529 Savings - Is it enough?

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raamakoti
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529 Savings - Is it enough?

Post by raamakoti » Mon Oct 16, 2017 8:53 am

Age of the kid = 5
net 529 as of today = 54k
monthly contribution = 1k

General question - Is it enough to pay for 4 year college, assuming no help from scholarship etc. Should I keep 1k per month contribution of lower it a bit?
Thanks for your help

rkhusky
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Re: 529 Savings - Is it enough?

Post by rkhusky » Mon Oct 16, 2017 9:12 am

Depends on the college (there is a wide range of tuition costs) and whether you are talking tuition only, or also on-campus living expenses (i.e. child is not living with you).

integrity
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Re: 529 Savings - Is it enough?

Post by integrity » Mon Oct 16, 2017 9:17 am

I'm in the exact same boat as you (40K in the 529 with a 4 year old).
I am also contributing $1K per month.
This is the maximum I can afford to contribute so it's a moot point to think about more.
Will end up with about $200K in contributions, plus hopefully some capital gains, by the time college starts.
This seems not bad to me. Do I have a fancy model to tell that it will be ok? No.
:beer

Rupert
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Re: 529 Savings - Is it enough?

Post by Rupert » Mon Oct 16, 2017 9:20 am

Decide what sort of college you're willing to pay for (state flagship uni, Harvard, etc.). Then visit that university's website to find out what the current cost of attendance is. Then enter that number along with your current savings and expected future savings into one of many available college costs calculators on the internet. (Vanguard has a decent one). The calculator will spit out a number for you that may or may not be accurate and will tell you if you're doing okay. That's the best you can do.

rkhusky
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Re: 529 Savings - Is it enough?

Post by rkhusky » Mon Oct 16, 2017 9:43 am

Make sure to max out retirement accounts before saving for college.

Jack FFR1846
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Re: 529 Savings - Is it enough?

Post by Jack FFR1846 » Mon Oct 16, 2017 9:54 am

An alternate strategy is to buy iBonds. If used for college (and you qualify income wise), the interest is all tax free. Only buy in parents' name to stay qualified. If not used for college, you'd only pay federal income tax on the gains....not state. These are more flexible than a 529. The wild card is if you can get a tax deduction in your state for the 529, in which case you'd want to evaluate for that.
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mega317
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Re: 529 Savings - Is it enough?

Post by mega317 » Mon Oct 16, 2017 9:55 am

My feeling is if I can afford to contribute 200k to a 529, then the downside of overfunding (might not be needed, limited flexibility or penalties) is worse than the downside of underfunding (use taxable investments or cash flow to make up the difference).

Some people wouldn't have trouble reassigning unused 529 money such as to other children or grandchildren. In my case I might prefer to reduce my retirement number a few hundred thousand.

alfaspider
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Re: 529 Savings - Is it enough?

Post by alfaspider » Mon Oct 16, 2017 9:59 am

raamakoti wrote:
Mon Oct 16, 2017 8:53 am
Age of the kid = 5
net 529 as of today = 54k
monthly contribution = 1k

General question - Is it enough to pay for 4 year college, assuming no help from scholarship etc. Should I keep 1k per month contribution of lower it a bit?
Thanks for your help
Are you using all of your tax advantaged retirement space? If not, there's no reason to contribute further to a 529.

As for college costs, it all depends on what college you are talking about. There are state schools for which that is enough to pay for 4 years today with no capital appreciation. There are expensive private schools for which that would not cover a single year. What you are willing to pay for is a very personal decision. For what it's worth, I want to be able to offer to pay for any school my son wishes to go to. However, the current plan is to stop at contributing at $100k balance with him at age 1.5 (3 years of contributions).
Last edited by alfaspider on Mon Oct 16, 2017 10:05 am, edited 1 time in total.

Grt2bOutdoors
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Re: 529 Savings - Is it enough?

