529 Savings For your Kids

[Tahoe1305]

Can someone confirm what the options are if they don’t use/need the $$ for college?

Scholarships or other good deals pay for it instead…..

I’ve heard you can roll it legally into a Roth but it isn’t simple.

 

[z987k]

This is the route we took as well. The tax savings were not significant enough to justify a large account that is locked into education funding, particularly since we have a boy. For all I know, he might decide to enter the workforce at 18 or he might make a 35 on his ACT and get a full ride to his college of choice. If that’s the case, we still have the freedom to use the funds as desired.

If you actually max a 529 fund and then s&p it for 18 years, you're looking at $500k ish in gains you don't have to pay taxes on.
Even at long term capitol gains rates that's still 75k.
And then it probably still wont pay for what college will cost 18 years from now.

 

[nreynolds84]

We put half of the kids’ Alaska PFD into a 529 plan. Hoping it gets put to good use in the future.

 

[passinggas33]

I would highly recommend that if you do a 529, look at the one through Utah. The have a low fee one, and has done really great for me investment wise. I’ve been very happy with theirs, as have my kids who have benefited greatly from having it.

 

[svivian]

Can someone confirm what the options are if they don’t use/need the $$ for college?

Scholarships or other good deals pay for it instead…..

I’ve heard you can roll it legally into a Roth but it isn’t simple.

I set my kids Colorado 529 savings up when she was born. You can select from 3 or 4 options. I chose the investment one that is like my 401k. So far it has performed well.

As for scholarships, you can take dollar for dollar out without penalty. You can also roll additional funds to other kids or even yourself for education.

Anything outside education is a 10% penalty plus taxes on gains

Colorado also matches $500 per year for the first 5 years right now.

 

[406flyfish]

We set up a 529 for each kid when they were born. Grand parents and family add to it for birthday & holidays.

 

[Thess87]

I’m with you there, however I’m also not a fan of UTMA accounts as I do not want a 18-21 year old automatically getting control of what may be a large sum of money

We chose to just open a brokerage in our names, and if/when they are ready we will transfer it to them. Too often people let the tax tail wag the dog.

Once they are of working age they will likely have essentially 0 income, so they can withdraw from a brokerage essentially tax free anyway within any reasonable amount of money.


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Yeah that’s a solid plan as well. I actually asked my guy about this last week. Because if the kids are turning out to be a holes I’m not going to reward bad behavior. He said that I can just clean that account out before there 18 and that would keep it from transferring. Might cost me some taxes, but that would be worst case anyway.

 

[mjh]

We did a 529-almost empty-means the offspring is almost done— one more semester- at least it better be.
Watch your allocations and risk levels along with market trends. Like many in 2008 we lost almost 1/2 its value. Took a long time to rebuild with less risky allocations. Shift allocations once they hit 18. Have other asset choices to cover education costs. Have the offspring earn some of their own college money-good to have skin in the game. Sweat equity is good as well. The kid builds credit through an on campus work program that covers about 1/2 his class credit costs-even gets a small paycheck now and then when he exceeds required commitment. In high school take classes for college credit- make sure they are transferable useful credits.

 

[mattflipper]

Look at some of the different states plans. Some other states had far better returns than some and when factoring this in it trumps the measly state tax benefit sometimes. You have to fund your states plan to get the benefit but with some there is nothing more than a state deduction and with the typically low state tax rates the tax savings is minuscule. Alaska has a good plan and Ohio was a good plan too.

 

[eamyrick]

Can someone confirm what the options are if they don’t use/need the $$ for college?

Scholarships or other good deals pay for it instead…..

I’ve heard you can roll it legally into a Roth but it isn’t simple.

You have to have a 529 for 15 years and money has to be into account for 5. Each year you just transfer the max Roth amount from there 529. At $7500 (current Roth amount), it would take 5 years to transfer the money out to hit the $35000 max. Would take 5 minutes a year.

The way I looked at 529s is that a it’s pretty common for people to say colllege isn’t needed or going away but truth is most middle class kids are going to college. 4 years in Texas schools is around $110k right now. My goal was to save about 80% of that for each kid. It looks like it’s going to cost me $250 per month per kid. My 12 year old has become very interested in flying and mentioned joining the Air Force. If he does this I will invest the entire $85k for him as an 18 year old which will set him up very well long term.

