How much do you target for a 529 plan?

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30west
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Re: How much do you target for a 529 plan?

Post by 30west »

DIFAR31 wrote: Tue May 11, 2021 2:04 pm
30west wrote: Tue May 11, 2021 1:50 pm The more prestigious the school, the less the aid package.
Can you clarify? If by a smaller aid package you are only referring to merit aid, I would say that this is generally accurate. The more "prestigious" schools don't need to dangle merit aid to attract the most sought after students. However, the more "prestigious" a school is, the more likely it will be offering a larger need-based aid package, because these schools have the endowment and the financial aid budget to do so.

Yes, my comment was based on personal experience and refers only to merit aid. We didnt qualify for need based aid.
Golfalot
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Re: How much do you target for a 529 plan?

Post by Golfalot »

We have a high school junior and senior. We targeted cost of college at $50k/year, so our goal was to have approx. $200k total per kid in their 529s. We stopped contributing to their plans several years ago, but we are fortunate that their grandparents provide small contributions for each birthday and Christmas. Fast forward now, and their plans have grown significantly to approximately $230k. So we are beyond what original plan was.

Our oldest is going to an out-of-state public university where R&B is $51k, but she was awarded a $20k Merit scholarship...Net R&B will be $31k/yr. So looks like we overshot on her and we'll need to figure out what to do with the 529 surplus. It is a nice perk that her laptop is a qualifying withdrawal, so I had no problem ordering a nice Apple MacBook Pro for her... :happy. Should be coming in the mail any day now.
DIFAR31
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Re: How much do you target for a 529 plan?

Post by DIFAR31 »

Golfalot wrote: Wed May 12, 2021 8:21 pm Our oldest is going to an out-of-state public university where R&B is $51k, but she was awarded a $20k Merit scholarship...Net R&B will be $31k/yr.
Which public university charges $51k/year for room and board? And don't forget, scholarship money used for room and board is taxable income to the student (and for the kiddie tax it's considered unearned income).
stimulacra
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Re: How much do you target for a 529 plan?

Post by stimulacra »

I'm targeting four years of undergrad tuition at a state flagship school.
sc9182
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Re: How much do you target for a 529 plan?

Post by sc9182 »

Zero - as we get zero state tax deduction, but get all conveniences (nuisances May be I should put it as) of 529 limitations. Don’t have rich uncles/grandparents to offload/divert monies into 529 for our kids.

BIG Zero for our 529 ..

We continue to do Routine - contribute to 401k s, HSA, MBR, brokerage, and other things but no 529/college-savings-plan/college-tuition-plans .

One day I promise to make millions dollars, or my grandpas decides to earn as much (income) - sure would then consider 529 .. until such time — lead normal life .. but no 529 ..
dogagility
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Re: How much do you target for a 529 plan?

Post by dogagility »

Golfalot wrote: Wed May 12, 2021 8:21 pm So we are beyond what original plan was.
Graduate school!
Golfalot wrote: Wed May 12, 2021 8:21 pm It is a nice perk that her laptop is a qualifying withdrawal, so I had no problem ordering a nice Apple MacBook Pro for her... :happy. Should be coming in the mail any day now.
Same for us... love buying something extravagant... so un-Bogleheadish. :twisted:
The more flexibility you have the less you need to know what happens next. -- Morgan Housel
Scotttheking
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Re: How much do you target for a 529 plan?

Post by Scotttheking »

Enough for 4-6 years private college. If in high school or earlier there is obviously too much, will start drawing for tuition then.
Plan is a lump when little plus max deduction (5k/kid) each year.
plasticofantastico
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Re: How much do you target for a 529 plan?

Post by plasticofantastico »

DIFAR31 wrote: Wed May 12, 2021 8:32 pm Which public university charges $51k/year for room and board?
I’m in California. Non-resident tuition to UCLA is $43K, add $1k/month for room and board and you are there.
roadnottaken
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Re: How much do you target for a 529 plan?

Post by roadnottaken »

Shooting for $200k/kid (current ages are 8,5,2,2) which is almost 2x what in-state tuition + R&B at a public school in California currently costs. I figure that's a reasonable ballpark and try not to overthink it given all the obvious uncertainties involved
finfire
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Re: How much do you target for a 529 plan?

Post by finfire »

2 kids, now 9 and 7. I started both as soon as born, $350/mo each, added some other contributions from bonuses etc.

I decided I'd stop once they got to $100K each. Not based on anything concrete, excep0 that it's a lot of money and we expect some help from the State/University in the future....

Turns out that that 9yo achieved $100K when she turned 9 approx, with approx 60K contribution and 40K earnings.

I am still paying for 7yo. Depending on earnings, we expect to achieve that in 2022. But who knows.....
DIFAR31
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Re: How much do you target for a 529 plan?

