Should I invest in 529 program for kids college fund saving? If yes, which state plan would you recommend? Also, does it matter if I open 529 plan through fidelity or directly through state?
Yes. Utah or Nevada if you have no state income tax. If you have state income tax then your states may get a tax deduction.
Talk to a financial advisor. 529s have become a big business and fees can be higher than regular funds.
Fee only advice only advisor. Don't get sucked into paying AUM fees.
Unless your state allows you to deduct the contribution from your income taxes, screw the 529 and put it in a mega backdoor Roth instead. Far less restrictive than a 529.
And what if you’ve already maxed out your mega backdoor Roth?
I will admit to having some bias against 529 plans. The fees were off putting to me. As others pointed out, make sure you do your research between your states and other states plans to see which ones are more suitable to you - assuming your state doesn't offer a state tax deduction for contributions. Some funds have high expenses, which is a bit preposterous. If your only goal with this is to pay for university, then by all means, it is a good choice. If you want to shelter assets from the greedy paws of Uncle Sam however, then I would also look into socking away dough in a HSA and never touching that money until retirement when you need it since there is no time limit to reimburse yourself from an HSA.
If you invest in backdoor 401k instead of 529, you would not be able to withdraw money for child education, right?
You can withdraw any Roth 401k funds after 5 years with no penalty. You just can’t withdraw the proceeds.
You CAN withdraw Roth funds for educaton expenses without a penalty. It is one of the few exceptions that are allowed. See the IRS Publication 590B which speaks to distributions from IRAs (you can roll your Roth 401k into a Roth IRA when you want to use the funds, BTW)
You can get the principal out for any reason or no reason after 5 years. Education, including fire your children, first time home buying and a few others are just a few of the reasons you can access the funds penalty free too.
It doesn't make sense to do 529 through a broker (in ur case fidelity) because the only thing they do other than just redirect ur money to the state plan, is to charge you a fee.
That's what I was thinking
All comments are very helpful for a confused sole like me. A quick question- if I start investing in IRA and then convert that IRA to Roth IRA, is there a penalty or fees that i end up paying during the process or during taxes?
If u do, check w a trust attorney, in some states, u can open 529 with a trust being the beneficiary, which allows any beneficiary of the trust to use the $ for education, this could be used by ur kids for college or u for basket weaving classes when u retire