Crazy to start 529 without kids??

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Bethyyy
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Crazy to start 529 without kids??

Post by Bethyyy » Wed Apr 11, 2018 9:11 pm

Hello, so excited to find this community! I recently inherited a very large sum of money from my grandfather. Years ago, he had given me a Boglehead guide to investing book; but as a college student at the time with no debt, little income, and no savings, I read a few pages then filed it away.

Sorry for the long introduction. Anyway, now I’m 27 and single and have $1M heading my way in the next few weeks. I maxed my Roth IRA for 2017, but that’s the extent of my investments. I don’t have 401k options at the moment.

Sooo would it be totally insane to invest the max toward a 529 with myself as the beneficiary? I’ve always thought about getting my MBA, but not sure I ever will. I DO know that I will have kids someday. So a 529 basically seems like a Roth that might actually be useful earlier (since kids would reach college before I reach retirement).
Any downsides I need to be aware of (other than the obvious that I don’t have kids or they don’t go to college, which I’m not worried about)? Assuming I do have kids, is there a better investment option that would earn more on that max 5k a year than the 529?

Darth Xanadu
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Re: Crazy to start 529 without kids??

Post by Darth Xanadu » Wed Apr 11, 2018 9:46 pm

Bethyyy wrote:
Wed Apr 11, 2018 9:11 pm
Hello, so excited to find this community! I recently inherited a very large sum of money from my grandfather. Years ago, he had given me a Boglehead guide to investing book; but as a college student at the time with no debt, little income, and no savings, I read a few pages then filed it away.

Sorry for the long introduction. Anyway, now I’m 27 and single and have $1M heading my way in the next few weeks. I maxed my Roth IRA for 2017, but that’s the extent of my investments. I don’t have 401k options at the moment.

Sooo would it be totally insane to invest the max toward a 529 with myself as the beneficiary? I’ve always thought about getting my MBA, but not sure I ever will. I DO know that I will have kids someday. So a 529 basically seems like a Roth that might actually be useful earlier (since kids would reach college before I reach retirement).
Any downsides I need to be aware of (other than the obvious that I don’t have kids or they don’t go to college, which I’m not worried about)? Assuming I do have kids, is there a better investment option that would earn more on that max 5k a year than the 529?
Hi! I think it's important to know/determine whether or not you would get a state tax benefit from contributing to a 529 plan. In which state do you reside?

EDIT: if you are single, and not sure you will spend money on qualified education expenses on yourself, then I would suggest you hold off on the 529. Max tax-advantaged space (Roth is done, maybe HSA if that's an option) ... safe investments until you figure out your game plan.
My friends said stick to your guns, but instead I just got stuck.

Bethyyy
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Re: Crazy to start 529 without kids??

Post by Bethyyy » Thu Apr 12, 2018 12:11 am

Thanks so much for the reply! I do live in a state with 529 tax benefits, which is part of the reason this idea caught my eye.
Roth is maxed for 2017 and 2018. Currently don’t have any other tax-free or tax-helpful options. In a few months I might have a 401k investment option, but not guaranteed and I can max that either way if needed.

I like the 529 idea because I can use it toward my own future education (50/50 if I will get an mba) OR shift it toward a child’s education. I 100% intend to have children, so don’t think there’s any way the investment would go to waste. If I don’t meet the right guy, then I’ll adopt or use a donor. And if my future kids don’t go to college or they get full rides, then I can just transfer the 529 to grandkids as the beneficiaries right?
Just went 14 steps ahead of myself there, but trying to cover my bases. Any other potential big risks to putting in the $5k a year toward a 529?

Captain kangaroo
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Re: Crazy to start 529 without kids??

Post by Captain kangaroo » Thu Apr 12, 2018 2:41 am

Bethyyy wrote:
Thu Apr 12, 2018 12:11 am
Thanks so much for the reply! I do live in a state with 529 tax benefits, which is part of the reason this idea caught my eye.
Roth is maxed for 2017 and 2018. Currently don’t have any other tax-free or tax-helpful options. In a few months I might have a 401k investment option, but not guaranteed and I can max that either way if needed.

I like the 529 idea because I can use it toward my own future education (50/50 if I will get an mba) OR shift it toward a child’s education. I 100% intend to have children, so don’t think there’s any way the investment would go to waste. If I don’t meet the right guy, then I’ll adopt or use a donor. And if my future kids don’t go to college or they get full rides, then I can just transfer the 529 to grandkids as the beneficiaries right?
Just went 14 steps ahead of myself there, but trying to cover my bases. Any other potential big risks to putting in the $5k a year toward a 529?


The only risk is the same risk you take with any investment, it could lose value.. That's just from a market perspective.

From a perspective of your goals.. There appears to be no risk. If you have kids who don't go to college, you can use it on grandkids. If you don't have grandkids, you can use it on yourself or use it on someone else. Either way you're getting a tax benefit for something that will be advantageous for you and bring you happiness in some form or another while saving you money.

youngpleb
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Re: Crazy to start 529 without kids??

