Allocating 529 contributions between kids

[Mushe]

Look at all this MM talk this week! I love January.

I could use some help from the hive mind in allocating our contributions. We always use the $5k child care FSA money for 529 contributions, and I like to do a summer deposit too. I also have monthly contributions going in, with a 66/33% split. For these purposes, I want to focus on the percentage of any overall contribution that would go to each child.

Kids are 6.5 years apart so DS is a lot closer to college, but I don’t want to short change DD or the opportunity for growth. We got her account started at birth, while we slacked on DS’s account until he was probably 3-4, but then tried to make up for it. He has a full 10 years left in school.
- DS, 8
- DD, 18 months

Right now, her account balance is about 10% of his. We contributed a few thousand to her account last year as a jump start, but since we’ll get our $5k back soon, I wanted to have a more well thought out plan.

How would you divide your contributions? We’re a ‘college is not optional’ family and plan to pay for at least undergrad. We’re fine planning to do some cash flow as well. Being back in expensive child care times has me wanting to be more strategic on how we spend.

[farmvillelover]

I'd personally try to even them out a bit, and then make future contributions at 50/50%. No real reason. If you're in age-based funds, realizing that the funds going into your son's account will be invested more conservatively.

My boys are 3 years apart and my older son's account is about 55% of the total in both 529 plans. I don't think it matters because if DS1 needs more, we will take from DS2's plan. If DS2 needs more, we will just cash flow it or come up with it some other way.

[Mushe]

farmvillelover interesting points, thank you! I’ll admit that I didn’t know we could move it between kids. 😬

[farmvillelover]

Jan 2, 2020 16:15:53 GMT -5 Mushe said:

farmvillelover interesting points, thank you! I’ll admit that I didn’t know we could move it between kids. 😬

Not just between kids but other family members:


There are no tax consequences or penalties when a 529 plan beneficiary is changed to a member of the beneficiary’s family. Qualified family members include the beneficiary’s:
  


Spouse

Son, daughter, stepchild, foster child, adopted child or a descendent

Son-in-law, daughter-in-law

Siblings or step-siblings

Brother-in-law, sister-in-law

Father-in-law, mother-in-law

Father or mother or ancestor of either, stepmother, stepfather

Aunt, uncle or their spouse

Niece, nephew or their spouse

First cousin or their spouse
source:  www.savingforcollege.com/article/how-to-change-the-beneficiary-on-your-529-plan

[icedcoffee]

My kids are 3 years apart. I basically didn't contribute to DS1's this year and instead made a contribution to DS2 in the amount of everything I've contributed to DS1's so far. Next year once everything is even (in terms of original contribution, not regarding growth) I will make 50/50 contributions going forward. Although they are 3 years apart they will only be 2 grades apart in school so I want things even now.

[tcu2003]

I allocate mine evenly between my 2 kids, who are 4 years apart in age (and grade levels). DS(7) has more than DD(3), but because we’ve had more cash to fund the 529s in the last couple of years, DD’s is maybe 60% of DS’s, and should have more than his will at college start time by the time she starts college since we put more in during her first few years than during his first few years.

[Mrs.flang]

I haven't opened a separate one for DD2 yet (she just turned 1), and we're only able to contribute a small amount to DD1s anyway. I had it in my head that since we could transfer between them that its not super urgent to open one for DD2 yet, but my plan was to open it around now so she's the same age as when we started DD1s and to try to keep the contributions split evenly. They are 2 years apart, but will be 3 grades apart in school.

[steamboat185]

We do 50 dollars per year of age per child per time period. Mine are 3 years apart. This way it will result in the same contribution amount for each kid. Once we have hit roughly one year of college expenses we move over to a brokerage account. Incase the rules have changed or my kids don’t want to go to college. I have no reason to want to pay for someone else to go to college (aside from any scholarship donations) at this point so changing the beneficiary outside my two kids isn’t much of a benefit.

[sandandsea]

Our boys are 4.5 years apart and 4 school years so won’t be in high school /starting college at same time. We started both at birth and contribute the same amount to each every year. Ds1 has more since he is 4.5 years ahead.

[whitemerlot]

My kids are 2 years apart in school and my older one has about 5k more than his sister. I wish I knew the magic number to save for my kids for college. I’d like to pay for undergrad, but am not sure exactly how much to shoot for and I’ve used many calculators.

[af1212]

I have one account in my name. We make all contributions to that account. Once we get closer to college age for my oldest I will take some out and put in an account just for her, then onto my second, then my third.

My oldest and then my second had some very generous contributions made annually by my grandmother before she passed away. There is no reason in my mind that my third wouldn’t have gotten the same if she had still been alive so this is the most fair way I could come up with.

[origami]

If my kids were 6y apart I’d probably just have 1 account and change beneficiaries when the time comes. But if I already had 2 accounts I’d just split contributions 50/50. I wouldn’t worry about the balances. There are 6 years without an overlap of contributions. It’ll be made up later.

[atarianna]

Mushe I feel like I have been living under a rock. I had no idea you could use DC FSA money toward 529s. My mind is blown and I am upset I’ve not utitilized this before now.

I found very little info online. Do you have any literature or resources about using FSA toward 529s?

[whitemerlot]

Jan 5, 2020 8:19:01 GMT -5 atarianna said:

Mushe I feel like I have been living under a rock. I had no idea you could use DC FSA money toward 529s. My mind is blown and I am upset I’ve not utitilized this before now.

I found very little info online. Do you have any literature or resources about using FSA toward 529s?

I’m guessing she just means when she gets her reimbursement from her childcare FSA, she uses it to fund her 529.

[Mushe]

Jan 5, 2020 8:19:01 GMT -5 atarianna said:

Mushe I feel like I have been living under a rock. I had no idea you could use DC FSA money toward 529s. My mind is blown and I am upset I’ve not utitilized this before now.

I found very little info online. Do you have any literature or resources about using FSA toward 529s?

Yes, what the next poster said! We have qualifying expenses, but only pull it out once a year and just throw it to their 529s.

[atarianna]

Jan 5, 2020 15:52:05 GMT -5 Mushe said:

Jan 5, 2020 8:19:01 GMT -5 atarianna said:

Mushe I feel like I have been living under a rock. I had no idea you could use DC FSA money toward 529s. My mind is blown and I am upset I’ve not utitilized this before now.

I found very little info online. Do you have any literature or resources about using FSA toward 529s?

Yes, what the next poster said! We have qualifying expenses, but only pull it out once a year and just throw it to their 529s.

I see. Now I feel stupid! Thanks for clarifying.

[thatgirl2478]

If you use the college calculators, you can run them for both kids and play with the numbers.

www.schwab.com/public/schwab/investing/retirement_and_planning/saving_for_college/college_savings_calculator

Just change up the allocation of the current investment with various monthly contributions & see how it works out.

Our kids are only 4 years apart. Based on the calculations from the site above, we'll be financing about 22k Out of Pocket for our 9 year old and $5k out of pocket for our 5 year old. Of course, that's assuming they do the 2year community college + 2 years State school combo ... and assuming we keep the same level of contribution... and assuming that they get no scholarships (they won't get need based anything unless something weird happens) etc etc etc. So we're splitting their fund & contributions 50/50 at this point.