Should you always use a 529?

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DJP1944
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Should you always use a 529?

Post by DJP1944 » Fri Apr 13, 2018 7:32 am

I'm a frequent reader but infrequent poster. Hopefully my question is straight forward. I estimate the cost of college for two children (ages 7 and 9) to be $100k in total each (today's dollars). It could clearly be higher but I'm using this as the best estimate by using current in state tuition costs and estimates for room and board.

I have roughly half per each currently in a money market account set aside specifically for college. It would be very feasible to fully fund for each kid and just set the money aside in a taxable account. Alternatively, I could periodically add to the funding until we reach fully funded status. Am I foolish not to use a 529? My hesitancy is two-fold...one - I don't like the ideas on having restrictions on how to use the money. Two, I am unclear on the benefit I would reap from the 529.

All responses are appreciated, I know this is a basic question but I have been unable to find advice for folks similar to my position.

*edited how much I estimate will be needed (removed "annually").
Last edited by DJP1944 on Fri Apr 13, 2018 9:41 am, edited 1 time in total.

scifilover
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Re: Should you always use a 529?

Post by scifilover » Fri Apr 13, 2018 7:49 am

The bigger question for you is why are you putting the funds into a money market account, rather than investing in a fund that will (hopefully) appreciate over the next decade. I have been putting funds aside for my grandchildren using the Utah 529. About 35% of the current fund balance represents investment gains. When the funds are withdrawn for college expenses, they come out without being taxed. This is the advantage. If you were to use a 529 and choose a MMF investment option, the advantage would be minimized.

livesoft
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Re: Should you always use a 529?

Post by livesoft » Fri Apr 13, 2018 7:55 am

Not everybody should use a 529 plan. A 529 plan is for the wealthy and high income folks which you seem to be one of that class because you have money set aside for college. I think you should use a 529 plan for some of the money you will definitely use to pay for college.

Are you or your family eligible for any of the other education tax benefits discussed in IRS Publication 970?
https://www.irs.gov/pub/irs-pdf/p970.pdf

If so, make sure that you know how to take advantage of them and be prepared to use them. That means that some of the money to pay college expenses won't come from 529 plans.

BTW, the benefit you reap from the 529 plan is simply that any gains in the investments are tax-free. If you have no gains or minimal gains (say you are using a money market fund or savings account), then a 529 plan gives you little benefit at all. OTOH, any losses in a 529 plan are difficult to take advantage of and thus would give you less benefit than losses in a straight-up normal taxable account.
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DJP1944
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Re: Should you always use a 529?

Post by DJP1944 » Fri Apr 13, 2018 8:06 am

scifilover wrote:
Fri Apr 13, 2018 7:49 am
The bigger question for you is why are you putting the funds into a money market account, rather than investing in a fund that will (hopefully) appreciate over the next decade. I have been putting funds aside for my grandchildren using the Utah 529. About 35% of the current fund balance represents investment gains. When the funds are withdrawn for college expenses, they come out without being taxed. This is the advantage. If you were to use a 529 and choose a MMF investment option, the advantage would be minimized.
The money market account is just a holding place until we settle on a good strategy. As we have accumulated assets we never had a specific allocation or frankly plan for college. It's time to get more intentional, hence the post. I appreciate the example your provide given your personal situation...very helpful.

thank you,

Dave

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greg24
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Re: Should you always use a 529?

Post by greg24 » Fri Apr 13, 2018 8:14 am

Are you paying a lot of state income tax? You could reduce it with 529 contributions.

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Re: Should you always use a 529?

Post by dsmil » Fri Apr 13, 2018 8:36 am

Are you already maxing a Roth? I like the idea of filling the Roth first, since there is less restrictions on the money. You'll only be able to pull out contributions tax free, but since your earnings will stay in there for retirement, you can decrease your retirement contributions during their college age so you still have access to the money that you need. Also, it's going to be harder to save for their college if the money is in a money market, rather than a mix of stocks and bonds.

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Re: Should you always use a 529?

Post by SimonJester » Fri Apr 13, 2018 8:37 am

If you get a state tax deduction it makes sense to utilize the 529 to some extent. Keep in mind you will want to leave $4,000 per year per student outside the 529 so you can reap the education tax credits.

Also your $100K per year ($50K per child per year) might be high, the current national average for public college in state rate is a little over $25K per year.
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Re: Should you always use a 529?

