bullion vs. college fund

we have invested in a college savings plan for our sons for several years now, and it shows none or very little interest over what we have put into it. would it be wise to withdraw it from the college fund and invest it into bullion? the funds that are invested into the 529 plans aren't FDIC insured.

 

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If this was me, and I'm not giving advice but if its not paying at least 7% you're losing money to inflation. If you think silver or gold is going to rise, take a gamble. Everything is a gamble nowadays

 

its only paying like 1.5% interest.

 

It depends. Some states have FDIC insured 529 plans and some do not. The 529 allows you to invest at relatively low maintenance fees and although you cannot deduct contributions on your federal taxes, some states allow you to do so on your state tax returns. The major benefit of these 529 plans is that you can invest in your child's education and not pay taxes when you withdraw the money and use it for educational purposes. All plans are different. Ask an advisor about a better fund inside your 529 plan. As far as taking money out to invest in PMs, I would advise no as you will be hit with significant fees for taking the money out. You may consider doing both from here on out. Good luck! TC

 

If you'll be hit with fees for taking the money out, don't take it out.

Though if you can lower the amount you add to the fund or stop and put it into PMs, I would do that for sure.

 

no, leave it in. A 529 you dont pay taxes on any gains when used for college. I started a 529 in 2007 and its done great. Some states have better plans, you have to pick the right one. i went with the virginia plan.

 

With any investment you have to pay attention to whats going on. I always stay away from targeted funds. Theres no transparency in what your investing in. Brokers whom are lazy will suggest them. I pick my funds my self. The key is you look at the top 10 holdings of all the funds availble, and you choose on a fund on the basis of how you think those ten companys will do in the future. Dont look at the past price performance of a fund as that is no indication of future performance. Diversify, pick 3 funds, a growth one, growth & income, and choose a safe one like muni's or some type of bond fund. Dont just buy your state fund because you live there. Some states have poor funds. I live in Wisconsin, and chose the Virginia fund. I dont get the state tax relief, but my funds continue to outperform my state fund

 

One thing you may want to consider - While there may be tax advantages to them, 529's count against you when applying for financial aid, because whatever is saved in there is tallied against your total assets. So, if you were planning on trying to use financial aid as a way to help, the 529 is not a good vessel. I would talk to your financial advisor about that.

Otherwise, as said, if there's a penalty for early withdrawal (usually there is), leave what you have in there for now, and then if you wish, you can put some money aside for PM's. Realize this tho - when you need to cash the money out, you're going to have to take the market rate at that time for selling. If you had to sell back a few years ago when it was $50, youd've made out well, but if you had to cash out today, you'd be half of what it was.

As everyone says, diversify to protect yourself, but I think adding some PM into the mix isn't a bad idea. Besides, if they were to get scholarships, you can always keep the PM for yourself or another use - maybe hold onto for a graduation gift or something afterwards to help set them up their lives - whereas the 529 HAS to be used on their education or related costs only, or you lose it.

 

No, you dont lose anything. A 529 can be transfered to a differnt child. If none of your children go to college or need the money, it is yours. You would have to pay taxes on interest gained just like any other mutual fund.

 

You're right, I was under the wrong impression. Any withdrawal that's not related to education ends up getting taxed at current rate, along with penalties.

 

While I understand the OP's motives about trying to get better returns, the question really bothers me.

Listen, PM "investing" is by its very definition commodity speculation. Would anyone else view commodity speculation as the SAFE place to put money you know will be needed in 10-15 years?

I am all for diversifying with PM holdings, but its not the same thing as a savings account. One shouldn't be risking their ability to put their child through college based upon the London Fixed price for PM. All commodities can go through major swings in valuations, and you cannot risk a major devaluation happening right before yoru child wants to go to school. S/he doe not have the time to wait for PM to go back up.

 

What im worried about is the state of the government and the sequester b.s., and the fact that this 529 fund is not FDIC insured, I dont want to loose all of funds. Paper is worth paper, and silver is worth more and always has been, right?

 

I don't see how the Fed budget should necessarily have anything to do with your state. Of course you can always research your state plan yourself, and see what protections may be there.

As to "paper is worth paper, and silver is worth more", I don't get that. Is a piece of paper showing you own 100 shares of Google valueless? How about a piece of paper denoting loaning $10,000 to Walmart? I guess I am not understanding the whole "paper is worth paper" argument. I know where you GET the argument from, but think its just a made up sales jargon.

Seriously, why would you bet your child's education on ONLY the worlds demand for a certain metal? What if they discover another huge Comstock lode right before s/he is entering college? What if [insert many possibilities]? If you wish to save outside the 529 structure that is yoru call, but please do not invest it ALL in Enron stock, Savings and Loans bonds, or PM. Spread the risk around, thereby in my view maximizing the potential for the money to be there when you need it. The goal is not to hit a home run, but for the money to be there enough to pay for school.

If you wish to swing for the fences, I would suggest doing so with your own money, not college fund money.

Just my opinion.

 

It all depends on how much risk you want to take and the benefits of your particular state's plan.
Precious metals have had quite a run over the past few years. Do you think that will last forever?
When you are talking about the long term, you shouldn't necessarily invest in the hot investment at the present time.
Real estate was really hot and it was believed to be safe. That crashed.

 

Is there another way of saving for college? There is the Next Gen around here, where you can put money aside for college and it is free from both state and federal taxes. There may be a better way to save for college in your state as well. Here's Maine's plan, and the benefits for Maine residents:

http://www.famemaine.com/files/Pages/NextGen/Maine_Resident_Benefits.aspx

 

PM’s are extremely risky! A financial adviser could probably be sued for advising you to put your child’s education fund all in PM’s.

 

Well, look at it this way, if we ever reach the very unlikley scenario that paper is just worth paper, things have gone very, very wrong and I don't see how a diploma would be worth more that the paper its printed on also.

 

If the choice was between silver and $100 bills under the mattress I would say do silver. As an 'investment', PMs are horrible, they don't create wealth, they don't produce anything, and they don't generate profit. But they do store value to some extent, which $100 bills don't.

However, you have the ability to actually invest the money in business which create products, boost production, and generate profits. These are investments, not PMs. They are risky which is exactly why the market, broadly speaking, gives a higher rate of return then inflation and PMs. If it were my 529 I would look for a low cost index fund, or a low cost highly rated bond fund depending on your horizon.

 

True, but not all diplomas are created equal.

While I'm sure the best use of a liberal arts degree would be to burn it for heat (even in a good economy), I'm sure the skills learned to get a medical degree of any sort would be valuable. Same thing with engineers, or plant sciences, or agriculture.

 

As to the OP, it's probably best to leave the funds in the college savings account. If you want to have PM in the college savings portfolio, then stop or reduce the funds currently going into the account and use them to buy PM.

IMHO - One of the reasons we have these various tax sheltered savings accounts (401k's, IRA's, CSA's, etc) is to make sure Americans stay invested in the economy. Make it so we have too much to lose if we choose to jump ship.