Should I stop contributing to 529 Plan?

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cheesehead
Posts: 7
Joined: Wed Sep 10, 2014 4:45 pm

Should I stop contributing to 529 Plan?

Post by cheesehead »

Hi everyone

A few details about myself in order to answer 529 question:
-38 years old, married, 2 kids (ages 4 and 6)
-100K in Vanguard Roth IRA (wife and I) accounts
-215K in 401k and 403b accounts
-22K in 529 accounts (Edvest, Wisconsin) for both kids
-currently investing 15% of 140K combined income in retirement vehicles (401K, 403b, and Roth IRAs)
-will be debt free (including mortgage) by age 39
-plan to max out 401K and 403b accounts starting next year
-will have school pension upon retirement

My question: I've read several articles recently about the pros and cons of 529 accounts. I'm wondering if I should stay the course and continue putting 2K/child away each year or choose tax-efficient account for college money instead. Thanks in advance for offering your thoughts.
trueblueky
Posts: 2365
Joined: Tue May 27, 2014 3:50 pm

Re: Should I stop contributing to 529 Plan?

Post by trueblueky »

Do you get a state tax break on 529?

Don't invest in the children's names as FAFSA counts their income and savings at a much higher rate than yours.

Do plan on paying at least $4,000 per child per year from taxable savings or current income to get the $2500 American Opportunity Credit tax credit for four years per child.
LongerPrimer
Posts: 903
Joined: Thu Jun 05, 2014 10:01 pm

Re: Should I stop contributing to 529 Plan?

Post by LongerPrimer »

You may want to for flexibility. Example, an UGMA, could be used for high school activities VS prohibited in 529.UGMA could acquire initial stocks or bonds. You can buy/sell as many times as you want VS 1 per year in 529 . We discovered, UGMA can be used to pay interest on student loans I figure that it is his education, we funded the UGMA for 18 years, and if child wanted to go a school that was bigger than his college fund, then the child could take loans. :dollar
Last edited by LongerPrimer on Thu Sep 11, 2014 12:16 am, edited 1 time in total.
letsgobobby
Posts: 12073
Joined: Fri Sep 18, 2009 1:10 am

Re: Should I stop contributing to 529 Plan?

Post by letsgobobby »

If you max your retirement accounts and have a paid off house and have no taxable investments and your income stays the same or go down, you could be eligible for some financial aid, possibly. I would stop investing in 529s.
BeaverFood
Posts: 22
Joined: Fri Jul 26, 2013 1:29 pm

Re: Should I stop contributing to 529 Plan?

Post by BeaverFood »

The WI max deductible 529 contribution annually per recipient is now $3,050. Personally, we're maxing those out immediately after our tax advantaged retirement accounts to reduce our state tax bill. The UW currently runs just shy of $20k per year for just tuition, room and board and increasing rapidly and it's about $15k for the non-flagship schools. Unless you're confident in the returns you'll get on the $22k you already have in the 529 plan, it seems wise to continue contributing and get the state tax deduction now plus reduce your out of pocket costs come college time.

I wouldn't suggest contributing if you weren't on track for retirement, but if you're maxing out those accounts like it should like you will be, why not get the extra tax advantage now? I don't see a huge downside.
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