Investment Vehicle for MBA Savings?

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kstar3488
Posts: 3
Joined: Wed Oct 23, 2013 7:42 pm

Investment Vehicle for MBA Savings?

Post by kstar3488 »

I am trying to save up to go back to school for an MBA. (I don't have much yet; I'm 23 and just finished paying off undergrad student loans). My goal right now is to enroll in a part-time program in the fall of 2016. I am going to try to complete in 3 years (maybe 4 depending on how strained I am financially and otherwise). Looking for an investment vehicle (something better than a low/no interest savings account) that will benefit from the following characteristics:
 - $3K initial investment
- $20K balance by Fall 2016
 - Biweekly/monthly contributions for 5 years
 - Account untouched for ~2yrs.
 - Biannual withdrawals ($5-10K) for 3 years
 - Moderate risk/ conservative growth
 - Willing to keep $3000 min balance
Any suggestions? (I am in Minnesota and our 529 offerings are less than ideal). I was trying to read up on the T. Rowe Price 529, but I am not clear on how/if the tax advantages would apply to me. My understanding is that earnings will grow federal tax free, but will still be subject to MN state tax. I am also considering your run-of-the-mill mutual fund; maybe a Vanguard conservative growth fund? I have a Roth IRA that I max out every year that I will be using to supplement this. Also, please consider the effects of this asset on potential financial aid awards. Thank you!
bigred77
Posts: 2049
Joined: Sat Jun 11, 2011 4:53 pm

Re: Investment Vehicle for MBA Savings?

Post by bigred77 »

If you get a state tax deduction for using a Minnesota 529 then use that.

Probably should simply save as much as you can. Investment returns will have an almost negligable impact on your outcome. I would suggest the LifeStrategy Income Fund.
User avatar
The529guy
Posts: 610
Joined: Fri May 23, 2014 1:08 am

Re: Investment Vehicle for MBA Savings?

Post by The529guy »

kstar3488 wrote:My understanding is that earnings will grow federal tax free, but will still be subject to MN state tax.
This is incorrect. No MN state tax on earnings if used for qualified expenses.

There is also no state income tax deduction, so the MN plan is not advantageous:
http://www.savingforcollege.com/529_pla ... plan_id=28

Can you tell us more about your willingness to take "moderate risk" for "conservative growth"? How much of your savings are you ok losing in the span of these first two years?

If you don't want to lose principal over this short-term period, I recommend you consider one of these options (but it sounds like they might be too low risk for you):

Virginia CollegeWealth: http://virginia529.com/collegewealth/index.php
Colorado CollegeInvest Stable Value Plus: https://www.collegeinvest.org/our-savin ... value-plus
Last edited by The529guy on Thu Oct 23, 2014 11:24 am, edited 1 time in total.
Grt2bOutdoors
Posts: 25617
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Investment Vehicle for MBA Savings?

Post by Grt2bOutdoors »

80% Short Term Investment Grade
10% Total Stock Market Index
10% Total International Index

^^ If 529 plan is not "in the cards".
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
avalpert
Posts: 6313
Joined: Sat Mar 22, 2008 4:58 pm

Re: Investment Vehicle for MBA Savings?

Post by avalpert »

While you could use a 529 plan to save for this, the advantage of tax free growth over just a couple of years for such a small amount of money is pretty small. What I would really target if I were you, since you are planning to go part time (and presumably work part time) is to get your expenses down to a point where you can pay for the MBA out of cash flow and focus your savings on longer term goals.
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