Should I raid my kids college fund to buy a new computer?

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miamivice
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Should I raid my kids college fund to buy a new computer?

Post by miamivice »

Eye catching title, but serious question.

Our financial situation is as follows:

- $850,000 in retirement
- $350,000 in vacant land equity (separate of primary home)
- $450,000 in non-retirement funds
- $190,000 in 529s
- $400,000 in equity of primary home
- $18,000 in HSA
- ($117,000) HELOC loan

Question:

I just purchased a laptop at Costco for about $800. Thinking about using 529 money to pay for it. (I am a part-time college student and would use the laptop for my college studies). The 529 accounts are currently in my name.

I have two kids that each have around 10 years to go for college. Without doing the math, I think that $190,000 saved up for college should be plenty. They will likely go to a state flagship, not a private college or community college.

Thinking about pulling money out of the 529s to pay for the laptop. Curious what Bogleheads might suggest?
e5116
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Re: Should I raid my kids college fund to buy a new computer?

Post by e5116 »

You have a net worth of $2M+ and are worried about where to take money out of for an $800 purchase? My honest opinion is it doesn't matter....it's not even worth worrying about. If you think you have too much in there and are taking classes yourself, sure take it from the 529. I'd hardly call taking out 0.4% of it a "raid."

You also have hundreds of thousands of investments/cash available in taxable accounts. That'd be a fine decision too. Personally, I'd probably just take it out of my normal cash because it's such a small amount and not worth the distribution/dealing with a 529 transaction/changing the beneficiary.
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celia
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Re: Should I raid my kids college fund to buy a new computer?

Post by celia »

Since you're a part-time student, why not first confirm that you would be eligible to take a tax-free withdrawal. Make a copy of your 2019 return and pretend you bought a computer for school last year. What happens software-wise?
BuckyBadger
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Re: Should I raid my kids college fund to buy a new computer?

Post by BuckyBadger »

For crying out loud. All this mental energy for a sub-$1,000 purchase? You are a literal millionaire.

Just buy it. Put it on a credit card. Pay it off when the bill comes.

Is this a serious post?
BarbBrooklyn
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Re: Should I raid my kids college fund to buy a new computer?

Post by BarbBrooklyn »

Are you currently out of work and experiencing cash flow problems?
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."
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MillennialFinance19
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Re: Should I raid my kids college fund to buy a new computer?

Post by MillennialFinance19 »

This question represents .0004% of your NW. Minus going to a payday loan shop and getting an $800 loan at 325% amortized over 12 years, I don't think you can mess this up.
For the love of God, stick to your plan!!!
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KingRiggs
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Re: Should I raid my kids college fund to buy a new computer?

Post by KingRiggs »

Should've bought a Mac... :wink:
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tashnewbie
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Re: Should I raid my kids college fund to buy a new computer?

Post by tashnewbie »

BuckyBadger wrote: Sun Jul 19, 2020 11:28 pm For crying out loud. All this mental energy for a sub-$1,000 purchase? You are a literal millionaire.

Just buy it. Put it on a credit card. Pay it off when the bill comes.

Is this a serious post?
+1
Herekittykitty
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Re: Should I raid my kids college fund to buy a new computer?

Post by Herekittykitty »

I doubt if you accumulated the assets you did and built up the 529, HSA, and so on without a plan. If you do not have a specific amount in mind for the various categories then work with your spouse on setting such an amount, and review annually to confirm that the amount still makes sense. If you do not have a written budget that includes not just set monthly expenses but also predictable expenses (tires, property taxes, appliance replacement, and so on) and that includes putting aside money designated for your college expenses, then start doing that. A computer for school is a predictable expense. Spending what you need to in order to maximize your learning and success in school is not only legitimate but necessary.

As far as the computer expense for your education - pay it out of general expenses, put it on a credit card and pay it over a few months, or whatever makes sense without going into funds designated for other purposes. And set up a category in your budget for funding your own education.

It looks to me like you have done a lot right and must have spent thought and discipline getting where you are. I'm wondering if somehow planning and setting aside money for your own college expense has missed being part of that so far. If so - prioritize your own education in your budget along with other important expenses such as college saving for the kids.

And get on a written budget if you aren't already, decide appropriate amounts for your various categories such as college savings for the kids and review those amounts annually to determine if they remain appropriate, and get yourself a category in the budget and savings for college expenses for yourself.

Finally: Good for you for furthering your education even while saving for your kids' educations. Well done.
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ctfish
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Re: Should I raid my kids college fund to buy a new computer?

Post by ctfish »

Determine if you are a "saver" or "immediate reimburser" for these types of accounts.

I've not raided a 529 to date (saver), but reimburse everything immediately from HSA down to the last OTC bandaid.
hudson
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Re: Should I raid my kids college fund to buy a new computer?

