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Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.

Are you suddenly contemplating making unusually large 529 contributions?

Poll ended at Sat Jan 31, 2015 12:34 pm

yes
14
11%
no
110
85%
other
5
4%
 
Total votes: 129

Topic Author
letsgobobby
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Post by letsgobobby »

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Wellfleet
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Re: I'm thinking about making very large 529 contributions A

Post by Wellfleet »

Me no. Focused on debt repayment and retirement savings. We set up an account for new baby for misc contributions. I have no idea if baby's grandparents have different plans however.
lolbatross
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Re: I'm thinking about making very large 529 contributions A

Post by lolbatross »

My plan remains the same.
1.) Get the max state deduction (IL-20k) for 2 years per kid
2.) Invest in index equities
3.) Plan to fund with a combination of 529/cash flow/taxable investments
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rob
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Re: I'm thinking about making very large 529 contributions A

Post by rob »

I answered No but not for the prohibited reason you're implying. I stopped 529 contributions a decade ago when spouse stopped working because I simply could not fund retirement AND college savings... so had to pick saving for retirement only. IF I were still funding them and had the cash available then I would change my answer. Hopefully I kept that obscure enough to avoid the trap in answering :D
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bigred77
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Re: I'm thinking about making very large 529 contributions A

Post by bigred77 »

I think I know what your hinting at.

I would 100% superfund a 529 for my kids if I had the financial means to do so at this time.

I would still fear how retroactive future rule changes may be.
jackholloway
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Re: I'm thinking about making very large 529 contributions A

Post by jackholloway »

I did a larger-than-one-year lump sum contribution near the end of last year. I am already maximizing those retirement vehicles I chiose, and am setting money aside in taxable, This gives access to the CO stable value, and lets me pull some bonds out of taxable.

There is risk - if they do not grandfather, or if they remove the lump sum options, or if they change both the penalties and the way lump sums are accounted for at tax time, I may be holding the bag, but there was always a risk that a 529 would be counted as a student asset. Pending legislation is always a risk, but it is a risk to every form of savings and retirement plan.
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runner9
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Re: I'm thinking about making very large 529 contributions A

Post by runner9 »

We put in every 2 weeks, I might put in 1 years worth if it feel right/change coming/etc in the future. Not now though.
staythecourse
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Re: I'm thinking about making very large 529 contributions A

Post by staythecourse »

I was waiting for this thread after yesterday's State of the Union.

We likely will just continue to invest the regular amount we do every month. Even if a law is actually past they will likely do the usual thing and give a small window for folks to take advantage before they change the rules. So I wouldn't do anything different now based on possibilities or what ifs.

Good luck.
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Ketawa
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Re: I'm thinking about making very large 529 contributions A

Post by Ketawa »

No, maxing out all tax-advantaged space and paying off a home mortgage should come first.
Grt2bOutdoors
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Re: I'm thinking about making very large 529 contributions A

Post by Grt2bOutdoors »

From your previous posts, you already indicated you have a large 6 figure balance in your 529 plan + a prepaid tuition plan.
I see you are seeking to bolster your estate planning. :wink: I am not, I'll pay my house off first. What's more illiquid - real estate I live in and use or a plan where it's the wild west? No, I will continue to fund the account as planned, I'll revisit that plan if there is a drastic change in my financial condition. I voted other.
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livesoft
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Re: I'm thinking about making very large 529 contributions A

Post by livesoft »

Nope. We are withdrawing from the last 529 plan we have. With about $50K in it, it is probably overfunded for the next 3 years of college expenses.
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user5027
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Re: I'm thinking about making very large 529 contributions A

Post by user5027 »

No. Our two children are through college and married with their careers underway. We have no grandchildren .... yet.
rkhusky
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Re: I'm thinking about making very large 529 contributions A

Post by rkhusky »

No, I will continue with our plan to invest up to the state match every year (although I've been putting in extra for the older children who I started out with a lower contribution). We don't have enough to make a single large contribution.
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letsgobobby
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Re: I'm thinking about making very large 529 contributions A

Post by letsgobobby »

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MathWizard
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Re: I'm thinking about making very large 529 contributions A

Post by MathWizard »

Unless you were already planning to do this, I would suggest you do not.

