How much in 529 is enough to fund college?

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wolfeman
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Re: How much in 529 is enough to fund college?

Post by wolfeman »

vkat wrote: Sun Dec 15, 2019 5:57 pm I am wondering how much budget in 529 is a good amount if u want to fund your child's undergraduate education debt free?
I haven't seen this mentioned yet, so you may want to read up on the American Opportunity Credit to see if it will apply to you (for one, there are MAGI limits in order to claim it). $2500 tax credit on $4000 spent for higher ed. Credit is good for 4 years per dependent. The costs applied towards this credit cannot come from your 529 plan (no double-dipping on the tax benefits). And the credit is probably better than most of the credits or deductions you will receive from your state's 529 plan. So, you would want to pay at least $16,000 of the college costs from money outside of the 529 plan.
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Re: How much in 529 is enough to fund college?

Post by SchruteB&B »

Van Down By Da River wrote: Mon Dec 16, 2019 2:19 pm
I did the math a few years ago (could be out of date) and here is what I am budgeting:

*Estimated Future Costs (4 Years) - $150,000 In State (IL) - $300,000 Out of State
I don’t know how far in the future you are estimating, but cost of attendance at flagship UIUC is $124-144k for four years this year.
H-Town
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Re: How much in 529 is enough to fund college?

Post by H-Town »

KlangFool wrote: Sun Dec 15, 2019 7:40 pm
vkat wrote: Sun Dec 15, 2019 5:57 pm I am wondering how much budget in 529 is a good amount if u want to fund your child's undergraduate education debt free?
OP,

Zero. For most people, there is no reason to save for your child's college education.

A) At low income and low saving rate,

i) Why save money for college education and hurt your kid's chances for financial aid?

ii) There is not enough money for retirement funding. Why worry about college education funding?

B) At a high income and high saving rates, there is no need to save for college education. The annual saving is more than enough to pay for a college education. If the retirement is fully funded when the kid goes to college, the retirement savings could be suspended for a few years to pay for a college education.

KlangFool
At a high income and high saving rates, people should be able to max out retirement savings and save even more in taxable accounts. They should use 529 account to avoid capital tax gain for 15-20 years of growth. With this situation, we are looking at the question: whether you are paying tax on capital gain or not.

This is not the issue of unemployment or the ability of cash flow college expenses. Money is fungible. In 15-20 years later, you can cash flow college expenses if you want. Just withdraw the same amount of money from 529 and put it in your Roth IRA and other accounts. And you don't have to pay any taxes at all.

529 can be transferred to grand kids and future generations. The money will continue growing tax free while it sit there.

If you want to pay unnecessary taxes, be my guest. Just imagine someone recommends using taxable brokerage accounts instead of Roth IRA.
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SmileyFace
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Re: How much in 529 is enough to fund college?

Post by SmileyFace »

KlangFool wrote: Sun Dec 15, 2019 7:40 pm
B) At a high income and high saving rates, there is no need to save for college education.
KlangFool
... provided you like paying extra taxes :)

For me - I am enjoying funding kids college educations with money that has grown for 20+ years tax-free.

OP: Provided you are fully funding your retirement accounts, are unlikely to be eligible for financial aid, and have good emergency fund savings - the 529 plan is a no-brainer place to save up for college costs (Provided you want to pay for your kids' college of course). I planned for 4-years of in-state tuition+Room/Board for both of my kids. I saved thousands in taxes by utilizing 529 plans for this.
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Re: How much in 529 is enough to fund college?

Post by KlangFool »

H-Town wrote: Tue Dec 17, 2019 12:30 pm
KlangFool wrote: Sun Dec 15, 2019 7:40 pm
vkat wrote: Sun Dec 15, 2019 5:57 pm I am wondering how much budget in 529 is a good amount if u want to fund your child's undergraduate education debt free?
OP,

Zero. For most people, there is no reason to save for your child's college education.

A) At low income and low saving rate,

i) Why save money for college education and hurt your kid's chances for financial aid?

ii) There is not enough money for retirement funding. Why worry about college education funding?

B) At a high income and high saving rates, there is no need to save for college education. The annual saving is more than enough to pay for a college education. If the retirement is fully funded when the kid goes to college, the retirement savings could be suspended for a few years to pay for a college education.

KlangFool
At a high income and high saving rates, people should be able to max out retirement savings and save even more in taxable accounts. They should use 529 account to avoid capital tax gain for 15-20 years of growth. With this situation, we are looking at the question: whether you are paying tax on capital gain or not.

This is not the issue of unemployment or the ability of cash flow college expenses. Money is fungible.
H-Town,

You are assuming that the parent is not permanently unemployed or under-employed over the next 15 to 20 years.

<<whether you are paying tax on capital gain or not. >>

Why would someone pay capital gain tax on their taxable account if they are not selling their investment? If the parents are fully-employed, they do not need to sell the investment. If they are unemployed, they would be selling the investment at zero taxes.


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H-Town
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Re: How much in 529 is enough to fund college?

Post by H-Town »

KlangFool wrote: Tue Dec 17, 2019 12:43 pm
H-Town wrote: Tue Dec 17, 2019 12:30 pm
KlangFool wrote: Sun Dec 15, 2019 7:40 pm
vkat wrote: Sun Dec 15, 2019 5:57 pm I am wondering how much budget in 529 is a good amount if u want to fund your child's undergraduate education debt free?
OP,

Zero. For most people, there is no reason to save for your child's college education.