Post by youngpleb » Thu Apr 12, 2018 4:57 am

Sounds like a great idea to me!
Last edited by youngpleb on Thu Apr 12, 2018 5:02 am, edited 1 time in total.
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craimund
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Re: Crazy to start 529 without kids??

Post by craimund » Thu Apr 12, 2018 5:01 am

Bethyyy wrote:
Wed Apr 11, 2018 9:11 pm
Hello, so excited to find this community! I recently inherited a very large sum of money from my grandfather. Years ago, he had given me a Boglehead guide to investing book; but as a college student at the time with no debt, little income, and no savings, I read a few pages then filed it away.

Sorry for the long introduction. Anyway, now I’m 27 and single and have $1M heading my way in the next few weeks. I maxed my Roth IRA for 2017, but that’s the extent of my investments. I don’t have 401k options at the moment.

Sooo would it be totally insane to invest the max toward a 529 with myself as the beneficiary? I’ve always thought about getting my MBA, but not sure I ever will. I DO know that I will have kids someday. So a 529 basically seems like a Roth that might actually be useful earlier (since kids would reach college before I reach retirement).
Any downsides I need to be aware of (other than the obvious that I don’t have kids or they don’t go to college, which I’m not worried about)? Assuming I do have kids, is there a better investment option that would earn more on that max 5k a year than the 529?
Are you self-employed? If so, you may be able to set up an individual 401K through a brokerage firm.

Otherwise I would save/invest in taxable accounts until there is a child or other beneficiary to go with the 529. May make sense to set it up for yourself if further education is in your future. You should then be able to transfer to a child if needed.
"When you ain't got nothing, you got nothing to lose"-Bob Dylan 1965. "When you think that you've lost everything, you find out you can always lose a little more"-Dylan 1997

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Tamarind
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Re: Crazy to start 529 without kids??

Post by Tamarind » Thu Apr 12, 2018 5:15 am

Unusual but not crazy. If you understand that future events might change your plans and it's still worth it to you, then go ahead. But also take the time to read this: https://www.bogleheads.org/wiki/Managing_a_windfall

Grt2bOutdoors
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Re: Crazy to start 529 without kids??

Post by Grt2bOutdoors » Thu Apr 12, 2018 6:16 am

Hello and welcome to the forum! Sorry for your loss.

Single and with a huge windfall - don’t tell anyone about your good fortune as nothing will attract the flies faster than the thought of free money or gifts. Don’t make loans to anyone, if they want a loan direct them to the nearest bank, you are not a bank.

Roth IRA maximum contribution this year is $5,500. A 529 plan may be a good idea if you believe you will attend graduate school but I would not contribute more than maximum state deduction. In event you don’t use it for grad school you could use proceeds for future offspring or perhaps later on for a cooking or art history class overseas.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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JamesSFO
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Re: Crazy to start 529 without kids??

Post by JamesSFO » Thu Apr 12, 2018 7:06 am

Personally I would not put more than the LESSER of (a) one year tuition and (b) state max that is deductible in [either way stopping around 1 year tuition if doing investment over multiple years].

Rationale:

1) You may change your mind and 529 money while flexible for reassignment is somewhat limiting

2) Taxable investing is pretty tax efficient too

3) It sounds like you are not sure what you want to do fully yet more generally, give yourself more time to decide what to do

4) You didn't mention your age/marital status/interest in kids (or nieces/nephews) but if you don't use for self who would use it (otherwise there are usually some penalties + taxes on withdrawal)

Leemiller
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Re: Crazy to start 529 without kids??

Post by Leemiller » Thu Apr 12, 2018 7:18 am

No way I’d do this. Plus, it will put pressure on your future plans re kids.

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buccimane
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Re: Crazy to start 529 without kids??

Post by buccimane » Thu Apr 12, 2018 8:35 am

JamesSFO wrote:
Thu Apr 12, 2018 7:06 am
4) You didn't mention your age/marital status/interest in kids (or nieces/nephews) but if you don't use for self who would use it (otherwise there are usually some penalties + taxes on withdrawal)
Bethyyy wrote:
Wed Apr 11, 2018 9:11 pm
Anyway, now I’m 27 and single and have $1M heading my way in the next few weeks. I maxed my Roth IRA for 2017, but that’s the extent of my investments. I don’t have 401k options at the moment.
Bethyyy wrote:
Thu Apr 12, 2018 12:11 am
I 100% intend to have children
A man convinced against his will is of the same opinion still

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JamesSFO
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Re: Crazy to start 529 without kids??