Post by Grt2bOutdoors » Mon Oct 16, 2017 10:02 am

Jack FFR1846 wrote:
Mon Oct 16, 2017 9:54 am
An alternate strategy is to buy iBonds. If used for college (and you qualify income wise), the interest is all tax free. Only buy in parents' name to stay qualified. If not used for college, you'd only pay federal income tax on the gains....not state. These are more flexible than a 529. The wild card is if you can get a tax deduction in your state for the 529, in which case you'd want to evaluate for that.
If one can afford to contribute $1,000 per month towards a college savings plan, chances are they will not qualify income wise. Other thing is chances are a 529 plan's growth rate and earnings will outpace that of an I bond over the next 15 years (chances, not guaranteed though). The OP should use the Vanguard college planner calculator, but also can monitor the account values, when the value of the account approaches critical mass - 2.5-3.0 times what the annual cost of college will be, then switch gears and place any remaining savings/contributions into a taxable account. Thereby lessening chances of overfunding. There are multiple ways to approach this.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Grt2bOutdoors
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Re: 529 Savings - Is it enough?

Post by Grt2bOutdoors » Mon Oct 16, 2017 10:05 am

Rupert wrote:
Mon Oct 16, 2017 9:20 am
Decide what sort of college you're willing to pay for (state flagship uni, Harvard, etc.). Then visit that university's website to find out what the current cost of attendance is. Then enter that number along with your current savings and expected future savings into one of many available college costs calculators on the internet. (Vanguard has a decent one). The calculator will spit out a number for you that may or may not be accurate and will tell you if you're doing okay. That's the best you can do.
The high number I've been hearing is $70K (tuition, room, board, fees) for super-expensive Northeast located universities - think greater Boston area, Washington D.C. corridor, Philly area, New York and then the super expensive schools on the coasts. It's getting to the point where they are going to price themselves into extinction.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

WL2034
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Re: 529 Savings - Is it enough?

Post by WL2034 » Mon Oct 16, 2017 10:29 am

raamakoti wrote:
Mon Oct 16, 2017 8:53 am
Age of the kid = 5
net 529 as of today = 54k
monthly contribution = 1k

General question - Is it enough to pay for 4 year college, assuming no help from scholarship etc. Should I keep 1k per month contribution of lower it a bit?
Thanks for your help
Even if your accounts have no gains between now and when your child begins college, you will have around $200k in the account just from additional contributions. If you can continue paying $1k/month additional while the child is in college x 4 years, that's a total of $250k. I feel like that should be plenty to graduate with nearly no debt. I would not contribute additional. Now, depending on how the account is invested, you could have huge gains and have more money than you need or lose a significant amount and come up short. College prices could also continue to skyrocket or even (?) decrease. There are a lot of unknowns, but your current plan sounds like a good one to me. It is significantly more than we are currently contributing (~$5k/year), which is just to the max of our state income tax savings.

soccerrules
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Re: 529 Savings - Is it enough?

Post by soccerrules » Mon Oct 16, 2017 12:14 pm

a +1 on the retirement comment. Need to make sure you are not setting yourself up to fail retirement.

I would caution fully funding the 529. It is less of a concern if you have other children or plan to have others (share the money). But with 1 child there is risk if they happen to get scholarships (don;t need all the 529) or decide not to go to college. (it happens)

I would fund 75% of the expected cost through your 529 and for sure fund it if you are getting any tax breaks. After that put it in a taxable account. If you need it for college expenses, it is there. If not, then it goes toward other things (retirement, etc)
Don't let your outflow exceed your income or your upkeep will be your downfall.

Spirit Rider
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Re: 529 Savings - Is it enough?

Post by Spirit Rider » Mon Oct 16, 2017 12:56 pm

rkhusky wrote:
Mon Oct 16, 2017 9:43 am
Make sure to max out retirement accounts before saving for college.
alfaspider wrote:
Mon Oct 16, 2017 9:59 am
Are you using all of your tax advantaged retirement space? If not, there's no reason to contribute further to a 529.
There is no one size fits all. There can be cases where contributions to a 529 can make sense, before you have maxed your retirement accounts. Especially, when you consider state tax deductions.

alfaspider
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Re: 529 Savings - Is it enough?