Post by DIFAR31 »

plasticofantastico wrote: Thu May 13, 2021 1:12 pm
DIFAR31 wrote: Wed May 12, 2021 8:32 pm Which public university charges $51k/year for room and board?
I’m in California. Non-resident tuition to UCLA is $43K, add $1k/month for room and board and you are there.
Sure, room and board plus tuition I can easily see at $50k+ for a non-resident at a number of public schools. But my response was to a post that referred to room and board alone priced at $51k/year. That's what I was asking about.
alfaspider
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Re: How much do you target for a 529 plan?

Post by alfaspider »

My plan was to contribute until the balance was $100k for each kid. Ended up being about $90k and $85k of actual contributions. Now that I've hit those balances, no more 529 contributions. I'm committed to fully funding any school they want to attend, and I think there is a strong possibility that school will not be a state school. I do not expect any need based aid unless we have a significant financial reversal before they attend college. However, I'm already overfunded if they do attend state school, so the $100k mark was a bit of a compromise. I don't plan to fully fund grad/professional school, but overshoot can go to that. Everyone in our immediate family had some form of post-college education, so I think it's fairly likely my children will as ell.

Long story short, 529s should be thought of as tax savings devices for parents, not gifts to your kid. You have to weigh the risk of an overshoot vs the risk of losing tax benefit.
bogcir
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Re: How much do you target for a 529 plan?

Post by bogcir »

RickBoglehead wrote: Mon May 10, 2021 4:01 pm No penalty for having leftover monies for the next generation.

We are using leftover monies from our kids for our grandchildren. Based on how much we have in 529s in total, unless the 2nd son starts reproducing quickly, this will find at least one more generation.
No specific penalty but it does count as a gift for tax reporting purposes if you change the beneficiary down a generation.

So it uses up some of the estate/gift tax exemption if it’s over 15k/30k, which may or may not be a concern for you.

What’s weird is it’s not clear whose estate tax exemption you are using in that situation. Yours? Or your kids?
Golfalot
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Re: How much do you target for a 529 plan?

Post by Golfalot »

DIFAR31 wrote: Wed May 12, 2021 8:32 pm
Golfalot wrote: Wed May 12, 2021 8:21 pm Our oldest is going to an out-of-state public university where R&B is $51k, but she was awarded a $20k Merit scholarship...Net R&B will be $31k/yr.
Which public university charges $51k/year for room and board? And don't forget, scholarship money used for room and board is taxable income to the student (and for the kiddie tax it's considered unearned income).
Doh...I meant tuition plus room & board. Sorry that was confusing. I live in the Midwest and a lot of our public universities charge substantially more for out-of-state students.
carloslando
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Re: How much do you target for a 529 plan?

Post by carloslando »

150K each. Enough to cover 4 years of in-state tuition in California (~40K or so each year), will require a bit of cash-flowing at some of the out-of-state schools they are looking to apply to (40-50K each year).

The private colleges at ~80K a year are going to be a stretch for us.
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JVT
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Re: How much do you target for a 529 plan?

Post by JVT »

We are targeting ~100k when kindergarten starts this fall based on current room and board at major state U currently running in the 20's. Hopefully the portfolio will keep up with tuition inflation - any excess will go to the next generation and any shortfall we will try to make up with cash flow (assuming a reasonable school). Due to this last year, we are currently ahead with ~125k but that can change with one downturn.

We have maxed all retirement plans for years and I certainly do not advocate forgoing those, but in our case we still are maxing and have a strong desire to cover 4 years with zero debt.
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Re: How much do you target for a 529 plan?

Post by abuss368 »

I don’t have a Target per se but a philosophy.

Every dollar saves is one less dollar in loans.

I learned that from Jack Brennan and I am thankful for it.

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cowdogman
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Re: How much do you target for a 529 plan?

Post by cowdogman »

Four years at the most expensive school in the country--and then hope the investment returns keep up with college inflation.

Any leftover funds can be used for graduate/professional school.

I've found that having a possibly "over-funded" 529 account makes the college selection and college payment years much less stressful.

But I would suggest that the "529" investment be split in half*--with half going to a 529 account and half going to a stand-alone taxable account investing in a target date fund (with the target date being high school graduation). Yes, you lose the 529 benefit on the taxable money, but you get more flexibility by (1) being able to use the taxable funds for college expenses that are not 529 expenses (e.g., airfare) and (2) you reduce the chance of money locked in a 529 at the end of the college years.

* "Half" is somewhat arbitrary. Pick a fraction you're comfortable with.
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lthenderson
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Re: How much do you target for a 529 plan?