Post by JamesSFO » Thu Apr 12, 2018 8:59 am

buccimane wrote:
Thu Apr 12, 2018 8:35 am
JamesSFO wrote:
Thu Apr 12, 2018 7:06 am
4) You didn't mention your age/marital status/interest in kids (or nieces/nephews) but if you don't use for self who would use it (otherwise there are usually some penalties + taxes on withdrawal)
Bethyyy wrote:
Wed Apr 11, 2018 9:11 pm
Anyway, now I’m 27 and single and have $1M heading my way in the next few weeks. I maxed my Roth IRA for 2017, but that’s the extent of my investments. I don’t have 401k options at the moment.
Bethyyy wrote:
Thu Apr 12, 2018 12:11 am
I 100% intend to have children
That will teach me to post early in the AM, glossed over those ::doh::

Nate79
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Re: Crazy to start 529 without kids??

Post by Nate79 » Thu Apr 12, 2018 10:09 am

No, I would invest in taxable account in very tax efficient index funds. Much more flexible and if life becomes more clear then you could fund 529s.

Another option would be to put money into ibonds which is also very flexible and can be used for college expense tax free.

beth65
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Re: Crazy to start 529 without kids??

Post by beth65 » Thu Apr 12, 2018 10:43 am

You are too young to predict the future. You may need to access that money some day, or kids might not be in the picture even if it’s a plan now, etc. There are better investment vehicles. You can even do a DAF and invest the money for charitable contributions and receive tax benefits as well. JMHO.

Katietsu
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Re: Crazy to start 529 without kids??

Post by Katietsu » Thu Apr 12, 2018 11:18 am

My vote is for not crazy. I agree with limiting the amount contributed. The $5000 that you mentioned seems reasonable. If you do this for a few years, and still have no concrete plans for the 529, you may wish to stop contributing.

These funds will represent a small part of your net worth. Otherwise, I think it would be a harder decision.

WhiteMaxima
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Re: Crazy to start 529 without kids??

Post by WhiteMaxima » Thu Apr 12, 2018 11:37 am

It makes perfect sense to start 529 earlier even without kids. Name youself as beneficiary then switch to your kids or even grand kids as beneficiary. Give 529 a 20 or 30 year run ( I would assume there would be 2 or 3 bull run during 20 to 30 years period).

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UpsetRaptor
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Re: Crazy to start 529 without kids??

Post by UpsetRaptor » Thu Apr 12, 2018 3:54 pm

Crazy smart. Since you're planning on having kids anyways, earlier you start it, earlier you start the tax free gains.

Retireby40
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Re: Crazy to start 529 without kids??

Post by Retireby40 » Thu Apr 12, 2018 6:13 pm

If you have already exhausted the other typical tax advantaged vehicles and you foresee college education in the future then it makes a lot of sense.

I believe family member designation includes spouses, children, siblings, parents, nephews and nieces, aunts and uncles, in-laws and any of their spouses. It also includes first cousins. If you, your spouse or your children don't use it then your grand kids could use it. That flexibility greatly reduces the risk that it will not be used.

However, there are a lot more restrictions on what qualifies as an education expense than many people realize. There are also caps in many states which are limited by the enrolled college guidelines or on-campus equivalents. In other words, if the dorm room costs $600/mos and an off campus apartment costs $1,000/mos then you are restricted to the lower value.

Some examples of the types of items not qualified for 529 expenses are transportation costs, insurance, student loan repayment, cell phones, club and activity fees including fraternity and sorority membership dues, lifestyle and personal expenses.

Just keep in mind 529s are not a panacea. As others have mentioned, once you get past a certain level then other more flexible tax efficient vehicles may be a better choice.

golfCaddy
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Re: Crazy to start 529 without kids??

Post by golfCaddy » Thu Apr 12, 2018 6:27 pm

Life doesn't always turn out the way you expect it to. I don't agree a single person can know they're going to have kids.

JBTX
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Re: Crazy to start 529 without kids??

Post by JBTX » Thu Apr 12, 2018 6:37 pm

I wouldn’t do it. You may not have kids. Or your kids may not go to college. Life happens.

Bethyyy
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Re: Crazy to start 529 without kids??

Post by Bethyyy » Thu Apr 12, 2018 11:34 pm

Wow! I thought this forum might be helpful, but went back to studying up on my reading list of finance books...
I’m honestly speechless and blown away by the outpouring of advice and discussion here! Going through the posts now (while googling things I don’t understand yet), but just wanted to thank you all again! So so so glad I came here instead of meeting with another sleazy “friend” selling life insurance...

Bethyyy
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Re: Crazy to start 529 without kids??

Post by Bethyyy » Thu Apr 12, 2018 11:41 pm

craimund wrote:
Thu Apr 12, 2018 5:01 am
Bethyyy wrote:
Wed Apr 11, 2018 9:11 pm
Hello, so excited to find this community! I recently inherited a very large sum of money from my grandfather. Years ago, he had given me a Boglehead guide to investing book; but as a college student at the time with no debt, little income, and no savings, I read a few pages then filed it away.

Sorry for the long introduction. Anyway, now I’m 27 and single and have $1M heading my way in the next few weeks. I maxed my Roth IRA for 2017, but that’s the extent of my investments. I don’t have 401k options at the moment.

