When it comes to college funding, there are a few main questions to answer.
- How much to fund?
- Where to fund?
- What if unused for college purposes?
How much to fund?
College cost is soaring like crazy…looks like there is no end in sight. I wish I could fund the entire cost, but I am not sure I can. So, I have set a target of $20000 per year for 4 years. Anything more than this, the kid has to manage.
Where to fund?
I wanted a most generic college funding option. By generic I mean the following:
- 529 plan
- basic age based investment option
- passive fund is okay
- good set of low-cost investment options
- acceptable in any college across the US
- any state tax advantages
- online acct management possible
- automatic investment possible
Since I am a fan of Vanguard, I have a bias towards Vanguard 529 plans. But, I did dig into many articles on the web to find a good 529 options. Turns out, most of the good plans happened to be Vanguard ones. I picked Nevada 529 plan as satisfied all the above requirements.
What if unused for college purposes?
If unused, the 529 plan can be withdrawn but with a 10% penalty. The penalty is applicable ONLY on the earnings in the plan and not on the principal (because I am using post-tax money for investing into the 529 plan). There is a wonderful article from savingforcollege.com that I will refer to here for further reference.
07/25/2014 $22600 28.25% complete
09/29/2014 $23185 28.98% complete
….. (see Progress Report for more updates)