529 Plans, Other Tax and Financial Issues

There is so much I must recount that has happened over the last few weeks. I can't keep up with the boy. And he's a boy now, no longer a baby. But first let's start with the latest issue.

We finally looked into 529 plans. Andy actually printed the info and brought it home. I had been mentioning it over the last year, but we hadn't done anything until now. Why? Mainly because we've been slow and frankly because it's not like we're awash in extra cash we can put away. (And there are so many competing financial musts--like pay off credit card, jack up 401s and IRAs, pay down the bizzillion mortgages, etc...and now starts up college plans for Ivan.) We haven't even gotten him into daycare, which not only costs money to send the kid to, but it also costs money to be put on waiting lists. It's worse than college applications.

Anyway, Maryland has two plans -- the prepaid one, where you pay tomorrow's college tuition at today's rate but it's only for MD public schools, if I get it correctly (there is a way to use it for other schools as well, but it description was rather convoluted) and the investnment one, which basically functions like an IRA.

So which one is better? Media and financial experts seem to favor the investment one. This option gets more complicated because since each state runs its own plan, you can invest in any state's plan regardless where you live. Of course, if you invest in another state's plan, you won't profit from your state's tax breaks. I guess there are financial pros and cons to each state's plan, but who has time to figure that out, other than professional financial experts who deal in the matter.

But our tax accountant threw us (I guess, me) off course, when he suggested that the prepaid one is better. That's the one he had for his kids (although he probably has way more money than we do). So now I'm torn.....which one to pick.

The prepaid one seems more expensive, meaning that in order to paid in full the entire amount of today's college cost, the monthly (or yearly, or whatever) payments seem to steep for our current expenses. If I read the info correctly we'd have to pay over $300 monthly for 191 months (ie 17 years) to pay down today's 4-year college MD tuition. It's probably a good deal, but I really don't see how with our current finances we can swing that (especially once we send Ivan to some sort of daycare, but that's a different discussion altogether)

I'm thinking of sending my friends (with kids) an email to see whether they've started these plans and which one they chose. Unfortunately, I'm quite sure they'll all say that they have no clue but to ask their husbands. (I can do that, but it will just annoy me that they won't know and that I'm the one who's taking care of it at this end, because it's in my personality to do so). And most of the people to whom I'd pose this question are currently financially much better off than we are and I really don't want to be reminded of that.