Post by alfaspider » Mon Oct 16, 2017 12:57 pm

Spirit Rider wrote:
Mon Oct 16, 2017 12:56 pm
rkhusky wrote:
Mon Oct 16, 2017 9:43 am
Make sure to max out retirement accounts before saving for college.
alfaspider wrote:
Mon Oct 16, 2017 9:59 am
Are you using all of your tax advantaged retirement space? If not, there's no reason to contribute further to a 529.
There is no one size fits all. There can be cases where contributions to a 529 can make sense, before you have maxed your retirement accounts. Especially, when you consider state tax deductions.
That's true- state tax deductions may make a difference- although they may be eroded by higher ER accounts if the state requires you use their plan. I'm in a no income tax state, so it's moot for me.

BashDash
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Re: 529 Savings - Is it enough?

Post by BashDash » Mon Oct 16, 2017 1:27 pm

I am in NY where I do get a deduction for my 529 contributions. I lump summed a big amount of money ( for us at least ) 50 for our two toddlers. I recently discovered that Roth IRA's can be used for purpose. My wife and I will be fully funding our 403b's and Roth IRA's along with a pension. I am ok with having Roth IRA be a dual purpose for our family. I'm also ok cash flowing it while working those years. They will be some of my biggest salary years as a teacher. There was always something bothering me about the limitations of a 529 plan so this seems like a good compromise. Plus, it will motivate us to fully fund the Roth as we are thinking of the kids education. I'm not sure if there is a perfect plan for this but I like the flexibility. Hopefully it will work out.

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FrugalProfessor
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Re: 529 Savings - Is it enough?

Post by FrugalProfessor » Mon Oct 16, 2017 1:29 pm

CA offers a total US stock market fund for 0.08%: https://www.scholarshare.com/research/fees.shtml. It is where I am planning on putting 529 contributions in excess of my state's 10k limit.

Regarding the optimality of prioritizing 529 above retirement, I have a hard time conjuring up such scenarios. The best I can do is the following:

Current effective marginal tax rate << Future effective marginal tax rate. This makes Roth IRA/401k contributions far superior to Trad IRA/401k. Perhaps employer doesn't offer Roth 401k. In this case the prioritization of funding would rationally be 1.) HSA + limited purpose FSA up to what you'll use, 2.) Roth IRA, 3.) 529, 4.) Trad 401k, 5.) Taxable brokerage. Even in this scenario, the Roth IRA clearly trumps the 529.

An innovative addition to the above list is step 2.5), which is the child's Roth IRA. Once the child has earned income, fully fund the child's Roth IRA. This has the added benefit over the 529 of not being used in student aid calculations.
I blog. My effective (not to be confused with statutory) MTR is 45% (fed + state, excluding payroll). I save $30k/year in taxes by maxing out deferrals. Taxes are the lowest hanging source of alpha.

informal guide
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Re: 529 Savings - Is it enough?

Post by informal guide » Mon Oct 16, 2017 1:45 pm

I have modestly overfunded 529 plans for my two children (both of whom graduated a few years ago). But my older child is now studying for an MBA so the overfunding in her account will go "poof." My other back-up plan is to use any excess to start accounts for grandchildren, if they materialize - -as one grandparent helped me for higher-ed expenses when I was young.

I am not worried about slightly higher expense ratios in 529 plans - - 0.10% higher expenses in a 529 plan with $50,000 is $50 per year

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Majormajor78
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Re: 529 Savings - Is it enough?

Post by Majormajor78 » Mon Oct 16, 2017 2:24 pm

integrity wrote:
Mon Oct 16, 2017 9:17 am
Do I have a fancy model to tell that it will be ok? No.
Here's a fancy model that will tell you it will be OK. You even get to pick the school.

https://www.oppenheimerfunds.com/invest ... alculators

Sorry, It won't let me link directly to the calculator. Click on the "education funding planner" link. Now it works.
"Oh, M. le Comte, it is only a loss of money which I have sustained... nothing worth mentioning, I assure you."

wilked
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Re: 529 Savings - Is it enough?

Post by wilked » Mon Oct 16, 2017 2:46 pm

I would say at age 5 plan on a minimum of $250K for a basic public 4 year college. It might come up short but you can always reassess in 5 years

heerekj1
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Re: 529 Savings - Is it enough?

Post by heerekj1 » Tue Oct 17, 2017 9:09 am

As others have said, it depends on the school. I offered my children to pay the in state tuition + room + board for any public university in the state and to contribute the equivalent to any college they went to. I was advised to continue to fund my retirement instead of a college fund. At the time all predictions were that college would be unaffordable anyway.