Post by lthenderson » Fri Apr 13, 2018 8:38 am

DJP1944 wrote:
Fri Apr 13, 2018 7:32 am
I am unclear on the benefit I would reap from the 529.
There are two big benefits. One is that all gains are tax free. The second one varies by state. In my state with two kids, I get to deduct approximately $15,000 per year off my adjusted gross income so that I don't have to pay tax on it. If for some reason you have extra after the kids are through college and you have nobody else to give it too for their education, you only pay a 10% tax penalty on the gains. You don't pay any penalty on your contributions.

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Re: Should you always use a 529?

Post by 4strings » Fri Apr 13, 2018 9:03 am

SimonJester wrote:
Fri Apr 13, 2018 8:37 am
If you get a state tax deduction it makes sense to utilize the 529 to some extent. Keep in mind you will want to leave $4,000 per year per student outside the 529 so you can reap the education tax credits.

Also your $100K per year ($50K per child per year) might be high, the current national average for public college in state rate is a little over $25K per year.
i don't understand the "$4k per year per student" comment and how it relates to an education tax credit.

can you elaborate please?

DJP1944
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Re: Should you always use a 529?

Post by DJP1944 » Fri Apr 13, 2018 9:36 am

SimonJester wrote:
Fri Apr 13, 2018 8:37 am
If you get a state tax deduction it makes sense to utilize the 529 to some extent. Keep in mind you will want to leave $4,000 per year per student outside the 529 so you can reap the education tax credits.

Also your $100K per year ($50K per child per year) might be high, the current national average for public college in state rate is a little over $25K per year.
I should have been more clear...I'm estimating I'll need $100K in total (in today's dollar) per kid or $25K per year. Thus, by my back of the envelope math we have half set aside at this point.

DJP1944
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Re: Should you always use a 529?

Post by DJP1944 » Fri Apr 13, 2018 9:38 am

taguscove wrote:
Fri Apr 13, 2018 8:51 am
Once the roth ira and 401k are maxed out, 529 is often the next major tax shelter for professional high income earners. It is a fantadtic tax break for the wealthy top 3-5% of income households. No annual contribution limit.

I have a few investment banking friends in their thirties who can use 529 to pay for NYC private schools now thanks to the GOP tax cuts. Theyre putting $500k in this year for their young children and all gains are tax free. One of my friends doesn't even have children yet, it is so good. Just put the 529 under your name and gift the amount to the child over time.

There are few guarantees in life, but investing heavily in children's education has large demonstrated financial returns.
Thank you, this comment helps bring it into focus for me. I thought I read though that there was a $300K limit per beneficiary...that's a trivial point to me though as I'd rather not over-fund it.

Separate question for everyone...what is the type of investment available and mostly used by folks with ~ 10 years before it's needed for the 529?

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DaftInvestor
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Re: Should you always use a 529?

Post by DaftInvestor » Fri Apr 13, 2018 9:40 am

DJP1944 wrote:
Fri Apr 13, 2018 9:36 am
SimonJester wrote:
Fri Apr 13, 2018 8:37 am
If you get a state tax deduction it makes sense to utilize the 529 to some extent. Keep in mind you will want to leave $4,000 per year per student outside the 529 so you can reap the education tax credits.

Also your $100K per year ($50K per child per year) might be high, the current national average for public college in state rate is a little over $25K per year.
I should have been more clear...I'm estimating I'll need $100K in total (in today's dollar) per kid or $25K per year. Thus, by my back of the envelope math we have half set aside at this point.
You might want to go back and edit your original post - you said "$100K annually each" - otherwise you will get more questions about saving $400K per child for state tuition/room&board. Just remove the word "annually".
The benefit of the 529 is that you won't have to be paying any taxes for the next 15 years on any growth of the funds. If you are afraid you might not use all of at least put HALF of what you are saving in 529s. Why pay taxes if you don't have to?

DJP1944
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Re: Should you always use a 529?

Post by DJP1944 » Fri Apr 13, 2018 9:42 am

DaftInvestor wrote:
Fri Apr 13, 2018 9:40 am
DJP1944 wrote:
Fri Apr 13, 2018 9:36 am
SimonJester wrote:
Fri Apr 13, 2018 8:37 am
If you get a state tax deduction it makes sense to utilize the 529 to some extent. Keep in mind you will want to leave $4,000 per year per student outside the 529 so you can reap the education tax credits.

