Q. I have two children - one is 7 and one is 2 years old, should I open 2 or 1 529 plans?
A. There are a few factors you should consider first before coming to the right solution:
a. Does your state's 529 plan charge an annual per account based management fee?
If yes, putting all the money in one account is more advantageous because you can save this fee from the second account. The money left in the 529 plan after the older child graduates from college can be easily used to cover the younger child's college expenses.
b. Does your state's 529 plan offer any per account-based tax benefit?
If yes, such account-based tax benefit typically has an upper limit. If you put all the money into one account, you will still receive this benefit because it can be carried over to future years, but you will miss the time value of such benefit.
In the end, the cost consideration probably outweighs the missed time value of the tax benefit, making contributing all the money to only 1 account for both children the better option.
A. There are a few factors you should consider first before coming to the right solution:
a. Does your state's 529 plan charge an annual per account based management fee?
If yes, putting all the money in one account is more advantageous because you can save this fee from the second account. The money left in the 529 plan after the older child graduates from college can be easily used to cover the younger child's college expenses.
b. Does your state's 529 plan offer any per account-based tax benefit?
If yes, such account-based tax benefit typically has an upper limit. If you put all the money into one account, you will still receive this benefit because it can be carried over to future years, but you will miss the time value of such benefit.
In the end, the cost consideration probably outweighs the missed time value of the tax benefit, making contributing all the money to only 1 account for both children the better option.
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