It turns out that I was able to provide what I said when the time came and along with scholarships and work they both graduated without debt. Cost projections were unrealistic and salary increases covered the nut.

johne417
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Re: 529 Savings - Is it enough?

Post by johne417 » Tue Oct 17, 2017 11:42 am

rkhusky wrote:
Mon Oct 16, 2017 9:43 am
Make sure to max out retirement accounts before saving for college.
alfaspider wrote:
Mon Oct 16, 2017 9:59 am
Are you using all of your tax advantaged retirement space? If not, there's no reason to contribute further to a 529.
I'm new here, so correct me if I'm wrong, but assuming:
- you will spend money on kids college in the future
- you have access to a 529 plan, with a state credit or deduction, and viable investment options

The grossly overly-simplified tax scenario would look something like:

Roth IRA:
- fed + state taxes at income
- no taxes on gains at withdrawal

529:
- fed-only tax at income
- no taxes on gains at withdrawal

No?

*Disclaimer: I max out Roth, like I'm sure most of here. Just logic checking.

Spirit Rider
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Re: 529 Savings - Is it enough?

Post by Spirit Rider » Tue Oct 17, 2017 12:30 pm

johne417 wrote:
Tue Oct 17, 2017 11:42 am
529:
- fed-only tax at income*
- no taxes on gains at withdrawal

No?
* A significant number of states do not offer a deduction for 529 contributions and most of those that do, it is an insufficient amount to fully fund even in-state tuition room and board. Even those that do have a higher deduction, many times it is not per beneficiary. If you have two or more children even they are insufficient. It is the distinct minority of states that have no limit or a high deduction per beneficiary.

rkhusky
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Re: 529 Savings - Is it enough?

Post by rkhusky » Tue Oct 17, 2017 12:43 pm

An additional consideration: you can obtain loans to fund education, but loans to fund retirement spending are hard to find.

MI_bogle
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Re: 529 Savings - Is it enough?

Post by MI_bogle » Tue Oct 17, 2017 12:47 pm

And yet another consideration is parenting philosophy - providing everything for kids financially vs making them earn things and pay for things themselves

There is a huge continuum between paying all of your child's college expenses and making your child take out loans for tuition and room and board

Very personal decision. For me, if I had 50K with 10+ more years for that to grow, I'd call it pretty good and let the kid decide where to go. They could take out loans to make up the difference between the college fund and final expenses

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Re: 529 Savings - Is it enough?

Post by bloom2708 » Tue Oct 17, 2017 1:17 pm

One strategy is X amount and 529 and X amount in a taxable account. Use 529 first along with cash flowing some each year.

Our oldest will enter college next fall. She is accepted to the local state school and a local private college. State school is $16k all up (unless she gets additional scholarships). The private college is still $25k after the $20k/year "Presidential Scholarship". $9k more per year.

The program she wants to go into is at the state school. I said if you choose that route, you come out with no debt. If you choose the private college, you will likely have some student loans to live with you for the first 10-12 of your working career. :wink:
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johne417
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Re: 529 Savings - Is it enough?

Post by johne417 » Tue Oct 17, 2017 1:37 pm

Spirit Rider wrote:
Tue Oct 17, 2017 12:30 pm
* A significant number of states do not offer a deduction for 529 contributions and most of those that do, it is an insufficient amount to fully fund even in-state tuition room and board. Even those that do have a higher deduction, many times it is not per beneficiary. If you have two or more children even they are insufficient. It is the distinct minority of states that have no limit or a high deduction per beneficiary.
Sure. Thought I covered that in my assumptions, that you're in one of the 30 states that has a state tax credit/deduction. And if you're not, then your college savings plan is then "only" just tied with a Roth for preferential tax treatment (income taxed, gains not), which ain't bad.

