Question for parents out there

[DegenerateDish]

My wife and I are expecting are first/second (she's due with twins) in late April. I've heard of U Promise, and have checked out their site, but was wondering if any parents out there use it and know more about it. Looking to see if it's worth it. My assumption is U Promise has their own 529 plan that you have to join to take advantage of the benefits. Anyone with good info on this, I'd appreciate the opinions.

[mu_hilltopper]

Hmm .. I think that's not quite right. 

I have an account with UPromise  .. but it does not require you to belong to their 529 plan as far as I know. 

I have a 529 thru Wisconsin's EdVest .. although I can't say that investment has done very well.

As for UPromise .. after hooking up my credit card, grocery card, etc .. I think I have like $150 in the account after 2-3 years.   It's chicken feed. -- However .. a co-worker also does it, and completely guides all their purchases thru their portal, trying to maximize the return.  If I recall correctly, she was quite happy with the amount she was "earning".

So .. is it "worth it"?  Sure, why not.  Doesn't cost anything except, I suppose, that they get to see what kind of food you are buying, etc. 

[MU B2002]

My wife and I are expecting are first/second (she's due with twins) in late April. I've heard of U Promise, and have checked out their site, but was wondering if any parents out there use it and know more about it. Looking to see if it's worth it. My assumption is U Promise has their own 529 plan that you have to join to take advantage of the benefits. Anyone with good info on this, I'd appreciate the opinions.

Don't really know about Upromise, but congrats.

[GGGG]

We decided not to use 529 plans for college savings.  I'd rather have the flexibility than the tax advantages.

[DegenerateDish]

Thanks all. I kind of got the same impression Hilltopper had. I figured it was probably "nickles and dimes" in the grand scheme of college investing using U Promise. I wasn't sure if you had to be tied into a certain 529 plan to enroll/use, so that's good to know.

I guess if you go crazy and purchase from every partner in their program (and have family do so to), maybe you see some benefit, but nothing significant.

[mu-rara]

529 plans do require that the funds be used for college, or you pay penalties (on the growth only).  They do grow tax free.  If you start the fund when the kids are babies, that 18 years of tax free growth can be substantial.  You as parents retain control of the account, and if Child #1 doesn't go to school, you can change the beneficiary to another child.

Custodial accounts are more flexible, the funds can be used for any expense as long as it is for the benefit of the child.  The child becomes owner of the account at 18 or 21 depending on the state.

In any case, start early.  $100 per month adds up over 18 years.  Tougher to get it going if you wait.

Good  Luck

[ZiggysFryBoy]

529 plan is the way to go.  make sure, though, that it is in the state that you live in to get the state tax advantages. 

upromise is worthless.

[ChicosBailBonds]

My wife and I are expecting are first/second (she's due with twins) in late April. I've heard of U Promise, and have checked out their site, but was wondering if any parents out there use it and know more about it. Looking to see if it's worth it. My assumption is U Promise has their own 529 plan that you have to join to take advantage of the benefits. Anyone with good info on this, I'd appreciate the opinions.

I've used it since 2001.  I've actually met the management and made a very strong appeal to my company to have us become part of it.  We had multiple meetings here in Los Angeles with the folks from Upromise and it came close to happening, but when GM sold us that changed many of the dynamics but we finally did become a partner a few years ago.

Some people only make nickles and dimes....I just looked up my two kids accounts in Upromise and here is what they have


11 year old son   $1,037.11

8 year old daughter  $976.02


This is only the latest run they have earned.  Early on, Upromise didn't link to a 529 plan directly so they had earned probably another $500 each which was deposited separately into a different 529 plan.

It's not much, but it's free money.  Here's the way I looked at it.  I'm getting paid to buy things I buy anyway.  In some cases, I'll go out of my way to buy a specific brand.  In the old days when Mobil gasoline was part of it, I would come to an intersection with 2 or 3 gas stations on the corner, and I'd go to Mobil because of Upromise.

Most of the money the kids have earned in the 529 plan attached is through the Upromise credit card.  Some people love to get miles or points (my family does, too), but we also earn dollars using that card.  