Post by lthenderson »

humblecoder wrote: Mon May 10, 2021 9:45 pm
dred pirate wrote: Mon May 10, 2021 3:36 pm Obviously I don't want to put so much in that I pay a penalty/tax to get my money back, and heck, we never know if she will even go to college this far out. But I also want to balance the tax savings with that risk.
Honestly, people fear this "penalty" (in air quotes) as if it is some end-of-the-world terrible event. It isn't. Yes, you have to pay taxes + 10% penalty on the earnings portion, but you did get tax deferred growth on that money.
It also depends on who gets the extra money leftover in the 529. If you give your children the extra money, they pay the income tax on the earnings at their tax rate which fresh out of college may be little to nothing. So they would end up with just the 10% penalty on the earnings which may just be a few percentage points of the entire enchilada.
JoeQ
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Re: How much do you target for a 529 plan?

Post by JoeQ »

LuckyGuy wrote: Tue May 11, 2021 7:42 am That came out to be $200 per child starting the day they were born.
Is that $200 per child per month?
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mattshwink
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Re: How much do you target for a 529 plan?

Post by mattshwink »

Targeting $240,000 to $400,000. If we hit $240,000 we will re-evaluate our plans and see if we might need more or can stop. As of EoY 2020 was $150,000 for the 9 year old. We contribute $8,000 per year since the year she was born.
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UpsetRaptor
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Re: How much do you target for a 529 plan?

Post by UpsetRaptor »

We're targeting 4 years of flagship in-state public university.
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cowdogman
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Re: How much do you target for a 529 plan?

Post by cowdogman »

lthenderson wrote: Fri May 14, 2021 10:05 am
humblecoder wrote: Mon May 10, 2021 9:45 pm
dred pirate wrote: Mon May 10, 2021 3:36 pm Obviously I don't want to put so much in that I pay a penalty/tax to get my money back, and heck, we never know if she will even go to college this far out. But I also want to balance the tax savings with that risk.
Honestly, people fear this "penalty" (in air quotes) as if it is some end-of-the-world terrible event. It isn't. Yes, you have to pay taxes + 10% penalty on the earnings portion, but you did get tax deferred growth on that money.
It also depends on who gets the extra money leftover in the 529. If you give your children the extra money, they pay the income tax on the earnings at their tax rate which fresh out of college may be little to nothing. So they would end up with just the 10% penalty on the earnings which may just be a few percentage points of the entire enchilada.
Yes, but non-qualified 529 withdrawals are taxed as ordinary income, not at cap gains rates and so for a high bracket taxpayer that could be painful, especially with the penalty added. It could also be painful for a taxpayer who qualifies for zero tax on all or part of cap gains. Hence my suggestion above to put some "college money" in a non-529 account, where it could also grow tax deferred (other than for dividends).

I agree with your comment about distributions to children but some parents may not want to do that.
Zillions
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Re: How much do you target for a 529 plan?

Post by Zillions »

Only 200K in total for both kids. Since our son is significantly disabled, my daughter will have that entire amount for her college. It should be enough for 4 years of under graduate education an in-state public University in California. We unfortunately cannot afford grad school for her.
tnr
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Re: How much do you target for a 529 plan?

Post by tnr »

We put in 100k before each of them turned 10. Our oldest has since grown to around 220k and our younger has grown to 190k.
MarkBarb
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Re: How much do you target for a 529 plan?

Post by MarkBarb »

I used the estimated 5x annual price of our big state U as a target price. I made monthly contributions and adjusted the amount annually based on current value and changes in the price.

Once the kids got to be around 11 yrs old, I switched to saving future amounts in taxable. My thought was that I had fewer years to get value from the tax break and was closer to risking having more money than needed. It is also good to have non-529 money for things that aren't covered.

If I had the liquidity, I would have front-loaded the 529 contributions.
logiclife
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Re: How much do you target for a 529 plan?

Post by logiclife »

Interesting question OP.

We have 100k saved up in a 529 since we started when our daughter was 3 years, now she is 13. We plan to fund atleast 80% of a public college.

frankly I keep thinking everyday how much is enough and where do I stop?
nepats
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Re: How much do you target for a 529 plan?

Post by nepats »

4 years of private tuition. If they don’t use it, we will either give them to the grandkids if any or donate it.
mass_biker
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Re: How much do you target for a 529 plan?

Post by mass_biker »

I am forever grateful for the grants and loans that my alma mater sent my way due to dire financial need during college. Without this support, I would not have graduated.

As a result. I do my little bit to repay that generosity with annual contributions to the school to support undergraduate financial aid...paying it forward etc.

With some good luck and good planning, my wife and I made saving early and aggressively for my kids one of our priorities.
Our logic, when they are little, they have time on their side. And compound interest is a wonderful thing.
Our goal was ~ $100k contributed by around the 5th or 6th birthday (assuming all other needs - 401k, etc.) were covered...and then let it ride.

Markets have been supportive of this endeavor which provides the kids (older now) some optionality as they begin the college process.

And if they don't use it - there is always grad school or the next generation.

m_b
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