Quick trick for funding the 529 college savings plan.

Posted by Matt

This tip might be coming a little bit too late (unless you have been postponing filing your tax returns like my wife and I have been), but I just got the notice in the mail last week.

The Oregon College Savings plan decided to make it just that much easier to save for your child's education by letting you route your tax refund directly to the savings plan. From the flyer I got in the mail:

Divert the refund to your Oregon College Savings plan 529 account by putting their routing (101000695) and account (1111538) numbers in the right boxes and marking the "Savings" checkbox. Follow the account number with your child's savings plan 10-digit account number (there are boxes).

Questions? Call Oregon College Savings plan customer service (866.772.8464)

My wife and I probably won't actually do this because we already contributed to the 529 during the year (to the full deductible amount and then some), but I still think it is a nice offering by the plan and a good idea. As always, remember to keep your other financial priorities in mind when considering a move like this. If you didn't contribute enough to retirement for last year yet, it's not too late, and that should come first.

529 education savings update (part 2)

Posted by Matt

It's done. The 529 setup process was extremely easy last night.

• My wife and I chose the index fund option.
• I didn't have to talk to a customer service rep or fill out a single sheet of paper. I made the initial deposit with an ACH transfer from our checking account and set up recurring monthly transfers. We're starting out small at first ($50/month) until we see how our budget shakes out in the new house.
• The whole thing took probably 10 minutes at most.

The only disappointment I had was when I looked up (as promised) how to allow relatives to contribute to the account. Essentially, there are vouchers that you have to print out, write the account number on and then give out. Potential contributors then have to mail a check (!) in with the voucher. Oh well. Maybe it will get easier someday.

Overall, I'm glad to say that this was yet another one of those financial situations where making the right decision is a lot more involved than acting on it.

529 education savings update

Posted by Matt

Trying to be financially responsible is hard.

I'm finally getting around to setting up an Oregon 529 account for my son, or rather I will be when I get home tonight and can dig up his social security card (required for registration). The first step of the registration is reading the plan guide. It's 40 pages!

Mostly it contained things that I had already read about when doing my initial research. The only decision left to make was which type of fund to use. My first thought was to go with the "years to retirement" option. With this choice, you just indicate when you expect your child to start college and the plan administrators automatically balance the allocations with the appropriate level of risk/return. Our son would start off in the "10+ years to college" fund, which aggressively pursues growth given that there is more time to recover from any economic downturns. When he gets closer to college age, he automatically gets switched to the next fund (7-9 years) which is intended to be less risky and provide lower returns. The rebalancing continues in several stages all the way up to the day college begins (and beyond, via the "in college" fund). This is very similar to the way target-date retirement accounts work, and it makes things very easy.

I'm also considering a plain-vanilla index fund option. The returns have actually been slightly better and the expense ratios are lower to boot (as is normal with all index funds), but both are within the recommendations I have previously found (<1% annually). If we go with this option, I'll probably want to switch it over to something more conservative as college gets closer. Knowing me, I'll probably be watching it every year anyway, so that's not too big a worry.

My wife and I are both pretty risk-averse, but we'll have to talk it over tonight when I finally set the account up.

Oh, and I did find one other thing that will be interesting for at least those grandparents who still like to give savings bonds at birthday time: it is possible for people other than the account owners to contribute directly to the account. I'll try to get more details for how that works into a later post.