Let your plan do its work, and don't adjust it based on a news item.
Quick deviations from a well thought out plan is a sure way to ruin.
ThankYouJack
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Re: I'm thinking about making very large 529 contributions A

Post by ThankYouJack »

I voted other, but will probably keep the same plan (taxable, prepaying debt, financial independence -- well before 529).

What is the proposed tax hike that would make me want to change my mind?
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batpot
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Re: I'm thinking about making very large 529 contributions A

Post by batpot »

staythecourse wrote:I was waiting for this thread after yesterday's State of the Union.

We likely will just continue to invest the regular amount we do every month. Even if a law is actually past they will likely do the usual thing and give a small window for folks to take advantage before they change the rules. So I wouldn't do anything different now based on possibilities or what ifs.

Good luck.
What-if's, not to mention the proposed "what" would be taxed at the point of withdrawal, so more contributions now would be pointless anyway.
Grt2bOutdoors
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Re: I'm thinking about making very large 529 contributions A

Post by Grt2bOutdoors »

letsgobobby wrote:
Grt2bOutdoors wrote:From your previous posts, you already indicated you have a large 6 figure balance in your 529 plan + a prepaid tuition plan.
I see you are seeking to bolster your estate planning. :wink: I am not, I'll pay my house off first. What's more illiquid - real estate I live in and use or a plan where it's the wild west? No, I will continue to fund the account as planned, I'll revisit that plan if there is a drastic change in my financial condition. I voted other.
As always I appreciate your thoughts. Yes - assuming all tax-advantaged retirement space already filled, does it make sense to lump sum 5 years of college savings (whatever that number is for you) today, given that current laws/rules for 529 withdrawals are quite favorable, given that the future is uncertain?

I agree with jackholloway that there is risk with all plans, legislative risk not least among them. I guess the poll tries to get at how Bogleheads view the current opportunity which exists today with the potential opportunity which may exist tomorrow. Is today's so attractive that it is worth altering behavior?
My employers plan offers me the opportunity to contribute after-tax dollars and do an in-service withdrawal once per year. Given the recent IRS pronouncements, I think a mega-back door Roth option is more preferable than to use an account whose withdrawals if not used for higher education are penalized and taxed at a higher rate. There are different vehicles out there that I believe can be suitable for your estate planning, the 529 plan imo offers less flexibility. In my case, I have a limited amount of dollars so placement is very important.
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reggiesimpson
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Re: I'm thinking about making very large 529 contributions A

Post by reggiesimpson »

I did when i initially opened them up for my children. Glad i did as my daughter has decided to go back and get another degree (pays more).
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baa_10
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Re: I'm thinking about making very large 529 contributions A

Post by baa_10 »

No.... all four of my kids are either out of college and working or in school with fully funded 529 plans already.
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bottomfisher
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Re: I'm thinking about making very large 529 contributions A

Post by bottomfisher »

No. Have 12 mo. old twin daughters. So I only recently got started with 529 plans for them. Currently have too many other financial obligations - recent 15 year mortgage refinance, retirement, student loans, home remodel, wife wants to stop working, etc. So we'll just continue as such and cross that bridge if/when we come to it. A contingency plan would be that our mortgage will be paid off around daughters 15 yrs old, so that money can then be utilized to aggressively save for higher education those last few years high school.
rkhusky
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Re: I'm thinking about making very large 529 contributions A

Post by rkhusky »

letsgobobby wrote: As always I appreciate your thoughts. Yes - assuming all tax-advantaged retirement space already filled, does it make sense to lump sum 5 years of college savings (whatever that number is for you) today, given that current laws/rules for 529 withdrawals are quite favorable, given that the future is uncertain?
If you believe the stock market is generally going to go up, it makes sense to lump sum if you have the funds. I don't think they will change the rules as stated, since that would kill the 529 program. It would be better to invest in taxable. And I really really can't believe that they would retroactively change the rules on existing investments. That would be an egregious breach of trust.
Bracket
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Re: I'm thinking about making very large 529 contributions A

Post by Bracket »

Why? Because of some recent "noise?"
It's just noise.
I plan to contribute about the same this year as I did last year.
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bengal22
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Re: I'm thinking about making very large 529 contributions A

Post by bengal22 »

why change strategy based on a speech.
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White Coat Investor
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Re: I'm thinking about making very large 529 contributions A

Post by White Coat Investor »

I've got faith in another branch that this isn't an issue.
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greg24
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Re: I'm thinking about making very large 529 contributions A

Post by greg24 »

Now would seem to be the worst time to make a large contribution, given that there are tax code changes in the air and we don't know what they are.
staythecourse
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Re: I'm thinking about making very large 529 contributions A

Post by staythecourse »

batpot wrote:
staythecourse wrote:I was waiting for this thread after yesterday's State of the Union.