Sooo would it be totally insane to invest the max toward a 529 with myself as the beneficiary? I’ve always thought about getting my MBA, but not sure I ever will. I DO know that I will have kids someday. So a 529 basically seems like a Roth that might actually be useful earlier (since kids would reach college before I reach retirement).
Any downsides I need to be aware of (other than the obvious that I don’t have kids or they don’t go to college, which I’m not worried about)? Assuming I do have kids, is there a better investment option that would earn more on that max 5k a year than the 529?
Are you self-employed? If so, you may be able to set up an individual 401K through a brokerage firm.

Otherwise I would save/invest in taxable accounts until there is a child or other beneficiary to go with the 529. May make sense to set it up for yourself if further education is in your future. You should then be able to transfer to a child if needed.
No, I’m not self-employed. Just have a shitty temporary job while I figure out my life.

Bethyyy
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Re: Crazy to start 529 without kids??

Post by Bethyyy » Thu Apr 12, 2018 11:47 pm

Tamarind wrote:
Thu Apr 12, 2018 5:15 am
Unusual but not crazy. If you understand that future events might change your plans and it's still worth it to you, then go ahead. But also take the time to read this: https://www.bogleheads.org/wiki/Managing_a_windfall
Thanks! Already have that page bookmarked and have read it more times than I can count!

Bethyyy
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Re: Crazy to start 529 without kids??

Post by Bethyyy » Thu Apr 12, 2018 11:59 pm

beth65 wrote:
Thu Apr 12, 2018 10:43 am
You are too young to predict the future. You may need to access that money some day, or kids might not be in the picture even if it’s a plan now, etc. There are better investment vehicles. You can even do a DAF and invest the money for charitable contributions and receive tax benefits as well. JMHO.
Not trying to predict the future at all. I don’t know what a DAF is though, but am always open to new ideas.

Just realized the potential benefits of my future going the way I presume it will (I either get an MBA soon or someday have kids who go to college).
Having kids is a 100% for me. If I don’t get married or can’t become pregnant, I’ll adopt or use IVF/donors. Honestly no worry in my mind about the 529 not being used. Worst case, it’ll go to my brothers’ children. Honestly not really a remote concern. Someone will use hat money and 5k isn’t much for me now but will be a lot to someone later hopefully.

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StormShadow
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Re: Crazy to start 529 without kids??

Post by StormShadow » Fri Apr 13, 2018 12:06 am

Nate79 wrote:
Thu Apr 12, 2018 10:09 am
No, I would invest in taxable account in very tax efficient index funds. Much more flexible and if life becomes more clear then you could fund 529s.
+1

I'd hold off the 529 until you have kids.

Frankly, if I were you I'd park it all into a high yield savings account and read up on investing before making any big decisions.

Bethyyy
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Re: Crazy to start 529 without kids??

Post by Bethyyy » Fri Apr 13, 2018 1:00 am

StormShadow wrote:
Fri Apr 13, 2018 12:06 am
Nate79 wrote:
Thu Apr 12, 2018 10:09 am
No, I would invest in taxable account in very tax efficient index funds. Much more flexible and if life becomes more clear then you could fund 529s.
+1

I'd hold off the 529 until you have kids.

Frankly, if I were you I'd park it all into a high yield savings account and read up on investing before making any big decisions.
One of my biggest takeaways from the boglehead book I read was to park windfalls and not touch them for awhile. I agree completely. I’ve watched 3 relatives totally fall apart, either due to a sudden windfall or because they assumed one was coming.

My windfall is slightly delayed and I happen to have a bit of free time at the moment to read books and research and make plans, so should be interesting!

Bethyyy
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Re: Crazy to start 529 without kids??

Post by Bethyyy » Fri Apr 13, 2018 1:08 am

StormShadow wrote:
Fri Apr 13, 2018 12:06 am
Nate79 wrote:
Thu Apr 12, 2018 10:09 am
No, I would invest in taxable account in very tax efficient index funds. Much more flexible and if life becomes more clear then you could fund 529s.
+1

I'd hold off the 529 until you have kids.

Frankly, if I were you I'd park it all into a high yield savings account and read up on investing before making any big decisions.
what would be the downside of investing a small amount in a 529?
Very worst case is I never go back to school, never have kids, and my brothers never have kids..so I suffer a penalty on withdrawing my contributions (but not on the earnings).
In that case I’m not sure why I’d even be withdrawing that money for anyway so irrelevant...

Think I just debated myself into the 529 for my future child.
Seriously though, tell me why it’s a bad idea if you think so. Thanks again!

LFKB
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Re: Crazy to start 529 without kids??

Post by LFKB » Fri Apr 13, 2018 1:30 am

It’s a good idea given the facts you’ve told us so I’d go ahead with it. However, the gains on $5k are not going to save you much in taxes. Let’s say that $5k becomes $20k over the next 25 years, you have a $15k gain and at 20% capital gains that’s $3k in savings. It’s not nothing but it’s not a ton. If you use it on an MBA a few years out you’re probably saving next to nothing.

