529’s and 7 money mistakes to avoid

June 8, 2007 at 8:04 pm Leave a comment

A couple of articles and features in the July 2007 issue of SmartMoney magazine caught my interest. I thought some of the information would be useful for others so I wanted to share.

First, in the StreetSmart section Ask SmartMoney a reader posed a question about a 529 plan he and his wife had for their son. Unfortunately, this son doesn’t want to go to college, so they want to know if they can rollover the funds in the 529 to a Roth IRA. Stephanie AuWerter answers that it’s a definite no. Adding that the IRS will consider it a withdrawal which is subject to income tax as well as a 10% penalty on earnings. But, she offered some great alternatives for the Petty’s in Corono, CA. “You can..roll over the account tax-free to another one of your kids, or even a niece or nephew.” Rick Darvis of Medicine Lake, Mont adds, “You can also let the account accrue and use it for future grandkids.” It’s also important to remember that the 529 can be used for vocational schools.

Another option that AuWerter offered, one that I wasn’t aware of, is that parents can also use the funds to attend an accredited school themselves. Kinda’ nice to know that.

SmartMoney featured the 7 Money Mistakes To Avoid in this issue. Here’s a brief summary:
1. Saving with the right hand and spending with the left

– Having a savings account with a mere 5% yield while paying 15% on credit cards
– Thinking tax refunds are great
– Obsessing about new car prices while not tracking grocery expenses

2. Playing it too safe
– Selling winning stocks too quickly while slowly selling losing ones
– Putting too much cash into low yield accounts and not enough in high-yield ones
– Not willing to trade for higher value

3. Looking into a cloudy crystal ball
– Risking too much in your own company’s stock
– Having very low insurance deductibles
– Thinking small cap stocks will rise continually

4. Living in the moment
– Not taking advantage of a company 401(k) plan
– Not doing a monthly budget
– Putting ogg IRA contributions until the last minute

5. Throwing good money after bad
– Holding onto lagging mutual funds because of upfront costs
– Making car repairs that are worth more than the car itself
– Spending time or money based on how much time and money is invested

6. Letting your ego get in the way
– Frequent trading
– Concentrating on “Surefire” winners
– Thinking you are an above-average driver

7. Following the crowd
– Buying ethanol stocks because they’re the next big thing
– Dumping stocks after steep market declines
– Taking investing tips from family and friends


Entry filed under: Budgeting, College Planning, Credit Cards, Kids, Money Fun, Saving and Investing, Spending.

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