Originally Posted by bauchtanz
Are there tax benifits to doing this?
Are any plans better than the other?
Yes, there are tax benefits in doing this. Our college accounts are tax deferred, which means that as long as the money is sitting in the account, there is no tax on it. If we take it out, then there is a tax penalty. It has lowered our tax liability a little, but not alot. For example, this year, we would have had to pay $250 per kid as our kids made money last year (dividends, etc) but putting even half their money in their accounts left us with $500 tax liability total (4 kids). That's 50% shaved off our kids' tax bill (which we would have paid for). Frankly I think the money should stay in the kids' accounts until they turn 18, and then they can pay the tax on it when the take it out themselves.. their money, so I think they should pay the tax on it, and not me.
We use T. Rowe price (through our state plan). We lock in current credit rates. We think they will skyrocket in the future. I think there are better plans out there though. I know a family (dad is an economist) that buys cds for thier kids.. he told me the return on them is better, but then he doesn't get the tax deferment on the principal.