Is there a reason you picked $5k as your amount? Is that your state deductibility limit?

We are having our first child in the next month and contributed $25k to a 529 a few weeks ago. We don’t have a state income deduction so that was not a concern.

Bethyyy
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Re: Crazy to start 529 without kids??

Post by Bethyyy » Fri Apr 13, 2018 2:06 am

Think I read somewhere that it was 5k max, but just spent a few minutes looking and can’t confirm that. Will figure our first thing tomorrow!

Bethyyy
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Re: Crazy to start 529 without kids??

Post by Bethyyy » Fri Apr 13, 2018 2:20 am

golfCaddy wrote:
Thu Apr 12, 2018 6:27 pm
Life doesn't always turn out the way you expect it to. I don't agree a single person can know they're going to have kids.
That’s such a broad, yet narrow-minded, statement to make. I expressed that I KNOW that I will have kids eventually. If not possible biologically, then through other means. Worst case, if I were dying and unable to ever have kids or whatever, then my estate would be left to my nieces and nephews anyway...
Of course I understand that life doesn’t always work out according to plan, but that doesn’t mean you can’t plan and try to optimize whatever your situation might be.

indexonlyplease
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Re: Crazy to start 529 without kids??

Post by indexonlyplease » Fri Apr 13, 2018 6:36 am

Why not invest for your self and get a great start in life at a early age. Then what ever happens marriage, kids, etc you will be ready and well ahead of the game. Your grandfather gave you a great gift. I am sure he wanted you to use it to have a better life.

So, imagine the money is invested for long term. You are done with college working in your career and making a good salary. But wait, life is even better because each year you can take some of the money earned on that 1 mil. and use it for what ever you want.

I think you should also look at talking to a Vangaurd advisor. It is free. See how they would have you invest the money. If you decide to invest the fee is small.

This would be a lot better than making mistakes. And you have someone to talk to about your investments before you make a bad mistake.

Remember this was your grandfather's gift to improve your life.

Also, don't worry about kids and college now. To many do. Many of us have kid that went to college with out the 529 and graduated without college debt. Why because the parents were set with their investments.
Last edited by indexonlyplease on Fri Apr 13, 2018 6:38 am, edited 1 time in total.

3funder
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Re: Crazy to start 529 without kids??

Post by 3funder » Fri Apr 13, 2018 6:36 am

I don't think you should open a 529 account without kids. Here's why:

-The windfall is substantial. You won't need investment growth to pay for business school.
-You aren't certain about business school, but even if you were, I highly doubt you'd wait long enough to begin the program to realize substantial gains from the contributions to your account. You don't want to wait until you're in your 40s to start, do you?

In short, you lack the need, certainty, and time (none of which is your fault or a flaw -- it just is what it is).

wfrobinette
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Re: Crazy to start 529 without kids??

Post by wfrobinette » Fri Apr 13, 2018 7:08 am

Bethyyy wrote:
Wed Apr 11, 2018 9:11 pm
Hello, so excited to find this community! I recently inherited a very large sum of money from my grandfather. Years ago, he had given me a Boglehead guide to investing book; but as a college student at the time with no debt, little income, and no savings, I read a few pages then filed it away.

Sorry for the long introduction. Anyway, now I’m 27 and single and have $1M heading my way in the next few weeks. I maxed my Roth IRA for 2017, but that’s the extent of my investments. I don’t have 401k options at the moment.

Sooo would it be totally insane to invest the max toward a 529 with myself as the beneficiary? I’ve always thought about getting my MBA, but not sure I ever will. I DO know that I will have kids someday. So a 529 basically seems like a Roth that might actually be useful earlier (since kids would reach college before I reach retirement).
Any downsides I need to be aware of (other than the obvious that I don’t have kids or they don’t go to college, which I’m not worried about)? Assuming I do have kids, is there a better investment option that would earn more on that max 5k a year than the 529?
I wouldn't do it yet. You plan to have kids but you or your partner could be sterile, you could change your mind, your kid may not be able to attend college, etc. As others have said the 529 could lose value and really won't have significant growth in the short term. For a traditional MBA you've only got about 3 more years to choose that path or you'll need to go the part-time/online route.

I'd get that money invested ASAP in your desired AA. Set up your emergency fund in either ST govt bonds or cash, Unfortunately, the vast majority of it will be taxable account. It will kick off ~$20k or more a year in dividends that can fund your Roth IRA provided you have a job or pay tuition later if you so choose or you can reinvest the difference between the total dividend-tax obligation. I would not reinvest dividends in one of the stock funds automatically unless you'll have the cash to cover the tax on the dividends. You certainly don't want to sell investments to pay the tax.

Another options is to start a business with some of that cash.

