spend down 529? continue to contribute?

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gips
Posts: 369
Joined: Mon May 13, 2013 5:42 pm

spend down 529? continue to contribute?

Post by gips » Sun May 20, 2018 8:48 am

- my d is sophomore in the fall, her 529 balance is $85k, her cost to graduate will be $165k
- my s is senior in the fall, his 529 balance is $35k, his cost to graduate is $65K
- the balance of funds will come from taxable accounts

should we:
- transfer funds from s to d to allow it to grow tax-free or
- use all funds next year
- or some other strategy?
- Should we continue to contribute? we are in ny, so we can deduct $10k on new contributions.

thanks,

mcraepat9
Posts: 880
Joined: Thu Jul 16, 2015 11:46 am

Re: spend down 529? continue to contribute?

Post by mcraepat9 » Sun May 20, 2018 1:33 pm

gips wrote:
Sun May 20, 2018 8:48 am
- my d is sophomore in the fall, her 529 balance is $85k, her cost to graduate will be $165k
- my s is senior in the fall, his 529 balance is $35k, his cost to graduate is $65K
- the balance of funds will come from taxable accounts

should we:
- transfer funds from s to d to allow it to grow tax-free don't you get the same benefit from spending the funds in D's 529 and simply contributing new funds to S's 529? or
- use all funds next year assume you are utilizing all other fed tax benefits available to you (i.e. AOTC/LLC etc.)? If so, don't see any downside to using funds and contributing new funds just to get the deduction as needed.
- or some other strategy?
- Should we continue to contribute? we are in ny, so we can deduct $10k on new contributions. if your plan is to pay for the amounts regardless, i think it's a no brainer to continue to contribute. Gains will probably be minimal given the short timetable to usage, but you can at least get the $10k state tax deduction for this year plus the next 3 years?

thanks,
Amateur investors are not cool-headed logicians.

mega317
Posts: 2199
Joined: Tue Apr 19, 2016 10:55 am

Re: spend down 529? continue to contribute?

Post by mega317 » Sun May 20, 2018 2:07 pm

I would contribute for the deduction. When you spend doesn't matter that much. Let's say you're in all bonds with a 3% dividend and 30% combined marginal rate- the current 110k would generate a 1k tax bill. So I'd spend from taxable first but itd not a huge deal and you probably don't want to end up over shooting.

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