"Think about where your family is financially when deciding how much to invest in a 529," says John Feyche, CPA., and manager for Zdonek & Wolowicz Accountancy Corporation in Torrance, Calif. Feyche cautions that 529 funds are counted as student resources and can reduce financial aid.
Families should also consider the need for liquid funds when deciding upon investment amounts."Once funds are in a 529 they are committed to education and subject to tax and penalty if withdrawn for other purposes," he
helped a divorced woman set up a college savings plan for her
daughter.Some funds were invested in a 529, but the remaining funds were kept liquid in a money market account."There was some concern the daughter might qualify for financial aid or the money market funds would be needed, and the woman wanted to see how things developed," he
"Roth IRAs have income limitations," says Feyche
."Right now to make the maximum annual contribution singles must have an adjusted gross income of $95,000 or less and couples $150,000 or less."
Using Uniform Transfer to Minor's AccountsThese accounts allow minors to own stocks and bonds."With a UTTM account, you're basically making a monetary gift to a minor," says Feyche