Also your $100K per year ($50K per child per year) might be high, the current national average for public college in state rate is a little over $25K per year.
I should have been more clear...I'm estimating I'll need $100K in total (in today's dollar) per kid or $25K per year. Thus, by my back of the envelope math we have half set aside at this point.
You might want to go back and edit your original post - you said "$100K annually each" - otherwise you will get more questions about saving $400K per child for state tuition/room&board. Just remove the word "annually".
The benefit of the 529 is that you won't have to be paying any taxes for the next 15 years on any growth of the funds. If you are afraid you might not use all of at least put HALF of what you are saving in 529s. Why pay taxes if you don't have to?
Thanks - I just edited it. It wasn't that I wasn't being clear...I was being clearly wrong!

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Re: Should you always use a 529?

Post by Kenkat » Fri Apr 13, 2018 9:57 am

4strings wrote:
Fri Apr 13, 2018 9:03 am
SimonJester wrote:
Fri Apr 13, 2018 8:37 am
If you get a state tax deduction it makes sense to utilize the 529 to some extent. Keep in mind you will want to leave $4,000 per year per student outside the 529 so you can reap the education tax credits.

Also your $100K per year ($50K per child per year) might be high, the current national average for public college in state rate is a little over $25K per year.
i don't understand the "$4k per year per student" comment and how it relates to an education tax credit.

can you elaborate please?
As long as you don’t earn too much, you can claim the American Opportunity Tax Credit or AOTC. You get a dollar for dollar tax credit for the first $2000 and a 25% tax credit for the next $2000. So, you receive a $2500 tax credit (not a deduction, but a dollar for dollar credit) for $4000 of tuition. If the $4000 is funded from a 529, it is not eligible for the credit.

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Re: Should you always use a 529?

Post by livesoft » Fri Apr 13, 2018 10:02 am

^There are other requirements for getting the AOTC and other education tax benefits. Please read IRS Publication 970 rather than getting partial answers on an internet forum. :!:
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Re: Should you always use a 529?

Post by dknightd » Fri Apr 13, 2018 10:03 am

I used 529 for part of my kids education. I also used EE bonds. My deal with them was I'd pay 1/2 of in state tuition. I think a kid gets more out of their education if they have skin in the game. Looking back I'm not sure it was worth the bother. It might have saved me some on taxes, but honestly I' not sure it was worth the effort.

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Re: Should you always use a 529?

Post by winterfan » Fri Apr 13, 2018 10:26 am

We are using one. My plan was to only fund it to pay for a state school though. Right now my child is 9 and there is about 42K in the plan. I thought that would be good enough, but my state implemented a tax credit last year, so we still contribute $100/mo and are eligible for a $500 tax credit. We only have one child, so I do not want to overfund it. It's possible we won't even need this much money, but it's also possible my child will go somewhere more expensive. I think it's hard to estimate.

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Mister Whale
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Re: Should you always use a 529?

Post by Mister Whale » Fri Apr 13, 2018 10:33 am

taguscove wrote:
Fri Apr 13, 2018 8:51 am
Once the roth ira and 401k are maxed out, 529 is often the next major tax shelter for professional high income earners. It is a fantadtic tax break for the wealthy top 3-5% of income households. No annual contribution limit.

I have a few investment banking friends in their thirties who can use 529 to pay for NYC private schools now thanks to the GOP tax cuts. Theyre putting $500k in this year for their young children and all gains are tax free. One of my friends doesn't even have children yet, it is so good. Just put the 529 under your name and gift the amount to the child over time.

There are few guarantees in life, but investing heavily in children's education has large demonstrated financial returns.
I don't understand this post. How were they able to put $500k into their 529 accounts without having to pay gift tax? :confused
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Re: Should you always use a 529?

Post by WhiteMaxima » Fri Apr 13, 2018 10:41 am

I would save 529 as a family scholrarship fund. You can always change beneficary as you want within your family. Let 529 run for 50 years or more, be aggressive as possible and let it compounding.

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Re: Should you always use a 529?

Post by guyesmith » Fri Apr 13, 2018 10:43 am

I'm torn too. My kids are both under 3. I'm torn between whether the savings are high enough to give up flexibility.

Joshua Sheats has a great podcast about this: https://radicalpersonalfinance.com/276- ... s-college/

:moneybag

SimonJester
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Re: Should you always use a 529?

Post by SimonJester » Fri Apr 13, 2018 10:48 am

4strings wrote:
Fri Apr 13, 2018 9:03 am
SimonJester wrote:
Fri Apr 13, 2018 8:37 am
If you get a state tax deduction it makes sense to utilize the 529 to some extent. Keep in mind you will want to leave $4,000 per year per student outside the 529 so you can reap the education tax credits.