A) At low income and low saving rate,

i) Why save money for college education and hurt your kid's chances for financial aid?

ii) There is not enough money for retirement funding. Why worry about college education funding?

B) At a high income and high saving rates, there is no need to save for college education. The annual saving is more than enough to pay for a college education. If the retirement is fully funded when the kid goes to college, the retirement savings could be suspended for a few years to pay for a college education.

KlangFool
At a high income and high saving rates, people should be able to max out retirement savings and save even more in taxable accounts. They should use 529 account to avoid capital tax gain for 15-20 years of growth. With this situation, we are looking at the question: whether you are paying tax on capital gain or not.

This is not the issue of unemployment or the ability of cash flow college expenses. Money is fungible.
H-Town,

You are assuming that the parent is not permanently unemployed or under-employed over the next 15 to 20 years.

<<whether you are paying tax on capital gain or not. >>

Why would someone pay capital gain tax on their taxable account if they are not selling their investment? If the parents are fully-employed, they do not need to sell the investment. If they are unemployed, they would be selling the investment at zero taxes.


KlangFool
I don't think you fully understand the tax-free feature of 529 account. Maybe be open your mind and think it through some more?

1) When you cash flow your kids' college expense and withdraw from 529 at the same time, you esssentially "harvest capital gain" tax free. Let's say the college expense for a given year is 40k and you have >40k capital gain in the 529. This 40k coming from 529 would be tax free, period. Then you can choose to invest this 40k in any way you want.

2) If you are unemployed and forced to sell investments, those investments would fill out lower tax brackets, which you can use for Roth conversion and take even more tax break.

I'm just trying to understand why would you say no to tax free opportunities.
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Re: How much in 529 is enough to fund college?

Post by KlangFool »

H-Town wrote: Tue Dec 17, 2019 1:06 pm
I don't think you fully understand the tax-free feature of 529 account. Maybe be open your mind and think it through some more?

1) When you cash flow your kids' college expense and withdraw from 529 at the same time, you esssentially "harvest capital gain" tax free. Let's say the college expense for a given year is 40k and you have >40k capital gain in the 529. This 40k coming from 529 would be tax free, period. Then you can choose to invest this 40k in any way you want.

2) If you are unemployed and forced to sell investments, those investments would fill out lower tax brackets, which you can use for Roth conversion and take even more tax break.

I'm just trying to understand why would you say no to tax free opportunities.
H-Town,

1) If I do not sell in order to "cash flow" college education, I do not need to pay capital gain tax. So, why should I need 529?

2) If I am unemployed, I would be selling the taxable investment at the long-term capital gain tax rate.

<<I'm just trying to understand why would you say no to tax free opportunities.>>

3) Your base assumption is someone could not be permanently unemployed or under-employed in their 40s and 50s. If you get rid of that assumption, then, 529 absolutely does not make any sense.

KlangFool
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H-Town
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Re: How much in 529 is enough to fund college?

Post by H-Town »

KlangFool wrote: Tue Dec 17, 2019 1:15 pm
H-Town wrote: Tue Dec 17, 2019 1:06 pm
I don't think you fully understand the tax-free feature of 529 account. Maybe be open your mind and think it through some more?

1) When you cash flow your kids' college expense and withdraw from 529 at the same time, you esssentially "harvest capital gain" tax free. Let's say the college expense for a given year is 40k and you have >40k capital gain in the 529. This 40k coming from 529 would be tax free, period. Then you can choose to invest this 40k in any way you want.

2) If you are unemployed and forced to sell investments, those investments would fill out lower tax brackets, which you can use for Roth conversion and take even more tax break.

I'm just trying to understand why would you say no to tax free opportunities.
H-Town,

1) If I do not sell in order to "cash flow" college education, I do not need to pay capital gain tax. So, why should I need 529?

2) If I am unemployed, I would be selling the taxable investment at the long-term capital gain tax rate.

<<I'm just trying to understand why would you say no to tax free opportunities.>>

3) Your base assumption is someone could not be permanently unemployed or under-employed in their 40s and 50s. If you get rid of that assumption, then, 529 absolutely does not make any sense.

KlangFool
I get your point. Perhaps your goals are different. We plan to retire in our early 40s. We will do a lot of Roth conversion and I will enjoy the tax-free benefit of 529 accounts.
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Re: How much in 529 is enough to fund college?

Post by Jack FFR1846 »

Something I have not heard is: If one were to tell their child "I'm giving you $x and expect you to take out your own loans for the remainder", what loans beyond Stafford ($5500 first year) would they find without a co-signer. I looked with my older son for info some years ago. What we found was: zero. This isn't enough money for even community college in my state.
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Re: How much in 529 is enough to fund college?

Post by Broken Man 1999 »

Goals do not have to be exclusive.

It is entirely possible for many to:
1. Own a home. AND
2. Own a car that isn't a hooptie. AND
3. Save for retirement. AND
4. Pay for your children's education.

Broken Man 1999
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aerosurfer
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Re: How much in 529 is enough to fund college?

Post by aerosurfer »

KlangFool wrote: Tue Dec 17, 2019 1:15 pm
H-Town wrote: Tue Dec 17, 2019 1:06 pm
I don't think you fully understand the tax-free feature of 529 account. Maybe be open your mind and think it through some more?

