OH 529

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AGR
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OH 529

Post by AGR » Thu Jan 07, 2010 8:06 pm

I've been saving for my oldest son's college expenses in an OH 529 plan. He is a junior in college. Fortunately, I haven't had to withdrawl any of these funds. I've been able to pay his college expenses out of cash flow.

My question is as follows: Does it make sense to continue making payments out of cash flow or should I first contribute the money to the 529 and then withdrawal it to get the state tax deduction?

I have two younger sons that will be starting college in the next few years.

Thanks,

AGR

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LadyGeek
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Post by LadyGeek » Thu Jan 07, 2010 8:51 pm

Welcome. The wiki has information on 529 plans. Please see 529 Plans on the Bogleheads Wiki.

If OH means the state of Ohio, please see Ohio 529 Plan on the Bogleheads Wiki.

(529 plans are not my background, but perhaps the wiki could help somewhat.)
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

livesoft
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Post by livesoft » Thu Jan 07, 2010 9:15 pm

So really you are using a single plan to benefit all your children. If you pay out of cash flow and still contribute that seems best ... with the knowledge that eventually you will deplete the 529 with the last child.

ohiost90
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Re: OH 529

Post by ohiost90 » Fri Jan 08, 2010 8:47 am

AGR wrote: My question is as follows: Does it make sense to continue making payments out of cash flow or should I first contribute the money to the 529 and then withdrawal it to get the state tax deduction?

AGR
As I understand your question, yes. I would contribute 2k for the tax deduction and then just withdraw it if I needed to. Ohio has very low risk options, vangaurd Prime money market, savings accounts, and CDs that would be perfect for that tatic.

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Kenkat
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Post by Kenkat » Fri Jan 08, 2010 9:01 am

livesoft wrote:So really you are using a single plan to benefit all your children. If you pay out of cash flow and still contribute that seems best ... with the knowledge that eventually you will deplete the 529 with the last child.
Just to note, you have to designate a single beneficiary for the 529 plan and only can fund expenses for that beneficiary with that plan. That said, you can change the beneficiary at any time - so if your son graduates with money left in his 529, you can switch the beneficiary to the next child.

I would take advantage of the $2000 tax deduction every year for every child if you can - even if you take the money right back out for expenses.

Ken

livesoft
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Post by livesoft » Fri Jan 08, 2010 10:00 am

where "expenses" means qualified expenses.

AGR
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Post by AGR » Fri Jan 08, 2010 1:43 pm

Thanks. It seems like a no-brainer to put it in the 529 and then turn around and withdrawal it for qualified educational expenses for the beneficiary, but it almost feels like a "loophole" to get the tax savings. Is there a minimum time that it needs to be in the account before it is withdrawn? The money is very conservaively invested given his age and timeframe when we expect to withdraw it.

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