Author Topic: 529 vs. ESA  (Read 2377 times)

Psychstache

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529 vs. ESA
« on: December 11, 2012, 07:37:09 PM »
Hello everyone,

I often see a lot of talk about 529 for educational savings. I was curious if there was a reason that these are preferable to Educational Savings Accounts (ESAs). I am curious about them but don't know much about either. Can someone explain why they picked one over the other. 

I feel I should point out I live in a state with no income tax (seen many ppl post about saving money on their state income tax with a 529).

Thanks!

TheDude

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Re: 529 vs. ESA
« Reply #1 on: December 11, 2012, 09:27:22 PM »
From my point of view I prefer a 529 but that probably because I live in a state with income tax.

I would think you should look into fees and investment options. I would think the ESA is a better options just because it give you more options.

madage

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Re: 529 vs. ESA
« Reply #2 on: December 12, 2012, 02:17:04 PM »
I considered an ESA when I moved to an income tax-free state, but ultimately decided to go with new 529's offered by a different state entirely (Utah's plan is pretty awesome). The main ESA disadvantage for me was the very low maximum annual contribution of $2000 per child. There's no penalty for having both, and since the OP lives in a state without income tax, go ahead and try them both to see what you prefer!

chucklesmcgee

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Re: 529 vs. ESA
« Reply #3 on: December 12, 2012, 04:30:34 PM »
ESA- $2000 contribution, income limit
529- no income limit, basically no contribution limit (some states prevent additional contributions if the account is worth $350,000, but nothing stops you from opening additional accounts with other states), some state tax benefits, some special estate tax benefits, usually high expense ratios and limited investment options

So generally I'd lean towards a 529. Especially if you're trying to sock away more than $2k a year (which will pay for about a week's worth of classes at a private school these days!)