1) When you cash flow your kids' college expense and withdraw from 529 at the same time, you esssentially "harvest capital gain" tax free. Let's say the college expense for a given year is 40k and you have >40k capital gain in the 529. This 40k coming from 529 would be tax free, period. Then you can choose to invest this 40k in any way you want.

2) If you are unemployed and forced to sell investments, those investments would fill out lower tax brackets, which you can use for Roth conversion and take even more tax break.

I'm just trying to understand why would you say no to tax free opportunities.
H-Town,

1) If I do not sell in order to "cash flow" college education, I do not need to pay capital gain tax. So, why should I need 529?

2) If I am unemployed, I would be selling the taxable investment at the long-term capital gain tax rate.

<<I'm just trying to understand why would you say no to tax free opportunities.>>

3) Your base assumption is someone could not be permanently unemployed or under-employed in their 40s and 50s. If you get rid of that assumption, then, 529 absolutely does not make any sense.

KlangFool


My glide path during my contributing years has me in a surplus (all tax advantaged buckets are filled plus taxable goals) to sustain an unemployment and continued underemployment, based on the fact it hasn’t presently happened and my field and company is in a current stable environment. That surplus can be used to save present tax dollars via 529 state tax deduction, while growing future dollars to be used for college savings I don’t have to cash flow, and hedging that your situation won’t happen but if it does I can always tap up to all of the 529 for my own survival.

Plus cash flowing money through the 529 during college years for continued state tax savings. My state does have a deduction 20% on up to $5k contribution.

Your logic is sound, but the one size fits all approach doesn’t make sense to me.
SchruteB&B
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Re: How much in 529 is enough to fund college?

Post by SchruteB&B »

Jack FFR1846 wrote: Tue Dec 17, 2019 1:32 pm Something I have not heard is: If one were to tell their child "I'm giving you $x and expect you to take out your own loans for the remainder", what loans beyond Stafford ($5500 first year) would they find without a co-signer. I looked with my older son for info some years ago. What we found was: zero. This isn't enough money for even community college in my state.
This is correct. The amount of the government loans goes up from $5500 for sophomore, junior and senior year; I recollect the total amount for 4 years is about $27k. Otherwise as you noted the loans require cosigners and then they are obviously the cosigners loans too.
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Re: How much in 529 is enough to fund college?

Post by Grt2bOutdoors »

SchruteB&B wrote: Tue Dec 17, 2019 4:21 pm
Jack FFR1846 wrote: Tue Dec 17, 2019 1:32 pm Something I have not heard is: If one were to tell their child "I'm giving you $x and expect you to take out your own loans for the remainder", what loans beyond Stafford ($5500 first year) would they find without a co-signer. I looked with my older son for info some years ago. What we found was: zero. This isn't enough money for even community college in my state.
This is correct. The amount of the government loans goes up from $5500 for sophomore, junior and senior year; I recollect the total amount for 4 years is about $27k. Otherwise as you noted the loans require cosigners and then they are obviously the cosigners loans too.
That amount for the Stafford loan has not changed in a very long time. I think it was that amount when I was in grad school over 20 years ago.
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Harry Livermore
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Re: How much in 529 is enough to fund college?

Post by Harry Livermore »

Broken Man 1999 wrote: Tue Dec 17, 2019 1:37 pm Goals do not have to be exclusive.

It is entirely possible for many to:
1. Own a home. AND
2. Own a car that isn't a hooptie. AND
3. Save for retirement. AND
4. Pay for your children's education.

Broken Man 1999
Correct. It may mean sacrifice, the car may not be a hooptie but might be used, and the house might need new windows until one or two of those kids finish college, but it's doable. For everyone.
For many (if not most) Bogleheads, their income precludes any sort of "need based" aid. If your child is a great student, many schools offer merit aid.
Many people erroneously assume that their child should attend the absolute "best" school, without considering affordability. There is a wide spectrum of schools, and a best-fit is possible for any family, combining affordability, academic rigor, and campus culture.
Save until it hurts. Save as much as you can manage in the 529 and your retirement accounts.
When I started having kids in the late 1990s, I looked at the trajectory of college costs. My own parents were caught unawares in the 1980s (my dad put himself through a local college in the early 1960s, working at a gas station at night) and struggled to put 4 of us through. I tried to learn from their experience. I figured, when I started that first Coverdell, college costs would continue to inflate at the same insane level as the previous 20 years. By the time my youngest was born in 2006, I looked ahead and figured that by the time he went, elite schools would be $80K per year. Friends, coworkers, and siblings thought I was nuts ("the government will do something about it"; "the market will reject those costs and the elites will have to lower prices"; etc.) In fact, as it turns out, I may have underestimated costs (not that any of my kids will be going to a super elite or Ivy school...)
The point is, do as much as you can without hobbling your own retirement. As KlangFool points out, you may be chronically underemployed in your 50s. But by my logic, and in contrary opinion to his, this is all the more reason to save as much as you can. Start early and be ready for ageism or industry disruption later on. I can tell you from first hand experience. My industry has changed, and I am slightly underemployed (self employed but business is a little rocky) My peak years were 2008-2015, where I routinely made twice what I'm making now. During that period, instead of running out and buying $1200 shoes and Porsches, my wife and I re-committed to sacrifice and saving. And I can tell you right now we are glad we did.
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Last edited by Harry Livermore on Thu Dec 19, 2019 7:47 pm, edited 1 time in total.
986racer
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Re: How much in 529 is enough to fund college?

