Q: A friend of mine saw a money program on PBS in which the host (she wasn’t sure who) indicated that there are tax penalties for the 529 plan if your child does not start college before 2013. My daughter is only 1 and I just put a good amount into her plan. Can you tell me if there is any truth to this?

A: Yes . . . and no.

The current tax laws expire in 2011, I think. Right now, 529 plan can grow federal and state tax free. If you use the money to pay for college tuition and expenses, you can withdraw the earnings tax free. But in 2011, that law will expire so the profit would be taxable. But I’d be shocked if Congress didn’t extend the law permanently. After all, who’d want to risk offending parents as a voting block??

You never know for sure, but I’d be willing to bet that your friend will be fine.

Q: I’ve heard people on WSB in Atlanta talking about the 529 plan for college savings and it always seemed like a very good plan. However, on PBS this past weekend someone was saying that if you have a child who will not be pulling out the money before 2011, you should seek other avenues, because all of the tax benefits will go away. Is this true?

A: The issue is whether all of the tax savings will indeed “sunset” in 2011, that is, disappear entirely. The reason 2011 was chosen by the Bush Administration was because it met certain financial projections. My guess is that by 2011, the tax savings will be so ingrained that if congress tried to do away with it, there would be a huge revolution from parents nationwide, and anyone voting against it would be voted out of office.

My feeling is, these benefits are pretty safe. By the way, the estate tax is supposed to be completely phased out by 2011 and then that law "sunsets" at the end of that year. But again, I think that after having zero estate taxes, anyone who tried to bring them back would be voted out of office.

Q: I have a son in the 3rd grade and would like to know the best way to save for college at this point. I’ve heard you talk about the 529 plans. Would that be a good option? Would a Roth IRA be a good option as well? Which companies or states offer the best plans or what I should I look for when choosing?

Also, what would be the best option to saving? I know you should have 3-6 months of expenses saved but I’m not sure of the best place to put it to get the best return on the money and still have relatively easy access to it if it is needed.

A: I think you should open up a 529 plan for your son. Go to www.collegesavings.org and www.savingforcollege.com and check out all of the different plans. These websites will walk you through all of the state plans, and actually rank them for you.

As for saving emergency funds, you should keep 1 month in a money market account, and 2-4 months in a 4 or 8-week CD. The interest won’t be great, but at least it’s a bit better than a money market account (check to make sure it is . . .) and you’ll have easy access to the cash.

Q: I have a mutual fund established in my daughter’S name (currently 8 years old). This fund was established for college. The current value is approximately $10,000. It is a custodial account set up as a UTMA.

My question:

Would it be wise to sell the shares in the account (pay the capital gains taxes) and roll the account over into a 529 college savings plan.

A: You control the cash and its investment in the UTMA. In a 529, those decisions are made for you. If you’ve been doing well (up until this time), then keep that cash there and open up a 529 plan for the other savings you’ll have. If not, then you can put it all in the 529.

It’s up to you.

Q: Are contributions to a qualified 529 plan deductible?

A: The money is tax-deferred until you use it and then it’s usually taxed at the child’s rate. Some of these programs are actually tax-free at the state level, so check into it. But nothing for your income tax forms.

Q: Where can I turn to for advice on refinancing and saving for college and retirement? Do you have any recommendations for a good investment counselor/company that can help set me up for the future? Is this something you do? I also want to take advantage of the current interest rates and refinance too.

A: I have a load of information about refinancing on my website, www.thinkglink.com. For saving for college, I have information about this in my book, 100 Questions You Should Ask About Your Personal Finances (about retirement, and investing, too). For information on 529 plans (your best bet, I think, for saving for college), go to www.savingforcollege.com or www.collegesavings.org (I think it’s a .org, but might be .com).

As for financial counselors, I think you should only use a fee-only financial planner, and then only if you really need it. They charge you by the hour as opposed to charging you a percentage of your wealth.

I hope this gives you a good start.