We likely will just continue to invest the regular amount we do every month. Even if a law is actually past they will likely do the usual thing and give a small window for folks to take advantage before they change the rules. So I wouldn't do anything different now based on possibilities or what ifs.

Good luck.
What-if's, not to mention the proposed "what" would be taxed at the point of withdrawal, so more contributions now would be pointless anyway.
Why would you alter your investment plan just because of possible changes. There is NO indication this is even going to happen. If anything what Mr. Obama wants is any FUTURE contributions to be taxed on taking it out and not past contributions. Of course, not sure how anyone is going to be able to do the accounting for something like that. If anything there is a stronger argument to put MORE in now before his anticipated changes were to take place if the law ever passed.

Here is an example of what happens if you try to guess what will happen. I met a girl at a party in 2013 who was telling me her father who ran his own mutual fund was going to take 10million and go ahead and gift it to his children as he was SURE the lifetime exemption would return to 1 million as EVERYONE predicted. What happened next? The law was kept as 5mill. per person (10mill. for couple) and this guy just gave away control 10 mill. which he would not have done otherwise. This is what happens if you try to guess.

It is foolish to change you plans based on possibilities. The only rational (not saying it is the best) approach is to do what is the LAW now and worry about how to adjust when that time comes when laws change. That's life... nothing is guaranteed and one always needs to be ready to adjust when those changes happen, but not when they are just discussed.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle
livesoft
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Re: I'm thinking about making very large 529 contributions A

Post by livesoft »

You guys cannot be serious about any tax code changes. All the pundits are really laughing about that and I laugh along with them. :)
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Re: I'm thinking about making very large 529 contributions A

Post by Leesbro63 »

This might be an idea to do just for estate planning if you have the cash. You could superfund even adult kids then change the beneficiaries to THEIR kids later, when they get some. Might even make sense to eat up some of one's $5,500,000 estate tax exemption to do. Any creative thinking here?
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Re: I'm thinking about making very large 529 contributions A

Post by LadyGeek »

staythecourse wrote:I was waiting for this thread after yesterday's State of the Union.
And I was waiting to post in the thread. :)

Please stay factual and avoid opinions of the political process.
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staythecourse
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Re: I'm thinking about making very large 529 contributions A

Post by staythecourse »

Leesbro63 wrote:This might be an idea to do just for estate planning if you have the cash. You could superfund even adult kids then change the beneficiaries to THEIR kids later, when they get some. Might even make sense to eat up some of one's $5,500,000 estate tax exemption to do. Any creative thinking here?
I have asked about this several times on this site, but have not had a good response/ discussion.

It has been awhile, but if my recollection is clear I think the worry I had was something about changing the beneficiary to someone else. It is allowed, but think it has to be one generation change to not be a taxable event. For example: Father to son, mother to aunt, daughter to 1st cousin, niece to uncle, etc... If you contribute to your adult child then change to your grandchild is it considered 2 generations as it is from original contributor or is it okay since it went from you to child to their child thus each move is one generation move?

I have not been able to find the consensus on this.

Good luck.
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Blue
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Re: I'm thinking about making very large 529 contributions A

Post by Blue »

It crossed my mind. There might be a narrow window where it makes sense to heavily front load this year. I'm "staying tuned" to see how the conversation develops. No immediate plans for now.
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Re: I'm thinking about making very large 529 contributions A

Post by GoldenFinch »

I have been funding monthly, but think I will fully fund what we were planning on contributing because we have the money right now. I have four kids and the 529 will really help for the younger three. Oldest is already in college on full scholarship which is really good because we didn't save for her. Next kid looks expensive.

I would not use a 529 if there was no tax advantage. What would be the point?
jon-nyc
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Re: I'm thinking about making very large 529 contributions A

Post by jon-nyc »

Mine will be smaller than usual. It's kind of full already. So I won't go beyond the 10k that the state of NY subsidizes.
James2
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Re: I'm thinking about making very large 529 contributions A

Post by James2 »

No, I've been funding but we are in the "using" stage.
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Re: I'm thinking about making very large 529 contributions A

Post by KlangFool »

Folks,

I fully funded Roth IRA, 401K, and HSA.. 529 plan does not make any sense for me. Hence, no contribution in any case.