Post by 986racer »

wolfeman wrote: Tue Dec 17, 2019 9:58 am
vkat wrote: Sun Dec 15, 2019 5:57 pm I am wondering how much budget in 529 is a good amount if u want to fund your child's undergraduate education debt free?
I haven't seen this mentioned yet, so you may want to read up on the American Opportunity Credit to see if it will apply to you (for one, there are MAGI limits in order to claim it). $2500 tax credit on $4000 spent for higher ed. Credit is good for 4 years per dependent. The costs applied towards this credit cannot come from your 529 plan (no double-dipping on the tax benefits). And the credit is probably better than most of the credits or deductions you will receive from your state's 529 plan. So, you would want to pay at least $16,000 of the college costs from money outside of the 529 plan.
MAGI limits can be avoided by gifting appreciated stock to the college student to have them pay part of the bill. With kiddie tax rules for the student you can avoid tax on almost 20k of capital gains
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Re: How much in 529 is enough to fund college?

Post by ChicagoC »

KlangFool wrote: Tue Dec 17, 2019 1:15 pm
1) If I do not sell in order to "cash flow" college education, I do not need to pay capital gain tax. So, why should I need 529?

KlangFool
Assuming you max other retirement vehicles, a 529 is s great place for funds that would otherwise go into the taxable. Even if you don’t need it to cash flow college, it gives you an opportunity to reestablish your cost basis by putting the money right back in your taxable.
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Wiggums
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Re: How much in 529 is enough to fund college?

Post by Wiggums »

986racer wrote: Thu Dec 19, 2019 5:43 pm
wolfeman wrote: Tue Dec 17, 2019 9:58 am
vkat wrote: Sun Dec 15, 2019 5:57 pm I am wondering how much budget in 529 is a good amount if u want to fund your child's undergraduate education debt free?
I haven't seen this mentioned yet, so you may want to read up on the American Opportunity Credit to see if it will apply to you (for one, there are MAGI limits in order to claim it). $2500 tax credit on $4000 spent for higher ed. Credit is good for 4 years per dependent. The costs applied towards this credit cannot come from your 529 plan (no double-dipping on the tax benefits). And the credit is probably better than most of the credits or deductions you will receive from your state's 529 plan. So, you would want to pay at least $16,000 of the college costs from money outside of the 529 plan.
MAGI limits can be avoided by gifting appreciated stock to the college student to have them pay part of the bill. With kiddie tax rules for the student you can avoid tax on almost 20k of capital gains
I wish I had done at least a partial 529. :-(
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RickBoglehead
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Re: How much in 529 is enough to fund college?

Post by RickBoglehead »

Wiggums wrote: Mon Dec 16, 2019 2:28 pm
vkat wrote: Sun Dec 15, 2019 5:57 pm I am wondering how much budget in 529 is a good amount if u want to fund your child's undergraduate education debt free?
They way I read your question, you don’t want to overfund the child’s 529 unless the residual amount can be transferred to another child or grandchild.

If you’re looking for a percentage, you can fund the 529 at 80% of the published cost of attendance amount times four years.

I hope this response helps.
Clear, concise, and answers the OP's question. Many of the answers seem to be for questions not asked.

College costs are widely disparate. A 4 year state school in state is also widely different depending on the state. OP needs to figure out what type of school he will save for, how many years left, estimate market returns,... Most good 529 sites discuss this.

Excess can fund future generations, we have enough thanks to the market, and 18+ years to go (except for one which has 8 years to go), that we hope to contribute to every grandchild's education. But their parents have to contribute also.

I think the idea of using Roth IRAs to fund a child's education is a really bad one. I funded my Roth retirement accounts to retire with.
Last edited by RickBoglehead on Fri Dec 20, 2019 8:51 am, edited 1 time in total.
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1789
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Re: How much in 529 is enough to fund college?

Post by 1789 »

Grt2bOutdoors wrote: Sun Dec 15, 2019 7:51 pm
1789 wrote: Sun Dec 15, 2019 7:41 pm I target around 15k for tuition and fees and 15k for room and board for public universities in OR. I don't know if these are good numbers thou. My son is 2.5 years old and we are plannning to stop contributing once we reach to around 60k and see the results over years. We don't want to overfund it so the rest should come from taxable or after tax roth monies in roths etc. i wrote this to give you an idea of what we do. I dont know for sure if what we are doing is ideal.
The Vanguard college planner estimates cost from age 18-22 for your child including room and board for Oregon State University is $193,000. I don't think you'll over fund it.
Thank you. I was not aware of this tool for some reason. Sounds like a good approximation model.
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assetalloc
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Re: How much in 529 is enough to fund college?

Post by assetalloc »

soccerrules wrote: Mon Dec 16, 2019 2:45 pm
vkat wrote: Mon Dec 16, 2019 2:33 pm
Also I would fund 529 in the projected 70- 80% range and then save extra in a taxable account under your name if you want too. We have chosen to cash flow some of the expenses as well along the way. (Books, Room/Board monthly in form of Rent, Food allowance, bills)
One may need to account for travel costs as well. Our child went to school appox. 2000miles away from home. We were surprised to know that airlines jack up the prices to 3X on the day college students travel (breaks/ semester). That adds up to $3k-$4k in travel costs per year. ~$75K is not an outrageous number for private schools. Even with some loans and scholarships, you have to plan to shell out big amount for college expenses. Afterall, someone has to pay for school athletes, scholarships to other students, etc. :oops: :moneybag
529b covers only few things, other expenses such as travel, etc comes from personal accounts.
wrongfunds
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Re: How much in 529 is enough to fund college?

