Ask Terry Questions 529 college savings

529 college savings

By Terry Savage on May 02, 2024 | College Savings / Student Loans

I STILL dont get your enthusiasm for 529 plans. I am bailing out of my grandson’s Bright Directions with MorganStanley because after two years it still isnt back to my original $5,000 (lost $1000 the first year!). I am investigating starting a direct Illinois 529 Bright Start program for my grandson,now a college freshman. The current report says it’s consistenly losing money too! Why are you endorsing these plans, just because the money isn’t taxed at withdrawal? I don’t get it!

Terry Says

Well, first of all you invested way too late! We had a horrible year for both stocks and bonds in 2022, which I think is the first year you invested.  And if you were going to invest, I always suggest going directly to the plan website, instead of paying the higher fees to an advisor.

And at this point, you don’t have very long for the money to grow, so instead of adding money to the plan, instead just pay his tuition bills directly to the school bursar.  That won’t count against the family in the financial aid formula, in case they are applying.

And for anyone reading this –the time to start a plan for a grandchild is when they are born!!  That gives the money time to grow — making the tax-free withdrawals more significant.

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