You now have a huge head start and If you do this right you can be FI in your 40's or early 50's. Doesn't mean you have to retire but it will give you options that most people will never have.

MikeG62
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Re: Crazy to start 529 without kids??

Post by MikeG62 » Fri Apr 13, 2018 7:38 am

Bethyyy wrote:
Wed Apr 11, 2018 9:11 pm

...Sooo would it be totally insane to invest the max toward a 529 with myself as the beneficiary? I’ve always thought about getting my MBA, but not sure I ever will. I DO know that I will have kids someday.
I don't think this is a bad idea at all. Not sure I would invest "the max", but certainly putting a chunk in a 529 and investing it aggressively (high equity allocation) given the very long time horizon seems to make sense to me.

FWIW, DW and I have a fair amount of funds left in our daughter's 529 accounts (~$50K). Our plan is to leave those funds invested in the 529 (with an aggressive asset allocation) and repurpose for potential future grandchildren. It feels like a great head start on helping my daughter's to fund their future kids education.
Real Knowledge Comes Only From Experience

aprilcpa
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Re: Crazy to start 529 without kids??

Post by aprilcpa » Fri Apr 13, 2018 8:53 am

My advice, from someone who received a windfall.

Put the money in the bank (or separate banks for FDIC protection) and let it sit for a year. DO NOT DO ANYTHING FOR AT LEAST A YEAR!!!!!

TRUST ME!!!

-buzz-
Posts: 82
Joined: Thu Apr 05, 2018 1:43 pm
Location: USA

Re: Crazy to start 529 without kids??

Post by -buzz- » Fri Apr 13, 2018 11:08 am

aprilcpa wrote:
Fri Apr 13, 2018 8:53 am
My advice, from someone who received a windfall.

Put the money in the bank (or separate banks for FDIC protection) and let it sit for a year. DO NOT DO ANYTHING FOR AT LEAST A YEAR!!!!!

TRUST ME!!!
I agree with that. Go slow.

Do get an up to date Will in place immediately. That's important given the size of your estate and not something a lot of 27 year olds think about.

Don't start a 529 right now. There are no appreciable tax savings if you use it within a few years to pay for your own MBA. Once babies come along, you'll have plenty of time for a 529 to work and a large nest egg to fund it. College expenses for future children will never be a concern if you manage the windfall well.

Assuming you will invest the money and not spend it, the only thing a 529 will do for you is save some taxes ~20 years from now. The difference between doing it now and after babies are born is negligible in the long run.
Bethyyy wrote:
Thu Apr 12, 2018 11:41 pm
No, I’m not self-employed. Just have a shitty temporary job while I figure out my life.
So... you're 27, in a crummy job, considering an MBA, and have the means to get it without going into debt?

Jump on that right away. Pick a reasonable cost program, pay cash, and get it done before you are 30. This will improve your competitiveness for better jobs in the future and increase your lifetime earning potential. Speaking from experience, it will be easier to complete the degree prior to having children.

Good luck!

Bfwolf
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Re: Crazy to start 529 without kids??

Post by Bfwolf » Fri Apr 13, 2018 11:46 am

I don't think this is a crazy idea, especially since you live in a state that offers a deduction for 529 contributions. It's a calculated risk. Yes, there's the possibility that you won't need that money for education expenses. But new parents don't know they'll need the money for education expenses either. If there's a 90% chance of needing the money for education expenses, then the expected return of putting it in the 529 is almost certainly going to be positive.

golfCaddy
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Re: Crazy to start 529 without kids??

Post by golfCaddy » Fri Apr 13, 2018 2:01 pm

Bethyyy wrote:
Fri Apr 13, 2018 2:20 am
golfCaddy wrote:
Thu Apr 12, 2018 6:27 pm
Life doesn't always turn out the way you expect it to. I don't agree a single person can know they're going to have kids.
That’s such a broad, yet narrow-minded, statement to make. I expressed that I KNOW that I will have kids eventually. If not possible biologically, then through other means. Worst case, if I were dying and unable to ever have kids or whatever, then my estate would be left to my nieces and nephews anyway...
Of course I understand that life doesn’t always work out according to plan, but that doesn’t mean you can’t plan and try to optimize whatever your situation might be.
You don't need to convince me of anything. You are the one who created a thread asking other people for advice.

youngpleb
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Location: VA, USA

Re: Crazy to start 529 without kids??

Post by youngpleb » Fri Apr 13, 2018 2:11 pm

If you are pretty sure you are going to go to grad school, then I'd definitely start it.

If you are pretty sure you are going to have kids one day, I'd definitely start it too. Maybe not "the max" because depending on your state that can be a huge chunk of money (i.e. my state Virginia is $500,000), but if you invested say $10,000 into one now and have a child in the next 8 years, add 18 years for that to compound from that date and it will most likely be a nice chunk of change. Maybe not enough to fully pay, but once you have taken the time to really think over your windfall management, you could easily pay the difference with your earnings (or better yet contribute more to the 529 once the child is born, with said earnings).
27. Always learning.

b4nash
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Re: Crazy to start 529 without kids??