As for the rest of that quote, that's not a reason to not use a 529. I mean, if you're planning on covering at least some of your kids college expenses anyways, might as utilize whatever tax-advantaged methods that you can (even if it doesn't cover all of it), before using taxable. Just like retirement.
MI_bogle wrote:
Tue Oct 17, 2017 12:47 pm
And yet another consideration is parenting philosophy - providing everything for kids financially vs making them earn things and pay for things themselves

There is a huge continuum between paying all of your child's college expenses and making your child take out loans for tuition and room and board

Very personal decision.
Very true. I can see where there's a tangible benefit to having a child be involved in the cost/benefit analysis, decision, and expenses to some degree. Alternatively, I've read many studies, and the literature is fairly clear that in aggregate the ROI for college, even more so the expensive more-selective ones, has never been greater. Personally somewhat torn on this issue.

3funder
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Re: 529 Savings - Is it enough?

Post by 3funder » Tue Oct 17, 2017 3:21 pm

Max retirement first, if possible. Then, you won't have to worry about overdoing things on the 529 end. My wife and I decided to do this. I'll let you know how it works out in about 15 years.
Last edited by 3funder on Tue Oct 17, 2017 5:41 pm, edited 2 times in total.

mega317
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Re: 529 Savings - Is it enough?

Post by mega317 » Tue Oct 17, 2017 3:26 pm

johne417 wrote:
Tue Oct 17, 2017 11:42 am
I'm new here, so correct me if I'm wrong, but assuming:
- you will spend money on kids college in the future
- you have access to a 529 plan, with a state credit or deduction, and viable investment options

The grossly overly-simplified tax scenario would look something like:

Roth IRA:
- fed + state taxes at income
- no taxes on gains at withdrawal

529:
- fed-only tax at income
- no taxes on gains at withdrawal
But the point we are trying to make here is that is indeed grossly oversimplified. The Roth is more flexible, and college can be financed with more options than can retirement. The assumption that you will spend money on college is just that, an assumption.
I think the state tax deductions are worth taking but not worth really thinking much about. In the state I have lived that offers a deduction, the maximum taxes saved is $425 per year. So you can save $7,650 over 18 years if you contribute $180k. Not nothing, but it's not going to make a difference in your life.

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CollegePrudens
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Re: 529 Savings - Is it enough?

Post by CollegePrudens » Tue Oct 17, 2017 10:39 pm

raamakoti wrote:
Mon Oct 16, 2017 8:53 am
Age of the kid = 5
net 529 as of today = 54k
monthly contribution = 1k

General question - Is it enough to pay for 4 year college, assuming no help from scholarship etc. Should I keep 1k per month contribution of lower it a bit?
Thanks for your help
To an extent, saving for college is like retirement planning. There are three distinct phases: target setting, accumulation and draw down. Relative to retirement planning, the draw down phase for college is simpler (at least for most people).

Target setting is difficult given the variability of college costs x-years out and and your child's abilities and competitive positioning. Regardless you should take a crack at the current costs for a target institution and the rate of increase till matriculation.

Once the target is set, it will be simpler to construct an asset accumulation portfolio and schedule that (in theory) meets the target.
Live as if you were to die tomorrow; learn as if you were to live forever - Gandhi

alfaspider
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Re: 529 Savings - Is it enough?

Post by alfaspider » Wed Oct 18, 2017 10:32 am

CollegePrudens wrote:
Tue Oct 17, 2017 10:39 pm
raamakoti wrote:
Mon Oct 16, 2017 8:53 am
Age of the kid = 5
net 529 as of today = 54k
monthly contribution = 1k

General question - Is it enough to pay for 4 year college, assuming no help from scholarship etc. Should I keep 1k per month contribution of lower it a bit?
Thanks for your help
To an extent, saving for college is like retirement planning. There are three distinct phases: target setting, accumulation and draw down. Relative to retirement planning, the draw down phase for college is simpler (at least for most people).

Target setting is difficult given the variability of college costs x-years out and and your child's abilities and competitive positioning. Regardless you should take a crack at the current costs for a target institution and the rate of increase till matriculation.

Once the target is set, it will be simpler to construct an asset accumulation portfolio and schedule that (in theory) meets the target.
The hardest part (in my mind) with college savings is that you want to start saving at a time when its simply impossible to have any idea what your child's plans will be (i.e., when they are an infant). The swing is anything from not going to college at all to matriculating at a very expensive private school in an expensive city AND assume historic 5% tuition growth rates remain unchecked. The difference between the two extremes is about $650,000 :shock:

There are two possible approaches, one can set a ceiling (such as, will only pay cost of state flagship or will pay out of taxable beyond a set amount) or get comfortable with possible over-funding (and payment of tax penalty).