Also your $100K per year ($50K per child per year) might be high, the current national average for public college in state rate is a little over $25K per year.
i don't understand the "$4k per year per student" comment and how it relates to an education tax credit.

can you elaborate please?
You get a $2,500 tax credit for AOTC if you spend $4,000 per student on tuition, however this money cannot come from a 529 or ESA.

https://www.irs.gov/credits-deductions/individuals/aotc
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Re: Should you always use a 529?

Post by bloom2708 » Fri Apr 13, 2018 10:49 am

Find a mix. We did 50% into the 529. 50% went into a taxable account.(some use Roth). I created a taxable account at Vanguard for each kid, but it is a joint account for my wife/me.

Both accounts were 80/20 when the kids were little. We gradually got more conservative. Our oldest is 18 now and her dollars are quite conservative.

In taxable I used VTSAX + VWITX (Total US Stock + Int-Term Tax-Exempt bond index). We added over the 18 years as we got closer to college, new money went into the bond side.

We plan to take some from the 529 and some from the taxable to claim the AOTC as mentioned above. Our oldest chose a state school and her 529 + taxable will cover all her costs. If there are funds left over, we can use for a wedding or add it to our taxable or transfer to the next kid.
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Re: Should you always use a 529?

Post by willthrill81 » Fri Apr 13, 2018 11:08 am

We don't use a 529 and have no plans to ever do so. I plan on retiring around the time that our daughter would be attending college, and I can either just pull the money we want to give toward college expenses from retirement accounts or, if I'm not yet retired, pay for it with cash flow.

I think that 529 accounts are best used for those who (1) won't be retired by the time that college expenses start accruing and (2) those who have already maxed out all other tax-advantaged space.

But even beyond that, I don't like being locked into having to use 529 money for educational expenses. We only have one child, and if she decides to not go to college (even though I'm a professor, I will most certainly not push her into it for a variety of reasons), we would be significantly worse off with a 529 compared to other tax-advantaged accounts.
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Re: Should you always use a 529?

Post by 4strings » Fri Apr 13, 2018 11:43 am

SimonJester wrote:
Fri Apr 13, 2018 10:48 am
4strings wrote:
Fri Apr 13, 2018 9:03 am
SimonJester wrote:
Fri Apr 13, 2018 8:37 am
If you get a state tax deduction it makes sense to utilize the 529 to some extent. Keep in mind you will want to leave $4,000 per year per student outside the 529 so you can reap the education tax credits.

Also your $100K per year ($50K per child per year) might be high, the current national average for public college in state rate is a little over $25K per year.
i don't understand the "$4k per year per student" comment and how it relates to an education tax credit.

can you elaborate please?
You get a $2,500 tax credit for AOTC if you spend $4,000 per student on tuition, however this money cannot come from a 529 or ESA.

https://www.irs.gov/credits-deductions/individuals/aotc
great thank you :sharebeer

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Re: Should you always use a 529?

Post by marcopolo » Fri Apr 13, 2018 12:02 pm

willthrill81 wrote:
Fri Apr 13, 2018 11:08 am
We don't use a 529 and have no plans to ever do so. I plan on retiring around the time that our daughter would be attending college, and I can either just pull the money we want to give toward college expenses from retirement accounts or, if I'm not yet retired, pay for it with cash flow.

I think that 529 accounts are best used for those who (1) won't be retired by the time that college expenses start accruing and (2) those who have already maxed out all other tax-advantaged space.

But even beyond that, I don't like being locked into having to use 529 money for educational expenses. We only have one child, and if she decides to not go to college (even though I'm a professor, I will most certainly not push her into it for a variety of reasons), we would be significantly worse off with a 529 compared to other tax-advantaged accounts.
I am not sure i understand the logic behind this. Can you explain your reasoning? I kind of came to the exact opposite conclusion.

I maxed out all my other tax advantaged accounts. Then the choice was to put the funds targeted for kids education into 529 or into taxable.
If i had continued to work, then maybe the taxable would have been fine, as i could simply cash flow the college expenses.

But, now that i am retired early, if i had not put the funds into 529, i would need to be drawing that money put of either taxable or tax advantaged accounts. Doing so would result in higher AGI and taxable income. Having the 529s allows me to pull the college expense Tax Free, and does not count as income, which is also a huge factor if managing ACA subsidies as a early retiree.