Post by b4nash » Fri Apr 13, 2018 2:37 pm

I started a 529 account without kids several years ago while I was single. I fund it every year up to the amount I can deduct on my state income taxes, after maxing out my 401K, Roth IRA, and HSA.

WhiteMaxima
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Re: Crazy to start 529 without kids??

Post by WhiteMaxima » Fri Apr 13, 2018 3:03 pm

Definitely 529. Not only so, do mega 529. Think of no inherit. The 1 mil is a windfall, let it grow exponentially tax free. If the the beneficiary is you, there is no gift event. Name a successor, pass grandpa's legacy forever.

kaneohe
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Re: Crazy to start 529 without kids??

Post by kaneohe » Fri Apr 13, 2018 7:07 pm

Bethyyy wrote:
Fri Apr 13, 2018 1:08 am
..........................................................

what would be the downside of investing a small amount in a 529?
Very worst case is I never go back to school, never have kids, and my brothers never have kids..so I suffer a penalty on withdrawing my contributions (but not on the earnings).
..........................................................
https://www.savingforcollege.com/questi ... icle_id=21

This might be backwards?

Patrick584
Posts: 4
Joined: Wed Sep 06, 2017 8:38 pm

Re: Crazy to start 529 without kids??

Post by Patrick584 » Fri Apr 13, 2018 8:02 pm

I started a 529 plan before having a kid and I’m glad I did. In addition to the flexible ways to spend it on education the penalty for withdrawal is not that bad and if far enough out it could be less than the impact of ongoing dividends & capital gains taxes. If it is money earmarked for education or retirement as a backup you should make use of the shelter. I would even suggest exceeding the 5k as you will be fighting taxes on your other investments. It’s amazing how many different parties lay claim to your investment income.

Bethyyy
Posts: 15
Joined: Wed Apr 11, 2018 8:25 pm

Re: Crazy to start 529 without kids??

Post by Bethyyy » Sat Apr 14, 2018 2:13 am

aprilcpa wrote:
Fri Apr 13, 2018 8:53 am
My advice, from someone who received a windfall.

Put the money in the bank (or separate banks for FDIC protection) and let it sit for a year. DO NOT DO ANYTHING FOR AT LEAST A YEAR!!!!!

TRUST ME!!!
I’ve heard this advice a few times and completely agree about waiting to make big decisions. I actually just found out about the inheritance a few weeks ago and it’ll be at least another month (or few) until I have the money. So it’s important for me to at least have a basic plan for where to put the money by the time I get it. If anything, keeping it in my basic savings account would make the money easier or more tempting to spend...getting most of it into logical investments that I’ve spent a few months researching and learning about makes more sense to me!
I really can’t emphasize enough how much I agree with this plan though. I’m saddened and terrified watching some relatives spend their similar inheritances before they even have the money.

Bethyyy
Posts: 15
Joined: Wed Apr 11, 2018 8:25 pm

Re: Crazy to start 529 without kids??

Post by Bethyyy » Sat Apr 14, 2018 2:23 am

-buzz- wrote:
Fri Apr 13, 2018 11:08 am
aprilcpa wrote:
Fri Apr 13, 2018 8:53 am
My advice, from someone who received a windfall.

Put the money in the bank (or separate banks for FDIC protection) and let it sit for a year. DO NOT DO ANYTHING FOR AT LEAST A YEAR!!!!!

TRUST ME!!!
I agree with that. Go slow.

Do get an up to date Will in place immediately. That's important given the size of your estate and not something a lot of 27 year olds think about.
Do I really need to be worried about a will now? This might sound dumb, but I just assumed that everything would go to my parents (or brothers if something happened to them)...any advantage to spelling that out?

Bethyyy
Posts: 15
Joined: Wed Apr 11, 2018 8:25 pm

Re: Crazy to start 529 without kids??

Post by Bethyyy » Sat Apr 14, 2018 2:38 am

golfCaddy wrote:
Fri Apr 13, 2018 2:01 pm
Bethyyy wrote:
Fri Apr 13, 2018 2:20 am
golfCaddy wrote:
Thu Apr 12, 2018 6:27 pm
Life doesn't always turn out the way you expect it to. I don't agree a single person can know they're going to have kids.
That’s such a broad, yet narrow-minded, statement to make. I expressed that I KNOW that I will have kids eventually. If not possible biologically, then through other means. Worst case, if I were dying and unable to ever have kids or whatever, then my estate would be left to my nieces and nephews anyway...
Of course I understand that life doesn’t always work out according to plan, but that doesn’t mean you can’t plan and try to optimize whatever your situation might be.
You don't need to convince me of anything. You are the one who created a thread asking other people for advice.
Sorry for my rude response to your post. I really appreciate all of the advice and help I’ve already gotten from this forum.
I also agree with what you said about life not always working out according to plan. People make investment decisions based on their future plans all the time. Sometimes it works out and sometimes it doesn’t.

