Message-ID: <22946281.1075860940739.JavaMail.evans@thyme> Date: Tue, 18 Dec 2001 06:31:21 -0800 (PST) From: richard.riehm@enron.com Subject: FW: Outstanding College Savings Plan Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Riehm, Richard X-To: X-cc: X-bcc: X-Folder: \Lindy_Donoho_Mar2002_1\Donoho, Lindy\Inbox\Junk File X-Origin: Donoho-L X-FileName: ldonoho (Non-Privileged).pst I thought you might be interested in this. I have no profit motive. I am just sharing some research that I have done. Richard Riehm 713.345.9385 Richard.Riehm@Enron.com -----Original Message----- From: The Riehm's [mailto:rriehm@houston.rr.com] Sent: Sunday, December 16, 2001 1:33 AM To: Riehm, Richard Subject: Outstanding College Savings Plan Are you concerned about saving for college expenses? If you are interested in what I have learned, read on. If not, delete this now and save yourself from my poor grammar. I started my own savings program for our kids a couple years ago, but it wasn't very tax efficient. Up until last year, there really wasn't a very easy way to save for college. You basically had 2 choices: Educational IRA that had contributions limited to $500 per year and you didn't qualify if you were "rich". The other was Prepaid College Tuition programs like the Texas Tomorrow Fund. The prepaid tuition programs are a good deal if you know your kid is going to go to an in state, public school because you can lock in tuition rates now. It doesn't cover room & board and if your kid goes out of state or to a private school, they will gladly give you your money back without much growth. A couple of years ago, Congress authorized what are know as Section 529 plans. Each state is authorized to set up their own plan, cover different expenses, allow different investment options and charge different fees. One of the best web sites I found to give me a basic background and help me compare state plans was www.savingsforcollege.com. This web site is packed full of information. Some of the features that make the 529 plans great are (each state varies on some options): High contribution limits (current max is $251,000 per beneficiary) The account owner maintains control (forever) and the money is moved out of the account owner's estate. You can switch beneficiaries to anyone else in the family from grandparents out to first cousins. Multiple Investment Options from 100% Equity to 100% bonds and time adjusted portfolios. Qualified withdrawals cover tuition, books, room & board at all (nationwide)accredited 2 and 4 year colleges and most technical schools. Tax free growth on qualified withdrawals. Each state plan has it's own quirks. Several states, including Texas do not even have a plan set up yet. You really have to evaluate several state plans to figure out what is best for you. Each state charges a management fee for maintaining these accounts. The fees I found varied from 0.30% to 1.05% annually based on your account balance. Some states only allow front loaded mutual funds and/or make you go through a broker. This can really add up. I looked for a plan that had high contribution limits to cover the most expensive schools and aid in estate planning. A low annual management fee was very important to me. I was also concerned with investment options. I like picking my own portfolio styles. Some states don't give you too many options because they think they know better. I also found a state that allows you to switch your investment selections once a year. Most states currently prohibit investment changes from what was selected when you make a contribution. I think this prohibition was due to a tax law that was recently revised to allow investment switching. I decided to go through New Mexico 529 plan. There web site is www.theeducationplan.com/education/SS/splash.jsp. I was able to set up my accounts on-line in a couple of minutes each. I think this is the best investment vehicle for saving for college. Let me know what you think. If you have any questions, I would be happy to reply. Richard Riehm H:281.485.8708 W:713.345.9385 RRiehm@Houston.RR.com