So, it seems to me that the 529 has MORE value if retiring before college expenses accrue, but i may be missing some angle. I would like to hear your reasoning.
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Re: Should you always use a 529?

Post by Afty » Fri Apr 13, 2018 12:03 pm

A 529 is like a Roth IRA that you can only use for college/grad school. You can choose whatever investments you want inside the 529 (out of the ones offered by your plan).

If you already have a substantial sum saved for college sitting in a money market fund, I don't see any reason not to put it in a 529 to avoid paying taxes on the interest. You may want to hedge your bets and only put half in a 529 and keep the rest in some kind of taxable account. This is what we do -- we fund the 529s to about half of what we expect to need, and plan to pay the rest out of cash flow or taxable investments.

Re: putting $500k in a 529. You can superfund a 529 and put in up to 5 years worth of the gift tax exclusion at once, without filing a gift tax return. This works out to $75k per child per parent (i.e. $150k for a married couple giving to one child). Maybe this family has many children or are combining gifts from relatives.

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Re: Should you always use a 529?

Post by willthrill81 » Fri Apr 13, 2018 12:16 pm

marcopolo wrote:
Fri Apr 13, 2018 12:02 pm
willthrill81 wrote:
Fri Apr 13, 2018 11:08 am
We don't use a 529 and have no plans to ever do so. I plan on retiring around the time that our daughter would be attending college, and I can either just pull the money we want to give toward college expenses from retirement accounts or, if I'm not yet retired, pay for it with cash flow.

I think that 529 accounts are best used for those who (1) won't be retired by the time that college expenses start accruing and (2) those who have already maxed out all other tax-advantaged space.

But even beyond that, I don't like being locked into having to use 529 money for educational expenses. We only have one child, and if she decides to not go to college (even though I'm a professor, I will most certainly not push her into it for a variety of reasons), we would be significantly worse off with a 529 compared to other tax-advantaged accounts.
I am not sure i understand the logic behind this. Can you explain your reasoning? I kind of came to the exact opposite conclusion.

I maxed out all my other tax advantaged accounts. Then the choice was to put the funds targeted for kids education into 529 or into taxable.
If i had continued to work, then maybe the taxable would have been fine, as i could simply cash flow the college expenses.

But, now that i am retired early, if i had not put the funds into 529, i would need to be drawing that money put of either taxable or tax advantaged accounts. Doing so would result in higher AGI and taxable income. Having the 529s allows me to pull the college expense Tax Free, and does not count as income, which is also a huge factor if managing ACA subsidies as a early retiree.

So, it seems to me that the 529 has MORE value if retiring before college expenses accrue, but i may be missing some angle. I would like to hear your reasoning.
It seems that you maxed out other tax-advantaged accounts before you contributed to a 529, the second scenario I described above. This makes perfect sense if you are confident that you'll have an outlet to spend 529 money on. Obviously, a 529 is better than taxable if both would be used to pay for college expenses.

In my scenario, there's no advantage whatsoever for a 529. I have over $72k of tax-advantaged retirement account space annually (and it grows every year), and I doubt that I'll ever be able to max out all of that. If I retire before my daughter starts college, I can pull money from those accounts to pay for her expenses. If not, I can simply cash flow those expenses.

This notion that many financial planners are espousing of contributing to a 529 while one still has 401k (if the investment options are decent) or IRA space seems ludicrous to me.
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Re: Should you always use a 529?

Post by Jack FFR1846 » Fri Apr 13, 2018 12:28 pm

My state only started giving any tax advantage on contributing to the in state 529 last year. $2k in saved us $100 :| I'm linked with the Fidelity Visa so spending there goes at 2% into the 529.

I have had no 529 prior and my son's in his 4th year of private college. We do have about $350 in US Savings bonds which I can spend on college and pay no tax on the interest. Or I can pay federal tax only and do whatever I want with the money from cashing them. At present, I'm cash flowing both my son's college costs and my other son's private high school for disabilities. I've sold some savings bonds and a nice surprise to us, both my mom and father in law have contributed to the tuition costs.
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WhiteMaxima
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Re: Should you always use a 529?

Post by WhiteMaxima » Fri Apr 13, 2018 12:37 pm

You should always use 529. 529 is just like a Roth IRA. I feel it is very easy to invest with 529 using their index fund. I have also given the 529 account number to my relatives and use it like gift fund pool. Education is the best investment for the future.

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Re: Should you always use a 529?