For me, this relatively small investment seems like a reasonable option to put a bit of money for the tax benefits as well as some potential peace of mind later on. I’m talking less than 1% of my current net worth to potentially fund an education.

Bethyyy
Posts: 15
Joined: Wed Apr 11, 2018 8:25 pm

Re: Crazy to start 529 without kids??

Post by Bethyyy » Sat Apr 14, 2018 2:44 am

kaneohe wrote:
Fri Apr 13, 2018 7:07 pm
Bethyyy wrote:
Fri Apr 13, 2018 1:08 am
..........................................................

what would be the downside of investing a small amount in a 529?
Very worst case is I never go back to school, never have kids, and my brothers never have kids..so I suffer a penalty on withdrawing my contributions (but not on the earnings).
..........................................................
https://www.savingforcollege.com/questi ... icle_id=21

This might be backwards?
Oops, yep think I had it backwards. Thanks!

Bethyyy
Posts: 15
Joined: Wed Apr 11, 2018 8:25 pm

Re: Crazy to start 529 without kids??

Post by Bethyyy » Sat Apr 14, 2018 3:06 am

Bfwolf wrote:
Fri Apr 13, 2018 11:46 am
I don't think this is a crazy idea, especially since you live in a state that offers a deduction for 529 contributions. It's a calculated risk. Yes, there's the possibility that you won't need that money for education expenses. But new parents don't know they'll need the money for education expenses either. If there's a 90% chance of needing the money for education expenses, then the expected return of putting it in the 529 is almost certainly going to be positive.
Yeah that’s what I was thinking! Guess I might’ve done a poor job explaining it though.
There’s always a risk with any kind of investment, but I actually don’t think this one is that large. I really like your comparison of my situation to new parents who don’t know if their child will need money for education. I see it as the same risk. And I’m not afraid of the risk as I know that I will have kids, and if somehow I don’t then I won’t need this money anyway (and my nieces and nephews will get it, which makes me happy too).

Grt2bOutdoors
Posts: 18603
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Location: New York

Re: Crazy to start 529 without kids??

Post by Grt2bOutdoors » Sat Apr 14, 2018 9:54 am

Bethyyy wrote:
Sat Apr 14, 2018 2:23 am
-buzz- wrote:
Fri Apr 13, 2018 11:08 am
aprilcpa wrote:
Fri Apr 13, 2018 8:53 am
My advice, from someone who received a windfall.

Put the money in the bank (or separate banks for FDIC protection) and let it sit for a year. DO NOT DO ANYTHING FOR AT LEAST A YEAR!!!!!

TRUST ME!!!
I agree with that. Go slow.

Do get an up to date Will in place immediately. That's important given the size of your estate and not something a lot of 27 year olds think about.
Do I really need to be worried about a will now? This might sound dumb, but I just assumed that everything would go to my parents (or brothers if something happened to them)...any advantage to spelling that out?
The advantage is you spell out exactly who you wish to receive your assets and you diffuse any potential future claims on your estate assets. People can and do sue estates with all sorts of claims indicating decedent promised them some portion of estate or can produce false documents. A will can override a lot of these claims. No will means the court decides who gets the assets.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

-buzz-
Posts: 82
Joined: Thu Apr 05, 2018 1:43 pm
Location: USA

Re: Crazy to start 529 without kids??

Post by -buzz- » Mon Apr 16, 2018 4:46 pm

Grt2bOutdoors wrote:
Sat Apr 14, 2018 9:54 am
Bethyyy wrote:
Sat Apr 14, 2018 2:23 am
-buzz- wrote:
Fri Apr 13, 2018 11:08 am

I agree with that. Go slow.

Do get an up to date Will in place immediately. That's important given the size of your estate and not something a lot of 27 year olds think about.
Do I really need to be worried about a will now? This might sound dumb, but I just assumed that everything would go to my parents (or brothers if something happened to them)...any advantage to spelling that out?
The advantage is you spell out exactly who you wish to receive your assets and you diffuse any potential future claims on your estate assets. People can and do sue estates with all sorts of claims indicating decedent promised them some portion of estate or can produce false documents. A will can override a lot of these claims. No will means the court decides who gets the assets.
Exactly right.

A Will minimizes the chances that your estate gets wrapped up in some kind of family squabble or ends up wasting a chunk of the assets on unnecessary and avoidable legal costs.

People sometimes get crazy when money is involved. Could be a "friend" or family member. More money = more crazy. It is an all-too-common story that disagreements/hurt feelings over an estate leave family members not on speaking terms.

Don't risk leaving your family in a mess. Spend a tiny fraction of the money to put a legal plan in place that tells exactly what should happen. Make sure your accounts have beneficiaries. Think of it as a last kindness to your family that you cared enough to make the financial part easier.

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