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Strollerderby
Parents Deep Sixing 529
The economy didn’t just hurt 529 plans financially.
After years of big jumps in usership of the state-sponsored piggy banks for higher education, the Wall Street Journal is reporting a drop in the number of parents investing in 529 plans for their kids these days.
So are parents not saving for their kids’ educations? Yes and no.
Some parents are simply wary about the market and have opted to invest on their own, following avenues they hope carry lower risk (and possibly a decent yield). Still others are scrimping on everything – and they’d prefer to keep the money close to home, lest they need it in a pinch.
Which makes them smarter than the average bear if you look at most financial gurus’ advice – save your money for your retirement, they warn. Let the young and able-bodied pay for college and work it off. Easier said then done – it was one of the hottest topics right here on Babble when mom Meagan Francis broached the subject of NOT paying for her kids college back in July.
Still, in light of the economy – when the choice comes down to putting money in an iffy 529 or putting food on the table, I don’t think the decision is all that hard.
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23 Comments
GP commented on Nov 12 09 at 5:56 pmWhat’s *that* iffy about a 529? If you have it time-adjusted, you know, to switch to less risky investments as your child approaches college age, then, your chances are good. Heck, my IRA is already nearly back to what it was before last year’s “crash”. I think thinking like this is bad for the economy….
MsC commented on Nov 12 09 at 6:03 pmThere are also 529s that offer more conservative options, like index funds or even CD-style accounts.
Sierra Black commented on Nov 13 09 at 1:20 amThanks for validating my total failure to save for my kids’ college education before she started kindergarten!
Mistress_Scorpio commented on Nov 13 09 at 12:33 pmUnless you have a whole shitpile of money, the financial advisers are correct. It’s better for parents to save for their own retirement and care in their old age so their kids aren’t saddled with having to shell out for elderly parents while they are trying to pay off those school loans.
GP commented on Nov 13 09 at 12:50 pmYou don’t need a “shitpile” of money to put some in your retirement AND some in a 529 for your kid. It’s all about percentages. We aren’t rich and we do both. Not everyone is going to be “elderly” when their kids are in college—and heck, we started old, but I’ll still be 10 years away from retirement at least when my girl starts. (35+18=53….) I think in this day and age it is a little irresponsible and selfish to not save for your kid’s college…at least TRY!
Laure68 commented on Nov 13 09 at 12:58 pmI agree with GP. I think we have an unrealistic expectation to retire at 65. When the retirement age was set at 65, our average life expectancy was around 64 years. Now it is 78 years. And people that make it past 65 are likely to live much longer than 78 years. My parents are in their early 70′s and they both still work. (My mom part-time, my dad full-time.) They do have fairly low-stress jobs, but I really think this keeps them healthy and active.
We put money in both our 401k’s and our son’s 529. It is very important to us to encourage our son to go to college, and I don’t want him to feel guilty when the time comes. With the cost of college, I’m sure we won’t have enough to pay for all of it, but it should relieve some pressure.
Mistress_Scorpio commented on Nov 13 09 at 2:12 pmMaybe the perspective is different for those who didn’t grow up in families who could afford college or retirement. I’ve seen firsthand how taking care of an old or sick parent could destroy a family financially, and my husband and I have done quite well without college. I’m putting money away for my son, just not necessarily for college and I’m taking care of my own care first so I don’t become a burden on him.
ChicaDificil commented on Nov 13 09 at 2:32 pmAnother reason why I heard that it is not such a hot idea to save in a 529 is because the amount of money in a 529 affects the amount of financial aid that the child is able to receive. If you save the money in a different account, you have the option of taking more in financial aid.
When I went to college I took on a lot of financial aid. It was not a big deal.
Also, what happens with the money in a 529 if the child later decides not to go to college?
GP commented on Nov 13 09 at 2:39 pmI did not come from a family who could pay for college…or, perhaps, they chose not to, but to instead give 10 percent to the church every week. Nice, right? This stinks. Why wouldn’t I, since I can, set aside money for my child. It is an absolute given that she is going to go to college, unless she becomes a tennis star or supermodel or something (in which case, she can go AFTER her star burns out). As far as funds in a 529 affecting financial aid,even with our modest but healthy incomes, my husband and I don’t really foresee us being “poor” enough to qualify for financial aid. Yes, we are those people who are not rich but who are firmly planted deeply enough into the middle class to not qualify for much in the way of any benefits. So, yes, we are enthusiastically using our state’s 529. I would think growing up in families that could not afford these things would make you extra-inspired to be taking care of business now. My grampas had their pensions from the Teamsters and Railroad and all that…all we have now are our 401ks and such…so we better save. My husbands mom is always worried about “being a burden” but repeatedly makes bad life decisions and it seems the ones who toot off about not being a burden are the ones most likely to be a burden (no offense specifically, but I am not getting your line of reasoning….)
patricia commented on Nov 13 09 at 2:45 pmMistress_Scorpio, I agree with you. I have paid (am still paying) for my own education, and I am SERIOUSLY worried about my dad and stepmom. When she retires, according to my dad, they’ll have “juuuust enough” with Social Security to pay the bills. And if she dies (a possibility- she’s not in great health), I don’t know what will happen to my dad. I don’t want to leave him in the street, but my husband has been laid off and we’re just trying to keep it all together right now. I would much prefer that I didn’t have to worry about my dad, even if I am saddled with student loans. I’m putting some away for my kids, but it’s not specifically marked for college and I’m putting much more toward my own retirement. I don’t think it’s irresponsible or selfish to not want to burden my kids the way my dad is (prosectively) burdening me.