Post by gunn_show » Fri Apr 13, 2018 12:38 pm

DJP1944 wrote:
Fri Apr 13, 2018 8:06 am
scifilover wrote:
Fri Apr 13, 2018 7:49 am
The bigger question for you is why are you putting the funds into a money market account, rather than investing in a fund that will (hopefully) appreciate over the next decade. I have been putting funds aside for my grandchildren using the Utah 529. About 35% of the current fund balance represents investment gains. When the funds are withdrawn for college expenses, they come out without being taxed. This is the advantage. If you were to use a 529 and choose a MMF investment option, the advantage would be minimized.
The money market account is just a holding place until we settle on a good strategy. As we have accumulated assets we never had a specific allocation or frankly plan for college. It's time to get more intentional, hence the post. I appreciate the example your provide given your personal situation...very helpful.
My response would be similar to scifilover's. Your kids are 7 and 9 and you still have the funds in MM. That is a long time with near-zero growth, basically the entire post-recession upswing. If you are going this investment route, leave it where it is, keep saving, and be done. If you are interested in growing the investments, move to a 529 so the money+growth can be taken out tax free. Some other factors like income tax deduction depends on your state, which you did not list, and others have mentioned already.

My kid is <1yo, in CA, I get no tax deduction, but I am putting her money into a Vanguard 529 currently at aggressive growth. It tails down the aggressive nature as it gets closer to college age. I already max out all my tax advantaged accounts, and worst case if she doesn't go to college or gets scholarships, we pass it on to her future kid(s) or even worst case I'll take the penalty for withdrawing for non-educational use. ("the earnings portion of non-qualified withdrawals will incur federal income tax as well as a 10% penalty")
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Re: Should you always use a 529?

Post by marcopolo » Fri Apr 13, 2018 1:03 pm

willthrill81 wrote:
Fri Apr 13, 2018 12:16 pm
marcopolo wrote:
Fri Apr 13, 2018 12:02 pm
willthrill81 wrote:
Fri Apr 13, 2018 11:08 am
We don't use a 529 and have no plans to ever do so. I plan on retiring around the time that our daughter would be attending college, and I can either just pull the money we want to give toward college expenses from retirement accounts or, if I'm not yet retired, pay for it with cash flow.

I think that 529 accounts are best used for those who (1) won't be retired by the time that college expenses start accruing and (2) those who have already maxed out all other tax-advantaged space.

But even beyond that, I don't like being locked into having to use 529 money for educational expenses. We only have one child, and if she decides to not go to college (even though I'm a professor, I will most certainly not push her into it for a variety of reasons), we would be significantly worse off with a 529 compared to other tax-advantaged accounts.
I am not sure i understand the logic behind this. Can you explain your reasoning? I kind of came to the exact opposite conclusion.

I maxed out all my other tax advantaged accounts. Then the choice was to put the funds targeted for kids education into 529 or into taxable.
If i had continued to work, then maybe the taxable would have been fine, as i could simply cash flow the college expenses.

But, now that i am retired early, if i had not put the funds into 529, i would need to be drawing that money put of either taxable or tax advantaged accounts. Doing so would result in higher AGI and taxable income. Having the 529s allows me to pull the college expense Tax Free, and does not count as income, which is also a huge factor if managing ACA subsidies as a early retiree.

So, it seems to me that the 529 has MORE value if retiring before college expenses accrue, but i may be missing some angle. I would like to hear your reasoning.
It seems that you maxed out other tax-advantaged accounts before you contributed to a 529, the second scenario I described above. This makes perfect sense if you are confident that you'll have an outlet to spend 529 money on. Obviously, a 529 is better than taxable if both would be used to pay for college expenses.

In my scenario, there's no advantage whatsoever for a 529. I have over $72k of tax-advantaged retirement account space annually (and it grows every year), and I doubt that I'll ever be able to max out all of that. If I retire before my daughter starts college, I can pull money from those accounts to pay for her expenses. If not, I can simply cash flow those expenses.

This notion that many financial planners are espousing of contributing to a 529 while one still has 401k (if the investment options are decent) or IRA space seems ludicrous to me.

The "and" between your two cases confused me, I thought you were saying you had to still be working AND maxed out your tax advantaged space. I get it now.

While I did not use 529 until after all tax advantaged space filled, I can see where if you were very confident you would be funding college expenses, it might make sense to use 529 before filling tax-deferred. Certainly not before other tax-free (such as Roth and HSA), but a portion going to 529 before filling trad IRA or Trad 401k might make sense as it provides tax-free as opposed to tax-deferred growth.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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