Post by wrongfunds »

stoptothink wrote: Mon Dec 16, 2019 8:36 am
amitb00 wrote: Sun Dec 15, 2019 7:48 pm My daughter is in 8 year medical program aka PLME at Brown University - an Ivy League school. Ivies only offer need based aid and so we are paying sticker price. Cost in undergrad is 75k every year and in med school I am assuming 80-85K every year.
You are talking about 600K expense. So upper limit is pretty hefty.
What percentage of med school students have their parents footing the bill?
All Asian parents; then again most of the med school students are Asian :-) I thought that was common knowledge.
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Re: How much in 529 is enough to fund college?

Post by LeftCoastIV »

I found this tool helpful when planning our college savings goals:
http://www.savingforcollege.com/college ... /index.php

Like any similar tool, the assumptions drive the outcomes.
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Re: How much in 529 is enough to fund college?

Post by stoptothink »

wrongfunds wrote: Sat Dec 21, 2019 4:08 pm
stoptothink wrote: Mon Dec 16, 2019 8:36 am
amitb00 wrote: Sun Dec 15, 2019 7:48 pm My daughter is in 8 year medical program aka PLME at Brown University - an Ivy League school. Ivies only offer need based aid and so we are paying sticker price. Cost in undergrad is 75k every year and in med school I am assuming 80-85K every year.
You are talking about 600K expense. So upper limit is pretty hefty.
What percentage of med school students have their parents footing the bill?
All Asian parents; then again most of the med school students are Asian :-) I thought that was common knowledge.
I know that was a joke, but nonetheless, I have 3 (Asian) former employees currently putting themselves through med school.
carminered2019
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Re: How much in 529 is enough to fund college?

Post by carminered2019 »

call me a bad dad but I do have a promissory note from my daughter to pay back after graduating from CRNA school, yes 300k+ :D
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MillennialFinance19
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Re: How much in 529 is enough to fund college?

Post by MillennialFinance19 »

We fight with this all the time. Going to aim for $200k per kid and hope it works!
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FandangoDave5010
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Re: How much in 529 is enough to fund college?

Post by FandangoDave5010 »

We never thought about a 529 until our RMDs started coming in from our IRAs. Not wanting to reinvest the money in another savings account, we set up a TO SPENDS checking account with Ally Bank to park RMD cash.

Then our daughter gifted us with a grandchild and that gave us a better use for the money. She will be eight in January and her 529 balance now is $150K with Vanguard. I could splurge and spend $85K for a Ford 150 pickup w/snowplow but my 2010 Nissan Frontier w/ snowplow has only 63K miles and doing fine. If I had to, I would settle for another Nissan Frontier for half the price of the Ford 150 and still fund the 529.

Thanks for all the suggestions but I am aiming for a 529 of $350K. But what's the difference, since her parents will inherit our IRAs anyway. (Who ever thunk that saving for retirement could be so profitable.) From my last comment here regarding 529s, many felt that college admissions officers do or will start looking at 529s for full paying students!
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Re: How much in 529 is enough to fund college?

Post by Thegame14 »

vkat wrote: Sun Dec 15, 2019 5:57 pm I am wondering how much budget in 529 is a good amount if u want to fund your child's undergraduate education debt free?
deoends on their age, and expected school.
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ClevrChico
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Re: How much in 529 is enough to fund college?

Post by ClevrChico »

There is no number for enough or not enough. I had zero college savings and made it work. Others with full rides didn't make it past freshman year.

I'm maxing out the 529 plans and calling it good.
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1789
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Re: How much in 529 is enough to fund college?

Post by 1789 »

ClevrChico wrote: Sun Dec 22, 2019 8:37 am There is no number for enough or not enough. I had zero college savings and made it work. Others with full rides didn't make it past freshman year.

I'm maxing out the 529 plans and calling it good.
You mean max out up-to state tax deduction limit?
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Re: How much in 529 is enough to fund college?

Post by Vulcan »

hbdad wrote: Sun Dec 15, 2019 8:01 pm Maybe I'm misunderstanding your point. It sounds like you suggest not saving money because it will hurt your chances at getting a loan? Because that's what financial aid usually means, loans. So don't save so you can take out more loans?
At most schools, yes.
But at the top 20 or so schools finaid means grants for incomes up to approx. 200K/yr.

For those in that range my recommendation is to max out all available retirement vehicles and, as the next bucket, if your kid is applying to one of the colleges that ignores home equity (link below), to pay off your mortgage before filing financial aid applications.

http://www.thecollegesolution.com/will- ... d-chances/
If you torture the data long enough, it will confess to anything. ~Ronald Coase
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ClevrChico
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Re: How much in 529 is enough to fund college?

Post by ClevrChico »

1789 wrote: Sun Dec 22, 2019 10:24 am
ClevrChico wrote: Sun Dec 22, 2019 8:37 am There is no number for enough or not enough. I had zero college savings and made it work. Others with full rides didn't make it past freshman year.

I'm maxing out the 529 plans and calling it good.
You mean max out up-to state tax deduction limit?
Yes, that's right.
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Re: How much in 529 is enough to fund college?

