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My two sons are ages 5 and 2 months respectively.
5-year old has a Vanguard 529 with about $35k, and a UTMA, (also with Vanguard) of about $76k.
I was about to open a 529 for the 2-month old, but read that I can affect unlimited rollovers between the two as long as the funds are used within 60 days of transfer for educational purposes.
My thought then, since I already have approx $113k in the 5-year old's account, is to max out his account with funds for both boys, to the balance/contribution limit, thereby taking advantage of the increased compound interest from the higher balance. As long as I keep track of the allocation between the two, I can roll the balance over to the younger boy's account when the time comes, along with (hopefully) any excess funds when my older son finishes college.
Any thoughts/holes/advice on this??
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itboglesthemind wrote:thereby taking advantage of the increased compound interest from the higher balance.
This is not a true statement. There is no "increased compound interest" having the money in one account versus splitting the money across multiple accounts.
Otherwise, your plan is reasonable. I have chosen to have one 529 per child. I don't see having multiple accounts as a big deal. They are very easy to maintain. If for some reason my DW and I should die, then it would be clear how much money each child got. This would not be the case in your situation. Hopefully, the odds of encountering this case is small enough that it really doesn't matter.
Last edited by mhc
on Fri Jul 26, 2013 10:01 pm, edited 1 time in total.
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Keep it simple - one account per child, no confusion about who has the larger or smaller of the balances. Compounding in one account would not be greater than if the balances were in two separate accounts - percentage growth is the same assuming the asset allocation remains the same. The other thought is the 5 year olds account should over time glide to a more conservative path whereas the younger child's account could be more aggressive due to the number of years before the funds are needed.
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+1 on separate 529s for each child, makes it clear what the intentions are. Also keep in mind that UTMA account money is money that legally belongs to that child, you cannot use child 1's UTMA to pay for child 2's college...
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