Post by hudson »

miamivice wrote: Sun Jul 19, 2020 10:12 pm Thinking about pulling money out of the 529s to pay for the laptop. Curious what Bogleheads might suggest?
It's OK....no problem.
RiotAct
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Re: Should I raid my kids college fund to buy a new computer?

Post by RiotAct »

Is this a “humble brag” post?
George Costanza
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Re: Should I raid my kids college fund to buy a new computer?

Post by George Costanza »

Was this just an excuse for you to list out your financial stats? Lame.
"I don't think I've ever been to an appointment in my life where I wanted the other guy to show up." - George Costanza
RudyS
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Re: Should I raid my kids college fund to buy a new computer?

Post by RudyS »

RiotAct wrote: Mon Jul 20, 2020 11:57 am Is this a “humble brag” post?
to me too.
student
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Re: Should I raid my kids college fund to buy a new computer?

Post by student »

I would use the 529 money if you think you kids won't be able to use all the money in the account.
Shael_AT
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Re: Should I raid my kids college fund to buy a new computer?

Post by Shael_AT »

Lol, what are we even talking about here?
BeerTooth
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Re: Should I raid my kids college fund to buy a new computer?

Post by BeerTooth »

Shael_AT wrote: Mon Jul 20, 2020 12:48 pm Lol, what are we even talking about here?
well, to be fair, the other topic at the top of the board was asking whether it was medically safe to walk outside for exercise, given that there is sunshine outside....so apparently that's the level of things people have found to worry about
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SmileyFace
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Re: Should I raid my kids college fund to buy a new computer?

Post by SmileyFace »

I wouldn't bother. Legally it may be fine to do so - but it will generate a 1099-Q to the IRS and why deal with the hassle of the potential of being questioned about the withdrawl if you don't need to. (I always pay directly from my 529 to my kids' schools so the 1099-Q is in their names - eases the chances of audit).
If you don't spend the full amount in your 529 on under-grad perhaps one of your kids will go to grad school and you can apply what is left there. Or it can be passed down to grand-kids.
sd323232
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Re: Should I raid my kids college fund to buy a new computer?

Post by sd323232 »

I don't think you can afford the laptop, sorry
Topic Author
miamivice
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Re: Should I raid my kids college fund to buy a new computer?

Post by miamivice »

DaftInvestor wrote: Mon Jul 20, 2020 1:27 pm I wouldn't bother. Legally it may be fine to do so - but it will generate a 1099-Q to the IRS and why deal with the hassle of the potential of being questioned about the withdrawl if you don't need to. (I always pay directly from my 529 to my kids' schools so the 1099-Q is in their names - eases the chances of audit).
If you don't spend the full amount in your 529 on under-grad perhaps one of your kids will go to grad school and you can apply what is left there. Or it can be passed down to grand-kids.
I think this is what I am leaning toward. I don't have other expenses that will be withdrawn from the 529 (everything else is paid by employer) so I think it will be suspicious if my only 529 expense is a laptop. Also don't really feel good about spending money earmarked for kids on myself.

With regards to the other questions, this is not intended to be a humblebrag or anything like that. Even though we have enough assets that it would seem like an easy decision, disposable cash flow is limited in our family and a $800 laptop purchase still seems like a big expense. We're finally in the position that I feel we should enjoy some of our income on ourselves but it's still harder to justify than it would seem.

Thanks for the comments.
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miamivice
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Re: Should I raid my kids college fund to buy a new computer?

Post by miamivice »

George Costanza wrote: Mon Jul 20, 2020 12:38 pm Was this just an excuse for you to list out your financial stats? Lame.
No. The way it works here is if you ask the question without any financial stats, people say not enough information. Then if you say how much is in 529s (only), people ask how retirement is doing. It's way easier just to lay out all of the information up front so nobody says not enough information.

My question is still valid....I have more in 529s than expected since the market has done well and don't anticipate that my kids will need it all. That was a surprise that I wasn't expecting. But I am not comfortable about the choice if I get questioned by the IRS (I already own several other computers) and am not really confident it would qualify.
02nz
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Re: Should I raid my kids college fund to buy a new computer?

Post by 02nz »

OP, the 529s are in your name but it has to be a qualified educational expense. If you are NOT enrolled (or about to be enrolled) at an eligible educational institution, then I don't believe you can draw from the 529 to buy a laptop.

Look at IRS Publication 970 and look for "Qualified Tuition Programs" aka 529s. Again, my quick read is that if you're not a student (or about to be), a laptop does NOT qualify.

From Fidelity:

"Computers and related equipment and services are considered qualified expenses if they are used primarily by the beneficiary during any of the years that the beneficiary is enrolled at an eligible educational institution."

https://www.fidelity.com/learning-cente ... 9-spending
Last edited by 02nz on Mon Jul 20, 2020 1:57 pm, edited 1 time in total.
aristotelian
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Re: Should I raid my kids college fund to buy a new computer?