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Re: 529 Savings - Is it enough?

Post by Grt2bOutdoors » Wed Oct 18, 2017 10:38 am

alfaspider wrote:
Wed Oct 18, 2017 10:32 am
CollegePrudens wrote:
Tue Oct 17, 2017 10:39 pm
raamakoti wrote:
Mon Oct 16, 2017 8:53 am
Age of the kid = 5
net 529 as of today = 54k
monthly contribution = 1k

General question - Is it enough to pay for 4 year college, assuming no help from scholarship etc. Should I keep 1k per month contribution of lower it a bit?
Thanks for your help
To an extent, saving for college is like retirement planning. There are three distinct phases: target setting, accumulation and draw down. Relative to retirement planning, the draw down phase for college is simpler (at least for most people).

Target setting is difficult given the variability of college costs x-years out and and your child's abilities and competitive positioning. Regardless you should take a crack at the current costs for a target institution and the rate of increase till matriculation.

Once the target is set, it will be simpler to construct an asset accumulation portfolio and schedule that (in theory) meets the target.
The hardest part (in my mind) with college savings is that you want to start saving at a time when its simply impossible to have any idea what your child's plans will be (i.e., when they are an infant). The swing is anything from not going to college at all to matriculating at a very expensive private school in an expensive city AND assume historic 5% tuition growth rates remain unchecked. The difference between the two extremes is about $650,000 :shock:

There are two possible approaches, one can set a ceiling (such as, will only pay cost of state flagship or will pay out of taxable beyond a set amount) or get comfortable with possible over-funding (and payment of tax penalty).
My ceiling is 2-3x cost of private - 2x will pay for full r&b, tuition, fees at local state flagship university. 3x pays for most private colleges. The difference will be paid for with scholarships/merit/work/taxable and if it comes down to it - loans. And, if by chance I am lucky enough to have some money left over in the account, I'll be using it in retirement to pay for a cooking class or two.......in some nice European town.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Spirit Rider
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Re: 529 Savings - Is it enough?

Post by Spirit Rider » Wed Oct 18, 2017 12:28 pm

Grt2bOutdoors wrote:
Wed Oct 18, 2017 10:38 am
if by chance I am lucky enough to have some money left over in the account, I'll be using it in retirement to pay for a cooking class or two.......in some nice European town.
You probably meant this in a light-hearted manner, but in the case you were serious there might be problem. To qualify as a qualified educational expense you must be attending a school that is eligible for FAFSA based student aid.

More than half of the 350 odd foreign schools on the DOE's list are in England and at the risk of being trashed by my English relatives, culinary expertise is not one of our strengths (how many English restaurants do you see). There are eight schools in France and four in Italy, with < 25 in all of Western Europe.
Last edited by Spirit Rider on Wed Oct 18, 2017 12:53 pm, edited 1 time in total.

integrity
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Re: 529 Savings - Is it enough?

Post by integrity » Wed Oct 18, 2017 12:47 pm

Majormajor78 wrote:
Mon Oct 16, 2017 2:24 pm
integrity wrote:
Mon Oct 16, 2017 9:17 am
Do I have a fancy model to tell that it will be ok? No.
Here's a fancy model that will tell you it will be OK. You even get to pick the school.

https://www.oppenheimerfunds.com/invest ... alculators

Sorry, It won't let me link directly to the calculator. Click on the "education funding planner" link. Now it works.
That's very cool, thanks! One of the better calculators I've seen in terms of clarity of output.

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Re: 529 Savings - Is it enough?

Post by rkhusky » Wed Oct 18, 2017 12:49 pm

Spirit Rider wrote:
Wed Oct 18, 2017 12:28 pm
Grt2bOutdoors wrote:
Wed Oct 18, 2017 10:38 am
if by chance I am lucky enough to have some money left over in the account, I'll be using it in retirement to pay for a cooking class or two.......in some nice European town.
You probably meant this in a light-hearted manner, but in the case you were serious there might be problem. To qualify as a qualified educational expense you must be attending at least half-time in a school that is eligible for FAFSA based student aid.

