529 Savings plans and saving for LB
November 13, 2015
Like Brian, I’ve been reviewing investing and savings vehicles for LB. As a California resident, my first step was naturally to see what the Golden State had to offer in the way of the 529 plan. Spoiler alert: Nothing awesome.
- California has a 529 savings plan, but does not currently allow a deduction or credit on your state income tax return for the annual contributions you make to the plan.
- Note: MEH.
- There is an overall limit of $371,000 in contributions and earnings that can accrue in the plan for each beneficiary, after which no further contributions can be made.
- Note: Not a problem.
- Qualified withdrawals of earnings from the California plan are exempt from state income taxes for state residents.
- Note: Good.
- California residents may also make qualified withdrawals from other state 529 plans on a tax-free basis.
- Note: Good?
Right now, all of LB’s savings are held in a regular online savings account and we’re going to be paying taxes on interest earned. It’s not such a substantial amount that I’m worrying about having to shelter it from our tax bracket, yet, and there’s still quite a bit to learn and research about the best ways to save this for LB’s future education and care needs.
Has anyone already done this and have some thoughts to share? What are your favorite savings vehicles, with or without children in the picture?
We have a 529 plan through our state set up for both kids. About 80% of any birthday or other gift money goes into it right now, with the remainder going into a fee-free minor savings account. We will start contributing from our own funds once I go back to work, but for now just the fact that they exist makes me happy.
https://nicoleandmaggie.wordpress.com/2013/10/07/a-post-for-ana-on-529-plans/