In my mind, it's easy money. Get your family to participate and it grows even more.  You won't get rich, their college won't be paid for by any means, but it's free money that can add up depending on where you shop and how you shop. 

Separately, I have different 529 plans for my kids in which I contribute monthly....the amount they've saved there is considerably higher.  No way will Upromise be the end all, it simply isn't designed for that, but by the time my kids go to school, they'll each have about 2 thousand dollars of free money they wouldn't have had. 

Hope it helps.  Good luck to you and your wife with the twins.  Congratulations.

[GGGG]

I use Roth IRAs as my college savings vehicles.  My wife and I both put in $400 per month.  These grow tax free, and you are allowed to take out your contributions first without paying taxes.

The advantages over 529s as I see them is that you can control your investment vehicle and if you don't need to use them for tuition for whatever reason, you still have the money to use for whatever you want.

[ChicosBailBonds]

I use Roth IRAs as my college savings vehicles.  My wife and I both put in $400 per month.  These grow tax free, and you are allowed to take out your contributions first without paying taxes.

The advantages over 529s as I see them is that you can control your investment vehicle and if you don't need to use them for tuition for whatever reason, you still have the money to use for whatever you want.

But doesn't that hurt you down the road when trying to get financial aid since the money is in your name and not the student's?  I could be wrong, but I thought that was one of the major benefits to a 529. 

Besides, a Roth can only be distributed tax free after the age of 59 1/2.  So aren't you going to pay a pretty penny when you withdraw before then....unless you are at that age where you can do that (did you start late with the kids?)

Of course the one huge advantage of a Roth IRA is if your kids decide not to go to school, that money can be used for something else without penalty.  The 529 must be used for educational purposes and will be penalized if it's not.


I've seen articles recommending ROTH over 529 and vice versa


   

[shaquilvaine]

savingforcollege.com is a great website that ranks various 529 plans.  The state of Nevada 529 (upromise) that utilizes Vanguard funds is actually pretty decent.  You can setup a 529 plan that dumps upromise money into it. 

[GGGG]

But doesn't that hurt you down the road when trying to get financial aid since the money is in your name and not the student's?  I could be wrong, but I thought that was one of the major benefits to a 529. 

Besides, a Roth can only be distributed tax free after the age of 59 1/2.  So aren't you going to pay a pretty penny when you withdraw before then....unless you are at that age where you can do that (did you start late with the kids?)

Of course the one huge advantage of a Roth IRA is if your kids decide not to go to school, that money can be used for something else without penalty.  The 529 must be used for educational purposes and will be penalized if it's not.


I've seen articles recommending ROTH over 529 and vice versa   

You are allowed to take out your contributions to a Roth IRA first without tax or penalty.  For instance, if I contribute $10,000 to a Roth, and it has $1,500 in income and capital gains, I can take out $10,000 at anytime without penalty or tax.  (Because it was initiated with post tax contributions.)  So if the wife and I are contributing $5,000 per year...for say 20 years....that's $100,000 right there.  (Assuming it doesn't lose money.) 

You could always do a 529 plan too on top of that.

And regarding financial aid, with the federal cutbacks in the program, if you are making $50,000 or more, chances are you aren't getting anything but loans anyway.

[reinko]

As a financial aid professional I typically recommend 529's over other savings vehicles, mainly for the reasons already stated.  The tax implications of course, and that 529's are weighed less in the financial aid formula when determining need.

529's are also viewed as parental assets, while IRA's and ESA's (Education Savings Accounts) are sometimes put in a child's name.  If you take anything from this post, savings should ALWAYS be done in a parents name.  If the asset is in the parents name, a school will only factor about 5-8% of said asset is available of a single year of college.  If that asset is in the child's name, that number skyrockets to over 30% and in some cases closer to 50%.  Not too mention most parents have at least a $50,000 Asset Protection Allowance, where the first $50K or so isn't event factored into the equation.  The following rules apply to public colleges that only use federal methodology, private institutions can use something called institutional methodology where they can make up their rules when it comes to assets.