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feh
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Re: I'm thinking about making very large 529 contributions A

Post by feh »

We've already contributed all that we're going to.
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Re: I'm thinking about making very large 529 contributions A

Post by niceguy7376 »

we fund 2k per year per kid as that is the max tax benefit ($100 per year per kid) and we started 3 years ago for 6 and 4 year old. It wont be a decent amount by the time they reach college but after 401k, ira and hsa, that is all we can contribute. Also our plan is not the greatest in terms of ER.
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Re: I'm thinking about making very large 529 contributions A

Post by Peter Foley »

No for a number of reasons. 529 plan contributions must be cash (you cannot transfer other assets). To make a large contribution in a single year would have undesirable tax consequences. I have thought about, but not explored in detail, the idea of setting up an educational trust for grandchildren.
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Re: I'm thinking about making very large 529 contributions A

Post by rkhusky »

niceguy7376 wrote:we fund 2k per year per kid as that is the max tax benefit ($100 per year per kid) and we started 3 years ago for 6 and 4 year old. It wont be a decent amount by the time they reach college but after 401k, ira and hsa, that is all we can contribute. Also our plan is not the greatest in terms of ER.
You can use any state's plan. Makes sense if your ER is costing you more than the state tax benefit. ER hits you every year, but tax writeoff is only one-time.
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tigerman3
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Re: I'm thinking about making very large 529 contributions A

Post by tigerman3 »

I've already got enough for 4 years of my daughter's college. I was contemplating funding post-grad, but that's speculative and I was warned by a friend to not over fund.
Cornbread
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Re: I'm thinking about making very large 529 contributions A

Post by Cornbread »

If this tax change regarding 529s comes to fruition, then yes I would consider making very large 529 contributions (shifting assets temporarily, if necessary) to get in before the tax advantages are gone. But I would not do that unless/until it actually happens - and I'm skeptical it would pass Congress anyway.
EddyB
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Re: I'm thinking about making very large 529 contributions A

Post by EddyB »

I have no idea whether "it" would happen, but I'm curious about whether anyone on here who is considering making an accelerated deposit is doing so with the expectation that if it becomes clear that "it" will not happen, they would then turn around and take the money back out in a non-qualified withdrawal, paying the penalty on the earnings portion of the withdrawal?
SGM
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Re: I'm thinking about making very large 529 contributions A

Post by SGM »

Already lump summed years ago. Both kids are out of school. No grandchildren yet. I will probably leave the excess in the plan for now. Maybe the children will go to grad school. Nothing recently reported will make a difference in my plan. A well-known couple has reportedly put $240,000 into 529s back in 2008-9 for their two daughters.
davebarnes
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529s are stupid

Post by davebarnes »

529s are a horrible "investment".
You are better off buying gold bars and stashing them in a safe place.

When you fill out the FAFSA, 529 money is counted.
Gold bars (or cash under the mattress) are not.
Think about it.
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Re: I'm thinking about making very large 529 contributions A

Post by itstoomuch »

don't like 529. Rather do taxable either in UGMA or plain taxable. I want flexibilty to invest why, when, where, and how.
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111
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Re: I'm thinking about making very large 529 contributions A

Post by 111 »

Nope. Given that my state has no income tax I've never really seen any advantage to a 529.
GoldenFinch
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Re: I'm thinking about making very large 529 contributions A

Post by GoldenFinch »

EddyB wrote:I have no idea whether "it" would happen, but I'm curious about whether anyone on here who is considering making an accelerated deposit is doing so with the expectation that if it becomes clear that "it" will not happen, they would then turn around and take the money back out in a non-qualified withdrawal, paying the penalty on the earnings portion of the withdrawal?
We are going to put money in the 529 and if "it" doesn't happen we will leave the money in until we use it for college. I was dollar cost averaging, but will just fully fund in the near future because we have the money sitting in cash anyway. Time in the market, not market timing, right?
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letsgobobby
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Re: I'm thinking about making very large 529 contributions A

Post by letsgobobby »

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jstrazzere
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Re: I'm thinking about making very large 529 contributions A

Post by jstrazzere »

No.

(The future is always uncertain. That is both bad and good.)
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