Knock yourself out. There’s no limit to how many 529 college savings plans you can set up for your child. But if you’ve got more than one plan in a single state, their values will be combined toward that state’s contribution limit, typically between $250,000 and $370,000. If the plans are in different states, the value of each remains separate.
Of course, with the maximum contribution for most 529s that high, there may be no need for multiple plans—unless Junior is already dropping hints about med school. Still, one advantage of having an assortment, says Joseph Hurley, the founder of Savingforcollege.com, is the ability to diversify your college-savings portfolio with a wider array of investment choices. This is especially important since 529 holders are currently allowed to reallocate funds between investments only once a year. But note: Experts warn against viewing 529s simply as a tax shelter. Unless the money is used for educational purposes by a near relative, the earnings will be taxed upon withdrawal, and a penalty will be assessed.
QUESTION: Last August I bought a 2009 Chevy Traverse. I’m now divorcing and don’t think I can afford the $400 monthly payment. Should I sell the vehicle (I still owe $25,000) and buy something cheaper, or would I be further ahead just keeping it?—Lisa Johnson, Houghton Lake, Mich.
Okay, bad news first: The current trade-in value on your Traverse runs a little less than what you owe. (Car values drop most steeply in the first year—on average, 15 to 30 percent, according to AAA.) The good news? You chose one of GM’s highly regarded comeback cars, which gives it more resale oomph than earlier Chevys.
That said, flipping it won’t be easy. If you make dealers aware that you’re in over your head on payments, says Karl Brauer, senior analyst at Edmunds.com, you could be lowballed on the trade-in and pushed to buy something of lesser long-term value with a stretched-out loan. If you downsize, your best option is to find a one-off third-party deal, like from a friend of a friend who’s selling cheap.
QUESTION: Our financial adviser suggested whole life insurance as part of our estate plan. My husband and I each have term insurance already. To help afford the whole life premium, he suggested we decrease contributions to our 401(k) plans—just not below our employer-match level. Second opinion?—Zirong Zhao, Boyds, Md.
It depends what you need more: retirement income or more money for your heirs. For your golden years, there are better ways to accumulate cash than with whole life insurance, a complex kind of policy that offers both death benefits and an accumulated cash value. (Term offers only the former, for a set period.) For estate planning, whole life is appealing, since your heirs won’t have to pay income tax on the death benefit—although they may be on the hook for estate tax. But watch out for high commissions. One way to reduce them, says Glenn Daily, a New York City-based fee-only insurance consultant, is with a policy that blends whole life, term and so-called paid-up additions. Ask your adviser about them.
Published October 12, 2010 Of course, with the maximum contribution for most 529s that high, there may be no need for multiple plans—unless Junior is already dropping hints about med school. Still, one advantage of having an assortment, says Joseph Hurley, the founder of Savingforcollege.com, is the ability to diversify your college-savings portfolio with a wider array of investment choices. This is especially important since 529 holders are currently allowed to reallocate funds between investments only once a year. But note: Experts warn against viewing 529s simply as a tax shelter. Unless the money is used for educational purposes by a near relative, the earnings will be taxed upon withdrawal, and a penalty will be assessed.
QUESTION: Last August I bought a 2009 Chevy Traverse. I’m now divorcing and don’t think I can afford the $400 monthly payment. Should I sell the vehicle (I still owe $25,000) and buy something cheaper, or would I be further ahead just keeping it?—Lisa Johnson, Houghton Lake, Mich.
Okay, bad news first: The current trade-in value on your Traverse runs a little less than what you owe. (Car values drop most steeply in the first year—on average, 15 to 30 percent, according to AAA.) The good news? You chose one of GM’s highly regarded comeback cars, which gives it more resale oomph than earlier Chevys.
That said, flipping it won’t be easy. If you make dealers aware that you’re in over your head on payments, says Karl Brauer, senior analyst at Edmunds.com, you could be lowballed on the trade-in and pushed to buy something of lesser long-term value with a stretched-out loan. If you downsize, your best option is to find a one-off third-party deal, like from a friend of a friend who’s selling cheap.
QUESTION: Our financial adviser suggested whole life insurance as part of our estate plan. My husband and I each have term insurance already. To help afford the whole life premium, he suggested we decrease contributions to our 401(k) plans—just not below our employer-match level. Second opinion?—Zirong Zhao, Boyds, Md.
It depends what you need more: retirement income or more money for your heirs. For your golden years, there are better ways to accumulate cash than with whole life insurance, a complex kind of policy that offers both death benefits and an accumulated cash value. (Term offers only the former, for a set period.) For estate planning, whole life is appealing, since your heirs won’t have to pay income tax on the death benefit—although they may be on the hook for estate tax. But watch out for high commissions. One way to reduce them, says Glenn Daily, a New York City-based fee-only insurance consultant, is with a policy that blends whole life, term and so-called paid-up additions. Ask your adviser about them.
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