But as stated already, ESA's and IRA's generally allow you to make the financial decisions versus a state agency.

One other thing to look into are something called pre-paid tuition plans.  It is an idea where with an investmant early on, you can lock in the school's tution in 2010 dollars, rather than 2028.  The big disadvatange of this, it that typically only set group of schools participate in these plans, so your child has to attend one of those institutions.  (If they choose not too, you get your contributions back).  

Read more here: http://www.finaid.org/savings/529plans.phtml

If you have specific questions, please feel free to PM me.

[reinko]

And regarding financial aid, with the federal cutbacks in the program, if you are making $50,000 or more, chances are you aren't getting anything but loans anyway.

In regards to federal need-based aid, this is correct.  But institutional funds are still in play.  Many of the top tier privates offer grant assistance to families that make up to $200K a year.  But these schools generally have acceptance south of 25%.

[mu-rara]

529 plan is the way to go.  make sure, though, that it is in the state that you live in to get the state tax advantages. 

upromise is worthless.

Depends on the state you live in.  Wisconsin tax deduction is almost worthless.  (what would you expect).  Utah and Alaska have great tax deductions.

[ChicosBailBonds]

Depends on the state you live in.  Wisconsin tax deduction is almost worthless.  (what would you expect).  Utah and Alaska have great tax deductions.

Wisconsin tax deduction almost worthless.....Color me shocked.  

[susie90]

We ended up buying pre-paid "semesters" in Illinois, (collegeillinois.com)  like above posted said.  They take the average of the amount of the Illinois in-state tuitions, and that's how much you pay per semester.  So if your kid ends up going to U of ILLINOIS, your getting a better deal because its more expensive than the average in-state tuition.  It is my understanding that whatever the average semester is "worth" when he/she enters college, that value is transferrable to a lot of schools....like Marquette!  Also transfers to anyone, and can be used up to age 29???  Our thinking was that college tuition is going up at faster rate than the stock market.  Just something else to consider.

[Tortuga94]

UPromise is a pretty good deal in my opinion.  You get credit for buying stuff you were going to buy anyways, so why not have some of those funds directed into a savings vehicle to fund your kids college education.  The UPromise plan uses Nevada's 529 plan, so unless you live in NV you don't get a state tax deduction, but as most people here have stated, the state deductions usually aren't that great.  I think the Nevada plan which uses Vanguard funds is good plan.  You can direct that Upromise send you a check for the accumulated funds and then deposit that into your state's 529 plan if you do need the deduction. Wisconsin's EdVest is not that great of a plan, so I don't use it. 

I do use the UPromise program and also fund a Coverdell(ESA).  The advantage of the Coverdell is that we can use the funds to pay for private high school if needed.  So, unlike a 529 which can only be used at accredited post-secondary institutions, the Coverdell gives us more options.  Considering that private school education is something that means alot to my wife and I, and private high school costs as much as some state universities, we decided to fund Coverdells for our kids.  Unless you are planning to sock away boat loads of money a Coverdell should work fine, the max contibution is $2000/yr.

Of course there are more options, Roth IRAs are also a good tool, assuming you ae eligible to make the contributions.  I believe that has already been discussed, so I won't repost the same info.

Congrats on your twin babies!  Good Luck.

[Freeport Warrior]

I've been using Upromise since 2006 and have over $2,000 for my kids. Better than getting more miles than I can never use because of blackout. There is also an option to just cash it out and request a check.

[StillWarriors]

I've been using it for the past few years just by registering my credit cards. It adds up slowly this way, but it doesn't cost anything to do so I don't see a reason not to do it. It certainly appears to be much more beneficial if you use a upromise credit card.

Congrats on the twins, and kudos for getting on top of the saving early!!!!

[DegenerateDish]

Thanks everyone for the advice and experiences you've had. Some really good info in here, and I like hearing the different perspectives of everyone.

[MU B2002]

Anybody know if there is any issue using UPromise with a company card?  Or would this vary on a company to company basis?