Post by aristotelian »

miamivice wrote: Mon Jul 20, 2020 1:43 pm
George Costanza wrote: Mon Jul 20, 2020 12:38 pm Was this just an excuse for you to list out your financial stats? Lame.
No. The way it works here is if you ask the question without any financial stats, people say not enough information. Then if you say how much is in 529s (only), people ask how retirement is doing. It's way easier just to lay out all of the information up front so nobody says not enough information.

My question is still valid....I have more in 529s than expected since the market has done well and don't anticipate that my kids will need it all. That was a surprise that I wasn't expecting. But I am not comfortable about the choice if I get questioned by the IRS (I already own several other computers) and am not really confident it would qualify.
I would suggest allocating the 529s more conservatively. Your timeframe is short enough that you should be derisking anyway. 190k real could go quickly between two kids and grad school so I don't think you have oversaved yet. Conservative allocation would keep your real value where it is, take away market risk on the downside and oversaving risk on the upside.
shess
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Re: Should I raid my kids college fund to buy a new computer?

Post by shess »

miamivice wrote: Mon Jul 20, 2020 1:39 pm I think this is what I am leaning toward. I don't have other expenses that will be withdrawn from the 529 (everything else is paid by employer) so I think it will be suspicious if my only 529 expense is a laptop. Also don't really feel good about spending money earmarked for kids on myself.
This is where I would sit. If you were paying other college costs from the 529, that makes it better, because they support each other. Even then, if you're a part-time student, I think you'd have to look at whether it's reasonable to purchase an entire computer for that. Personally, I think a full-time student justifies it, even if they use the computer for some personal use, but I'd be leery about trying it for a part-time student unless the coursework clearly justifies it.

But as a general rule, I wouldn't forbid myself from this kind of transaction. Your 529 is part of your overall plan, and I don't think it's fair to just say "It's for the kids, it's untouchable" unless you need to do that to prevent yourself from making bad decisions. IMHO, $190k/2 with 10 years left feels generous to me. I'm not saying it's too much, but it feels to me like nearing the cusp between "I have troubles imagining spending less than this" vs "There are many places which don't need this much". YMMV.

As far as the shaming ... I don't know, I assume you have such well-funded accounts because you pay attention before spending $800. I don't see anything wrong with that, and I doubt you buy new laptops frequently enough that this time is really wasted. People get in huge discussions about perfecting asset allocations for modest accounts (where perfection hardly matters in absolute terms), I see no reason to not talk about saving a few hundred in taxes...
Last edited by shess on Tue Jul 21, 2020 2:10 pm, edited 1 time in total.
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galawdawg
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Re: Should I raid my kids college fund to buy a new computer?

Post by galawdawg »

You make $180k a year and are asking whether to pay for a new laptop computer for yourself with money you have earmarked for your children's college education? Really??
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TomatoTomahto
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Re: Should I raid my kids college fund to buy a new computer?

Post by TomatoTomahto »

galawdawg wrote: Mon Jul 20, 2020 2:09 pm You make $180k a year and are asking whether to pay for a new laptop computer for yourself with money you have earmarked for your children's college education? Really??
We often say that money is fungible, well, so are education funds. His two kids are 10 years from college and already have $190k in their 529s. I think it’s okay 👍
I get the FI part but not the RE part of FIRE.
Katietsu
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Re: Should I raid my kids college fund to buy a new computer?

Post by Katietsu »

I would just take it out of the 529. There will be a 1099-T in your name. This is only $800 for the year. This is a situation that does not usually result in any questions by the IRS. And, in the remote case there was a question, the response would take about 90 seconds.

And I spent quite a bit of mental energy this morning trying to figure out if I should spend a net of $4.25 ($15 convenience fee - $10.75 cash back reward) for the convenience of paying my county taxes online vs check by mail.
fyre4ce
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Re: Should I raid my kids college fund to buy a new computer?

Post by fyre4ce »

Pay cash and be done with it. I think my last trip to Costco cost me half that just on food and supplies.
FishTaco
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Re: Should I raid my kids college fund to buy a new computer?

Post by FishTaco »

Dear Sir,

This is the bogleheads forum. I believe you may have migrated here by mistake. We have a few core beliefs here that I will share:

1. - No one should spend $800 for a computer. A $200 chromebook formatted to run a version of Windows 95 that you have in the closet will be sufficient.
2. - Kids should only have enough in 529 account for 2 years community college followed by 1.75 years at state university.
3. - What kind of car do you drive? I suggest a 2000-2005 Toyota Camry with the rear seats removed for hauling lumber and improved gas mileage.

Good Day.
Living Free
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Re: Should I raid my kids college fund to buy a new computer?

Post by Living Free »

sd323232 wrote: Mon Jul 20, 2020 1:27 pm I don't think you can afford the laptop, sorry
Haha! Funniest comment I've seen on bogleheads in a while :beer
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