Post by scubadiver »

scubadiver
Last edited by scubadiver on Sun Jul 12, 2020 12:27 pm, edited 1 time in total.
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Devil's Advocate
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Re: How much in 529 is enough to fund college?

Post by Devil's Advocate »

KlangFool wrote: Sun Dec 15, 2019 7:40 pm
vkat wrote: Sun Dec 15, 2019 5:57 pm I am wondering how much budget in 529 is a good amount if u want to fund your child's undergraduate education debt free?
OP,

Zero. For most people, there is no reason to save for your child's college education.

A) At low income and low saving rate,

i) Why save money for college education and hurt your kid's chances for financial aid?

ii) There is not enough money for retirement funding. Why worry about college education funding?

B) At a high income and high saving rates, there is no need to save for college education. The annual saving is more than enough to pay for a college education. If the retirement is fully funded when the kid goes to college, the retirement savings could be suspended for a few years to pay for a college education.

KlangFool
Ya Klang,

What about those of us who will be retired when our kids go to college??

DA
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Re: How much in 529 is enough to fund college?

Post by KlangFool »

Devil's Advocate wrote: Mon Dec 23, 2019 7:21 pm
KlangFool wrote: Sun Dec 15, 2019 7:40 pm
vkat wrote: Sun Dec 15, 2019 5:57 pm I am wondering how much budget in 529 is a good amount if u want to fund your child's undergraduate education debt free?
OP,

Zero. For most people, there is no reason to save for your child's college education.

A) At low income and low saving rate,

i) Why save money for college education and hurt your kid's chances for financial aid?

ii) There is not enough money for retirement funding. Why worry about college education funding?

B) At a high income and high saving rates, there is no need to save for college education. The annual saving is more than enough to pay for a college education. If the retirement is fully funded when the kid goes to college, the retirement savings could be suspended for a few years to pay for a college education.

KlangFool
Ya Klang,

What about those of us who will be retired when our kids go to college??

DA
Devil's Advocate,

And, why is that a problem?

A) If you have the money to retire and pay for college education, you do that.

B) If you have the money to retire but no money to pay for college education, then, you do not pay for a college education.

C) If you are in between (A) and (B), you provide whatever amount that you can afford.

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Re: How much in 529 is enough to fund college?

Post by Devil's Advocate »

KlangFool wrote: Mon Dec 23, 2019 7:41 pm
Devil's Advocate wrote: Mon Dec 23, 2019 7:21 pm
KlangFool wrote: Sun Dec 15, 2019 7:40 pm
vkat wrote: Sun Dec 15, 2019 5:57 pm I am wondering how much budget in 529 is a good amount if u want to fund your child's undergraduate education debt free?
OP,

Zero. For most people, there is no reason to save for your child's college education.

A) At low income and low saving rate,

i) Why save money for college education and hurt your kid's chances for financial aid?

ii) There is not enough money for retirement funding. Why worry about college education funding?

B) At a high income and high saving rates, there is no need to save for college education. The annual saving is more than enough to pay for a college education. If the retirement is fully funded when the kid goes to college, the retirement savings could be suspended for a few years to pay for a college education.

KlangFool
Ya Klang,

What about those of us who will be retired when our kids go to college??

DA
Devil's Advocate,

And, why is that a problem?

A) If you have the money to retire and pay for college education, you do that.

B) If you have the money to retire but no money to pay for college education, then, you do not pay for a college education.

C) If you are in between (A) and (B), you provide whatever amount that you can afford.

KlangFool
That is a good plan.

DA
:sharebeer
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Re: How much in 529 is enough to fund college?

Post by Vulcan »

Devil's Advocate wrote: Mon Dec 23, 2019 7:21 pm What about those of us who will be retired when our kids go to college??
That is the best possible scenario in terms of financial aid at the "full-need" institutions, so long as taxable assets are not so large as to preclude getting any aid even in the absence of large taxable income.
If you torture the data long enough, it will confess to anything. ~Ronald Coase
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Re: How much in 529 is enough to fund college?

Post by texags00 »

I have about $11k in my states 529 for each daughter, 10 and 7 yo. Sorry if sounds cold, but I prescribe to the , "you cant get loans for retirement, you can for college." Grandparents might help and they will potentially get a sizable inheritance as well from said grandparents. Plenty of scholarships, grants and work study programs out there to make them appreciate working towards a degree as well. I of course will chip in when available when it comes time, but unfortunate my secure, modest retirement funding comes first.
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Re: How much in 529 is enough to fund college?

Post by Xrayman69 »

KlangFool wrote: Tue Dec 17, 2019 12:43 pm
H-Town wrote: Tue Dec 17, 2019 12:30 pm
KlangFool wrote: Sun Dec 15, 2019 7:40 pm
vkat wrote: Sun Dec 15, 2019 5:57 pm I am wondering how much budget in 529 is a good amount if u want to fund your child's undergraduate education debt free?
OP,

Zero. For most people, there is no reason to save for your child's college education.

A) At low income and low saving rate,

i) Why save money for college education and hurt your kid's chances for financial aid?

ii) There is not enough money for retirement funding. Why worry about college education funding?

B) At a high income and high saving rates, there is no need to save for college education. The annual saving is more than enough to pay for a college education. If the retirement is fully funded when the kid goes to college, the retirement savings could be suspended for a few years to pay for a college education.

