customer service to make any changes or get answers to any questions is a non-starter. They won't communicate by email or chat, they often won't even answer the phone, when they do answer it's an obscene wait time, and then they either provide the wrong information or screw something up on their end of the process. It was unbelievable, over and over and over again.

I've had good luck with Fidelity's customer service, and their website interface is decent enough, although cluttered with more stupid junk than I'd like.
 
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Russ Smith

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After my experiences with Vanguard over the past year, I won't hold an account with them, period. I'm okay with holding their mutual funds through someone else, but a situation where I'm dependent on Vanguard customer service to make any changes or get answers to any questions is a non-starter. They won't communicate by email or chat, they often won't even answer the phone, when they do answer it's an obscene wait time, and then they either provide the wrong information or screw something up on their end of the process. It was unbelievable, over and over and over again.

I've had good luck with Fidelity's customer service, and their website interface is decent enough, although cluttered with more stupid junk than I'd like.


I recently moved my inherited IRA from Vanguard to Fidelity to have it managed by the same person who manages my Fidelity IRAs. It took 5 weeks to move teh cash version. I can't be sure but Fidelity said while some of it was on their end the largest portion if the delay was on Vanguards end. hard to be sure but when I first started i was told the cash part would transfer first, in reality the stock portion did. I have no idea what went wrong but it went wrong more than once.
 

Ouchie-Z-Clown

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After my experiences with Vanguard over the past year, I won't hold an account with them, period. I'm okay with holding their mutual funds through someone else, but a situation where I'm dependent on Vanguard customer service to make any changes or get answers to any questions is a non-starter. They won't communicate by email or chat, they often won't even answer the phone, when they do answer it's an obscene wait time, and then they either provide the wrong information or screw something up on their end of the process. It was unbelievable, over and over and over again.

I've had good luck with Fidelity's customer service, and their website interface is decent enough, although cluttered with more stupid junk than I'd like.
There’s multiple reasons vanguard is so inexpensive on the mutual fund side - the skimp everywhere.
 

gmabel830

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I have three kids. Ended up opening up two 529 plans with the State of Michigan in the names of the older two kids and a new Fidelity investment account instead of doing the 3rd 529 plan. Since you can change the name of who is on the 529 plan, I figured two was a good bet while having money accrue in a separate investment vehicle would be good in case one of the three does not end up getting education beyond high school.

I graduated college with a 4.0 GPA and my brother didn’t graduate high school. So I guess I am just predispositioned to the fact that kids can end up on very different paths no matter how similar you raise them. Just my luck they will all get PhDs!
 
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