529 - How much do I save?

[TarHeel2002]

3 kids (12,10 and 4).

Each has their own account with
82k
62k
25k

I add $500 per month per child. My goal is to mostly pay for in-state 4 year university currently running 110-130k all in. We make about 300k annually. Retirement savings is on track (1.35 million and adding 73k per year). I am 43. Should I just keep going with the $500 per month per child or make any adjustments? I don’t want to over save but also don’t want to cash flow too many educational expenses come college time. Thanks!

[christoman]

I think this is a good approach. I have four kids, with the youngest the only one left in college (2 1/2 years to go). I did basically the same thing, starting by funding to in-state public school. Probably around the time the oldest was in 8th grade, I felt this was largely covered and started throwing extra money into a brokerage account to supplement in case any of them wanted to go to a private school. Ended-up sending all to college (1 public, 3 private) with over $50K left over. Having the public school funding as a floor was a good target which gave me and my wife the opportunity to re-evaluate over time. Prioritizing retirement 1st, like you are doing, is the right way to go.

[Sho]

I was thinking about the same today . Our plan is to have 200 k /child ( including the growth) and then stop . I am 2 years older than you with oldest one going to college in about 5 years .I have 2 kids and my retirement saving trajectory is almost same as you .

I think you have a good plan .

[queenofthemadhouse]

How important is it to you to take full advantage of the state tax deduction? Does your state allow you to carrforward deductions to future years?

[markjk]

I think this is a reasonable approach and similar to what we've done. I'm just a little bit ahead of you and have been thinking about this quite a bit recently. A few other thoughts on the college savings topic.

Starting in 2024 and moving forward you'll be able to convert a portion of that 529 to a Roth IRA if the 529 is not fully utilized for education. So the risk of overfunding a 529 has decreased a bit which is nice.

As the time approaches to use the money for college, I do suggest ramping down risk with investments. The last thing you want is to be heavy on stocks and have a 50% market correction as you are finally pulling the money to use it. Not all agree with me on this but college savings is very different from retirement as the withdrawal timeframe is so much shorter (4 - 8 years for college versus possibly decades for retirement). There just isn't as much time to deal with market volatility with college savings once you are to the point of using the money.

Alternative options for education savings such as treasuries and iBonds are finally paying something. Shifting some of your contributions to those instruments might make sense for you as they provide more flexibility. In the case of iBonds, you still don't pay any state or local taxes and in some circumstances when used for education, you might not have to pay federal tax either.

Best of luck.

[soccerrules]

clarity of cost increases as you get closer. A reminder is you don't need 100% of the dollars ready for the 1st semester, it is at minimum a 4 year journey for each child and typically paid our 2x a year for 4 years.

I am about to pay for the last of 24 semesters (halleluiah) . I ended up cash flowing room and board for most of the years and it has worked out fine.

If i did it all over again I would fund 70-80% on 529 for tax free growth and any state tax benefits. And then any extra into a brokerage account for greater flexibility. I would also try to cash flow as much as possible to leave the taxable brokerage dollars invested.

The rollover from 529 to a Roth is a nice option although limited to lifetime of $35K each.