KlangFool
At a high income and high saving rates, people should be able to max out retirement savings and save even more in taxable accounts. They should use 529 account to avoid capital tax gain for 15-20 years of growth. With this situation, we are looking at the question: whether you are paying tax on capital gain or not.

This is not the issue of unemployment or the ability of cash flow college expenses. Money is fungible.
H-Town,

You are assuming that the parent is not permanently unemployed or under-employed over the next 15 to 20 years.

<<whether you are paying tax on capital gain or not. >>

Why would someone pay capital gain tax on their taxable account if they are not selling their investment? If the parents are fully-employed, they do not need to sell the investment. If they are unemployed, they would be selling the investment at zero taxes.


KlangFool
Would saving in a 401K and the tax savings be a risk due to the ever looming potential risk of being long term unemployed or underemployed? There is currently not an exception for a 10% penalty for early withdrawal for living expenses. Should money going to tax advantaged savings such as 401K above and beyond the company match also be preferentially put into taxabale accounts given if the need should potentially arise in which an individual becomes long term unemployed or underemployed.

I’m willing to take the risk given the risk benefit ratio and odds advantage to fully fund tax advantaged Long term retirement savings and tax advantaged long term educational savings compared to my individual risk. I realize the risk of these tax advantage strategies and potential need to access liquid funds to maintain living expenses in the event of long term unemployment or underemployment but as they say “no such thing as a feee lunch” other than diversification.
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Re: How much in 529 is enough to fund college?

Post by KlangFool »

Xrayman69 wrote: Tue Dec 24, 2019 8:48 am
Would saving in a 401K and the tax savings be a risk due to the ever looming potential risk of being long term unemployed or underemployed? There is currently not an exception for a 10% penalty for early withdrawal for living expenses. Should money going to tax advantaged savings such as 401K above and beyond the company match also be preferentially put into taxabale accounts given if the need should potentially arise in which an individual becomes long term unemployed or underemployed.

I’m willing to take the risk given the risk benefit ratio and odds advantage to fully fund tax advantaged Long term retirement savings and tax advantaged long term educational savings compared to my individual risk. I realize the risk of these tax advantage strategies and potential need to access liquid funds to maintain living expenses in the event of long term unemployment or underemployment but as they say “no such thing as a feee lunch” other than diversification.
Xrayman69,

<<Would saving in a 401K and the tax savings be a risk due to the ever looming potential risk of being long term unemployed or underemployed? There is currently not an exception for a 10% penalty for early withdrawal for living expenses. >>

I have no idea what you are trying to say in those 2 sentences. But, let me try to answer your potential questions.

https://www.madfientist.com/how-to-acce ... nds-early/

A) Read the above URL. There is a way to get the money out slowly via Roth conversion that avoids the 10% penalty.

B) If the person needs to get the money out quickly, the person is probably in a low-income situation. Hence, even paying 10% tax penalty is still cheaper than paying a marginal tax rate and put the money into the 529.

<<I’m willing to take the risk given the risk benefit ratio and odds advantage to fully fund tax advantaged Long term retirement savings and tax advantaged long term educational savings>>

I seriously doubt that. Unless you are in the 32% and above tax bracket, it is not necessarily advantageous to use 529. You achieve better tax savings using alternate approaches.

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Re: How much in 529 is enough to fund college?

Post by KlangFool »

Vulcan wrote: Tue Dec 24, 2019 8:26 am
Devil's Advocate wrote: Mon Dec 23, 2019 7:21 pm What about those of us who will be retired when our kids go to college??
That is the best possible scenario in terms of financial aid at the "full-need" institutions, so long as taxable assets are not so large as to preclude getting any aid even in the absence of large taxable income.
And, you do not have a large 529 account.

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Re: How much in 529 is enough to fund college?

Post by smitcat »

KlangFool wrote: Tue Dec 24, 2019 9:53 am
Vulcan wrote: Tue Dec 24, 2019 8:26 am
Devil's Advocate wrote: Mon Dec 23, 2019 7:21 pm What about those of us who will be retired when our kids go to college??
That is the best possible scenario in terms of financial aid at the "full-need" institutions, so long as taxable assets are not so large as to preclude getting any aid even in the absence of large taxable income.
And, you do not have a large 529 account.

KlangFool
"And, you do not have a large 529 account."
Exactly correct....
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Re: How much in 529 is enough to fund college?

Post by Vulcan »

smitcat wrote: Tue Dec 24, 2019 9:59 am
KlangFool wrote: Tue Dec 24, 2019 9:53 am
Vulcan wrote: Tue Dec 24, 2019 8:26 am
Devil's Advocate wrote: Mon Dec 23, 2019 7:21 pm What about those of us who will be retired when our kids go to college??
That is the best possible scenario in terms of financial aid at the "full-need" institutions, so long as taxable assets are not so large as to preclude getting any aid even in the absence of large taxable income.
And, you do not have a large 529 account.

KlangFool
"And, you do not have a large 529 account."
Exactly correct....
Yes, 529 balances are treated the same way as taxable accounts in finaid calculations.

However, even socking away full cost of a private 4yr degree into a 529 account (let's say $250K) would only reduce aid by less than $15K/yr (5.64%).

So in this scenario, too, the problem could arise with having more in 529 than is necessary.
If you torture the data long enough, it will confess to anything. ~Ronald Coase
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Re: How much in 529 is enough to fund college?