GP commented on Nov 13 09 at 2:56 pmThing is, if it gets that bad, the old folks can always come live with you. I’d never outright give people money. But, my door is always open.
Laure68 commented on Nov 13 09 at 3:06 pmChicaDificil – actually, this is not true. A 529 is treated the same as any other money you have. In fact, the child is the beneficiary, but you (or whoever is actually sponsoring the account) is the owner. If you put the same money in a CD for yourself, it would count the same.
Mistress_Scorpio commented on Nov 13 09 at 3:09 pmGP, I’m used to you being a dick about experiences that you don’t understand, so no offense taken. Patricia, I wish you the best with your family situation. I had the experience of growing up with sick and financially dependent grandparents living with us when I was young. First, my maternal grandfather who had a stroke while I was in high school and 2 years after he passed, then my stepdad’s mother who had Alzheimers. It severely alters the family dynamic when the heads of the household have duties of breadwinner, caregiver, parent and adult child and everything in between laid on them.
jenny tries too hard commented on Nov 13 09 at 3:16 pmGP, if my parents never come to live with me, I will consider the whole paying-for-my-own-education thing more than a blessing. Unfortunately, I don’t think I’ll be that lucky. I paid for my own college, and I’ll probably still fill in the gaps of my dad’s Army retirement because saving money is apparently a foreign concept to him and stepmom. Errghh. I totally agree about putting aside more for your retirement than you put aside for your kids college. You can have no real way of knowing if your kid will be able to put you up in the guest room when you reach old age, unless you think they’ll run it past you before they decide to marry someone you can’t stand, get divorced, have 4+ kids, have foster kids, move to Siberia, be a career aid worker in a third world country, etc. No, it’s best to see to a modest retirement, buy long-term care insurance (happy birthday Dad) etc. before you put aside college money. I do agree that both can be done, though, even if you are less than filthy rich.
GP commented on Nov 13 09 at 3:30 pmYou have a point, JTTH, about the parents coming to live with us. LOL.
I agree,overall, that if you are that broke, the retirement must come first, possibly, depending on your age and your kids’ age. We are putting MORE into retirement than college simply because we will need more $$$. Still, I think as a matter of discipline, even if you don’t think you have money, you should try and put *something* away..even if its $20 a month, *something* as a gesture to your kid, if nothing else. People piss money away on so much crap (myself included)…
MAMA commented on Nov 13 09 at 3:30 pmChicaDificil- The way we got around it was to put my Dad’s name as the owner and my son as the beneficiary. That way, when he applies for financial aid, it doesn’t show up in either of our names. And, my father can give it to him as a gift and write it off.
Ivy commented on Nov 13 09 at 4:27 pmI work as a vendor for CollegeInvest:
CollegeInvest, Colorado’s nonprofit 529 provider, has a number of highly conservative savings options including a new CD product “Smart Choice.”
SmartChoice, managed by FirstBank, has all the same state tax advantages of a traditional 529 plan and is FDIC insured with no fees and no minimum balance.
Go to http://collegeinvest.org/default.aspx?pageID=66 to learn more about SmartChoice and other conservative 529 savings options.
Mistress_Scorpio commented on Nov 14 09 at 12:08 amI’m always highly suspicious of solicitors in a blog thread. That’s the tactic of a scammer… if you want to advertise, why not pay like the legit companies do?
GP commented on Nov 14 09 at 6:09 amgetting down to the “community” level in chat rooms and message boards is a common marketing strategy nowadays and does not necessarily make the company mentioned by the poster a “scammer”…while I would not speak to the quality of the investments themselves, CollegeInvest and FirstBank are both “legit” companies, and probably also advertise in more traditional ways as well…
Claire Richardson commented on May 24 10 at 4:23 pmFinancial Aid is much needed these days because of global economic recession.”,~
Abigail Moore commented on Jul 19 10 at 1:16 amfinancial aids are really needed in 3rd world countries as well as on disaster areas.`’.
Toby Simpson commented on Jul 19 10 at 3:58 amfinancial aids are really needed in 3rd world countries as well as on disaster areas.,*-
auctions melbourne commented on Aug 15 11 at 11:15 amI’m lookin to create a lil more money and wish to take up a blog to make money..
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