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Tuition costs rising and unpredictable stock market.
And saving for college -- become more and more tricky many parents put their money in what's called by 29 plans you know the state sponsored programs that offer tax free investing.
But aren't say the best option joining me now Joseph Hurley saving for college dot com founder Joseph it's great to see you again.
Hi thanks for coming in and I happy holidays -- -- your -- busy right now.
But I wouldn't talk to you about some of the concerns very important concerns that by 29 investors have with these plans.
They haven't been performing -- very well mostly because the stock market volatility.
How do you respond to that.
To the extent that your account is invested in stocks or even long term bonds they can go up and down in value just like your 401K.
Many people have seen their 401K.
-- -- -- in value -- but you know some people don't realize that if you wanna get away from the stock market most 529 plans do you have.
Very conservative options you can choose a money market account.
Or even a bank savings account and some of these programs so it's really up to you to -- -- investment option that you feel most comfortable with.
Other problems of people report with these plans that there are limits on on your ability and change your investment.
And this is because of IRS rules you can't move your money around willing -- You've really got to stick to the planned three year how do you respond to people it says this today and that's just too limiting I don't like that.
Well some people are seen -- then and it is a -- that I'd like to see go away.
But the fact is that you can't change your investments once every year couple years ago the -- -- that up to two times per year and very few people took advantage of that.
And so for most families one time.
Per year one investment changed for years planning for and if you really want to change in and and and you're you're under that restriction if you have two children all you have to do is change the beneficiary and the account you can change your investment at the same time.
-- -- -- Well a lot of people complain to -- too few options.
That they can invest in May be the mutual funds they want to work that they asset class they want would you say that.
Well -- every 529 plan -- did you select.
A limited number of investment options for its participants so if you're not going to be able to choose your own stocks or bonds.
Or choose from a long list of mutual funds there's gonna be maybe ten or fifteen options -- that plan which for many people is more than sufficient.
It makes the whole process simpler if you throw.
Fifty different options that then they're just not -- to know what to do.
So the states have actually vetted these investment options.
They've chosen what they feel would be the best investment options for college savers.
-- that's what you had to choose from so works very well unless you are engaged trader or market timer then you're not gonna be happy with anyone in.
Do that anyway now with the 529 plan out -- but what you do have benefits of these -- -- list of them.
At course we talked about tax free savings that's not nothing that's very meaningful you also talk about a potential state tax deduction tell me about that.
While most states -- actually 34 states will give you a state income tax deduction.
-- a tax credit for your contributions.
Usually today I don't see in into your own State's 529 plan.
In some states -- will match contributions for lower income families.
So there are these extra benefits that states later on -- their 529 plans that you're not gonna get -- any other type of investment.
While that's a big benefit also the flexibility to change beneficiaries that's important -- because.
You never know when that's gonna happen right.
Yeah you don't know if if that child that you set up the account for is actually going to be going to college -- spending all that money for their college.
Sort can be transferred to a to a sibling or to a cousin or -- -- passed down to -- and -- other great grandchild she do have that flexibility to move money around.
To different family members show great stuff thanks for coming and tonight Merry Christmas.