Post by KlangFool »

Vulcan wrote: Tue Dec 24, 2019 12:26 pm
smitcat wrote: Tue Dec 24, 2019 9:59 am
KlangFool wrote: Tue Dec 24, 2019 9:53 am
Vulcan wrote: Tue Dec 24, 2019 8:26 am
Devil's Advocate wrote: Mon Dec 23, 2019 7:21 pm What about those of us who will be retired when our kids go to college??
That is the best possible scenario in terms of financial aid at the "full-need" institutions, so long as taxable assets are not so large as to preclude getting any aid even in the absence of large taxable income.
And, you do not have a large 529 account.

KlangFool
"And, you do not have a large 529 account."
Exactly correct....
Yes, 529 balances are treated the same way as taxable accounts in finaid calculations.

However, even socking away full cost of a private 4yr degree into a 529 account (let's say $250K) would only reduce aid by less than $15K/yr (5.64%).

So in this scenario, too, the problem could arise with having more in 529 than is necessary.
Vulcan,

On top of all this, the parent needs to pay at least 4K per year without the 529 in order to receive the $2,500 AOTC tax credit.

https://www.irs.gov/credits-deductions/individuals/aotc

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Re: How much in 529 is enough to fund college?

Post by Triple digit golfer »

KlangFool wrote: Tue Dec 24, 2019 9:52 amUnless you are in the 32% and above tax bracket, it is not necessarily advantageous to use 529. You achieve better tax savings using alternate approaches.
Like what approaches? We are in 22% bracket and max out tax deferred and Roth accounts. No HSA. What's next that offers better tax savings than a 529?
KlangFool
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Re: How much in 529 is enough to fund college?

Post by KlangFool »

Triple digit golfer wrote: Tue Dec 24, 2019 2:57 pm
KlangFool wrote: Tue Dec 24, 2019 9:52 amUnless you are in the 32% and above tax bracket, it is not necessarily advantageous to use 529. You achieve better tax savings using alternate approaches.
Like what approaches? We are in 22% bracket and max out tax deferred and Roth accounts. No HSA. What's next that offers better tax savings than a 529?
Triple digit golfer,

A taxable account with 100% stock.

KlangFool
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Triple digit golfer
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Re: How much in 529 is enough to fund college?

Post by Triple digit golfer »

KlangFool wrote: Tue Dec 24, 2019 3:06 pm
Triple digit golfer wrote: Tue Dec 24, 2019 2:57 pm
KlangFool wrote: Tue Dec 24, 2019 9:52 amUnless you are in the 32% and above tax bracket, it is not necessarily advantageous to use 529. You achieve better tax savings using alternate approaches.
Like what approaches? We are in 22% bracket and max out tax deferred and Roth accounts. No HSA. What's next that offers better tax savings than a 529?
Triple digit golfer,

A taxable account with 100% stock.

KlangFool
How does that offer better tax savings than a 529?
KlangFool
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Re: How much in 529 is enough to fund college?

Post by KlangFool »

Triple digit golfer wrote: Tue Dec 24, 2019 3:08 pm
KlangFool wrote: Tue Dec 24, 2019 3:06 pm
Triple digit golfer wrote: Tue Dec 24, 2019 2:57 pm
KlangFool wrote: Tue Dec 24, 2019 9:52 amUnless you are in the 32% and above tax bracket, it is not necessarily advantageous to use 529. You achieve better tax savings using alternate approaches.
Like what approaches? We are in 22% bracket and max out tax deferred and Roth accounts. No HSA. What's next that offers better tax savings than a 529?
Triple digit golfer,

A taxable account with 100% stock.

KlangFool
How does that offer better tax savings than a 529?
Start your own topic with your own specific details to discuss.

KlangFool
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Re: How much in 529 is enough to fund college?

Post by A440 »

We stopped contributions for child #1 when the balance reached enough to fund 4 years of an in-state tuition. That balance goes further in some states and not as far in others. Student will still be required to have some "skin in the game" with costs.
I don't know what the future holds, but I know who holds my future.
Xrayman69
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Re: How much in 529 is enough to fund college?

Post by Xrayman69 »

Triple digit golfer wrote: Tue Dec 24, 2019 3:08 pm
KlangFool wrote: Tue Dec 24, 2019 3:06 pm
Triple digit golfer wrote: Tue Dec 24, 2019 2:57 pm
KlangFool wrote: Tue Dec 24, 2019 9:52 amUnless you are in the 32% and above tax bracket, it is not necessarily advantageous to use 529. You achieve better tax savings using alternate approaches.
Like what approaches? We are in 22% bracket and max out tax deferred and Roth accounts. No HSA. What's next that offers better tax savings than a 529?
Triple digit golfer,

A taxable account with 100% stock.

KlangFool

How does that offer better tax savings than a 529?
It doesn’t.
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Re: How much in 529 is enough to fund college?

Post by 60B4E24B »

BanquetBeer wrote: Mon Dec 16, 2019 6:54 am My advice is you don’t have to save it all in a 529. If you save 75k in a 529 and college costs come to 100k, you maybe missed out on $25k * 1/2 cost basis * 15% = $1875
1. Some folks pay more than 15% for capital gains (I'm paying 34%)
2. States often provide a tax benefit for contributions. (I'm saving ~$1k yr in state/local taxes.)
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