More than half of the 350 odd foreign schools on the DOE's list are in England and at the risk of being trashed by my English relatives, culinary expertise is not one of our strengths (how many English restaurants do you see). There are eight schools in France and four in Italy, with < 25 in all of Western Europe.
I found some culinary schools listed here (albeit not in Europe):
http://www.savingforcollege.com/eligible_institutions/

The half-time attendance only applies to room and board, not tuition.

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Re: 529 Savings - Is it enough?

Post by Spirit Rider » Wed Oct 18, 2017 12:55 pm

rkhusky wrote:
Wed Oct 18, 2017 12:49 pm
The half-time attendance only applies to room and board, not tuition.
Thanks, I edited my post to remove that.

itstoomuch
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Re: 529 Savings - Is it enough?

Post by itstoomuch » Wed Oct 18, 2017 12:56 pm

Likewise, depends.
Trouble with over funding a 529 is that you now a college fund for grandchildren.
UGMA has a lot more flexibility including 529-UGMA, and using excess funds for enrichment ECs and go funds after graduation of HS, college, first job, and first marriage :annoyed
Ymmv
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Impromptu
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Re: 529 Savings - Is it enough?

Post by Impromptu » Wed Oct 18, 2017 1:02 pm

If anyone wants encouragement on putting less money into a 529, I am putting $300/month for my daughter. Over 18 years that will be $64,800 invested, probably growing to around $125,000 at age 18. i could afford more, but am not going to. Scholarships, work, loans will have to cover anything beyond that. But hopefully she will be financially savvy enough to judge costs and obligations. She may even go to vocational training, military, or nothing.
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CollegePrudens
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Re: 529 Savings - Is it enough?

Post by CollegePrudens » Wed Oct 18, 2017 4:08 pm

alfaspider wrote:
Wed Oct 18, 2017 10:32 am
The hardest part (in my mind) with college savings is that you want to start saving at a time when its simply impossible to have any idea what your child's plans will be (i.e., when they are an infant). The swing is anything from not going to college at all to matriculating at a very expensive private school in an expensive city AND assume historic 5% tuition growth rates remain unchecked. The difference between the two extremes is about $650,000 :shock:

There are two possible approaches, one can set a ceiling (such as, will only pay cost of state flagship or will pay out of taxable beyond a set amount) or get comfortable with possible over-funding (and payment of tax penalty).
Grt2bOutdoors wrote:
Wed Oct 18, 2017 10:38 am
My ceiling is 2-3x cost of private - 2x will pay for full r&b, tuition, fees at local state flagship university. 3x pays for most private colleges. The difference will be paid for with scholarships/merit/work/taxable and if it comes down to it - loans. And, if by chance I am lucky enough to have some money left over in the account, I'll be using it in retirement to pay for a cooking class or two.......in some nice European town.
The general problem here is that given the difficulty of target setting several years out and in the face of uncertainties that cannot be easily reduced, one needs to have a plan for both over-runs and under-runs. Strategies are possible for both cases and I list a few below:

Over-run (asset value > cost of education)
  • Withdraw funds and use for retirement (pay the penalty, taxes as needed)
  • Retain for future education (grad school, professional certification)
  • Retain but reallocate to another beneficiary (yourself, child's sibling)
Under-run (asset value < cost of education)
  • Fund increment from cash flow
  • Take loans
  • Work more (the child, the parents or both)
Several additional items can make the list, I am limiting to a handful just for illustration.
Live as if you were to die tomorrow; learn as if you were to live forever - Gandhi

FinanceGeek
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Re: 529 Savings - Is it enough?

Post by FinanceGeek » Wed Oct 18, 2017 9:13 pm

Another aspect of funding 529 plans versus keeping money for education, in taxable, UGMA accounts, iBonds, etc. is that 529 plans have Federal and in many cases State asset protection features that protect the funds against claims made on the Donor, Owner, or Beneficiary. Depending on the state, the protections may be stronger than those for tax deferred accounts such as IRAs.

http://advisor.morningstar.com/uploaded ... _Table.pdf

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