 

[sasquatch]

If you actually max a 529 fund and then s&p it for 18 years, you're looking at $500k ish in gains you don't have to pay taxes on.
Even at long term capitol gains rates that's still 75k.
And then it probably still wont pay for what college will cost 18 years from now.

Don’t have to pay taxes on (IF) used for education

A brokerage account, with LTCG could also draw out large sums per year and equal almost no taxes for someone going to school. Going to school means 0 or minimal earned income so the tax bracket would be very low for them.

Plus, it can be used for anything. Far too often we get stuck on “tax free growth” without really looking into how taxes are actually paid out, and end up with lots of money tied up where we can’t use it freely.

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[Tahoe1305]

You have to have a 529 for 15 years and money has to be into account for 5. Each year you just transfer the max Roth amount from there 529. At $7500 (current Roth amount), it would take 5 years to transfer the money out to hit the $35000 max. Would take 5 minutes a year.

The way I looked at 529s is that a it’s pretty common for people to say colllege isn’t needed or going away but truth is most middle class kids are going to college. 4 years in Texas schools is around $110k right now. My goal was to save about 80% of that for each kid. It looks like it’s going to cost me $250 per month per kid. My 12 year old has become very interested in flying and mentioned joining the Air Force. If he does this I will invest the entire $85k for him as an 18 year old which will set him up very well long term.

If your 12 year old has questions, let me know. I just retired flying and teaching at the academy. Still fly a good amount. It’s a great career.

 

[SDHNTR]

As per usual, when people ask for financial advice on this site, there is lots of misinformation and misunderstanding here. Proceed with caution.

529’s are fantastic tools for most kids, but not right for everyone. Each situation is unique and many of the blanket statements made here are incorrect.

 

[eamyrick]

As per usual, when people ask for financial advice on this site, there is lots of misinformation and misunderstanding here. Proceed with caution.

529’s are fantastic tools for most kids, but not right for everyone. Each situation is unique and many of the blanket statements made here are incorrect.

I’m sure there is an awesome financial advisor but after interviewing a few I haven’t found one yet. Advisor that set up my 529 placed me in a target date fund for a 1 year old.

I’ve probably learned more about investing here and Reddit than anywhere else.

 

[omicron1792]

I’m sure there is an awesome financial advisor but after interviewing a few I haven’t found one yet. Advisor that set up my 529 place me in a target date fund for a 1 year old.

Also they want to make it seem complicated to….get you to use an advisor.

It’s not complicated.

 

[DangerRanger]

Nc doesn’t offer anything special for their nc529 so I looked up some of the best ones back when I did it for fees etc and ended up using my529 from Utah I think.

i especially like that now if the kids don’t use it you can roll 35k into an IRA.

My529 target dates funds are pretty well constructed, they are rolling mixes of us total market index, international market index and roll into bond index fund acquisition and then savings as you get closer. I personally just buy vti for HSA and taxable accounts but my 529 target dates are performing well so far for me

 

[ShortMagFan]

My wife and I gifted the max to 529 plans for each of our kids for 2-3 years 12-15 years ago. The investment performance was fantastic. Our oldest graduated with $50k left in her 529. It’s now invested aggressively and will be hers to help pay for her kids education a couple decades from now.

Our youngest is just a sophomore but looking like we will end up in a similar spot with his 529 as well

The untaxed gains paid for a significant portion of both my kids’ college tuition so I’d say I’m happy with it. One out of state public tuition and one private tuition so real $$$

 

[sasquatch]

Also they want to make it seem complicated to….get you to use an advisor.

It’s not complicated.

Bingo


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[omicron1792]

Nc doesn’t offer anything special for their nc529 so I looked up some of the best ones back when I did it for fees etc and ended up using my529 from Utah I think.

i especially like that now if the kids don’t use it you can roll 35k into an IRA.

My529 target dates funds are pretty well constructed, they are rolling mixes of us total market index, international market index and roll into bond index fund acquisition and then savings as you get closer. I personally just buy vti for HSA and taxable accounts but my 529 target dates are performing well so far for me

The roll into a Roth is the kids Roth though right? Not yours?

 

[Tahoe1305]

The roll into a Roth is the kids Roth though right? Not yours?

Yes.