529 Questions

[noodleoo]

Is there a good 529 savings calculator that you guys recommend? I’m looking for one where you can change the contributions, amount already funded and rate of return to run some scenarios. I remember someone on here saying they prefunded the 529s for their kids and I’m curious how that works as I had never thought of it before. Would I be better off investing $10-20K for each kid now and letting it grow or is it better to contribute regularly over time?  Kids are almost 6 and 2.5 and I have about $9k total saved so far. 

I’d love to hear how others are approaching college savings too! 

[coffee]

I would pre-fund if I could. Your money will grow more overtime. 

I have 3 children and our goal is to pay for all of their college expenses. We met with a financial advisor a couple months ago, and he recommended to not contribute more than $250 a month, per 529. Then the rest to save it in a regular investment account. His foundations were:
1) Since we want to fully fund, he thinks we could potentially end up with too much money in the 529. If that happens we would have to pay penalties to take the money out. Also there is always the possibility that one children doesn't want to pursue the educational route.
2) Scholarships.- Since the 529s are under our children names, it has heavy weight against them from getting financial aids. Vs. a regular investment account in their parents name. 

[sandandsea]

We used the daycare flex spending account reimbursement to start funding $5k per year when we had ds1. When we got the reimbursement we put it directly into his 529. When we had DS2 we added $5k out of pocket for him too. There have been a couple of times when we did a larger lump sum than the $5k as our incomes grew and we were able to save more specifically for college. We are trying to save more now when they’re younger so it has more time to grow and so we can cross it off the savings needs list. Our goal is to cover 4 years tuition and room/board at a state school so an estimate of $150k-$175k per child.

I’ve found Savingforcollege.com to be a helpful site with a good calculator. Our savings are in ScholarShare, the CA state fund since it was easy and decently rated.

ETA. We chose to do the 529 for a few reasons. It grows tax free which is a huge benefit. Some states (not ours) offer a tax benefit for contributing to your states 529. The penalty is 10% on the growth so worth the risk to us in case we over-save. In the event you get a scholarship you can withdraw that amount penalty free. Also if we do over save (it wouldn’t be by a lot) then it would just open more options for them - grad school, private schools, etc. Or it can be transferred to another family member if one child doesn’t use it. And we don’t think our kids would get many scholarships/financial aid anyway due to our incomes and we are expecting them to go to college or some sort of higher education. I think there are different best answers for different families and situations so definitely look into a few options to see what works for you.

[awkwardpenguin]

Just as an FYI, 529s are considered a gift to the child, so you can contribute up to $15k per parent per child per year without triggering a gift tax return. There's also a special rule for 529s that lets you do 5 years of contributions as a lump sum as long as you don't contribute anything else in the 5 year time period. But the amount you can deduct on your state taxes varies by state. It's quite low in your state ($2k per married couple per year) so I'd guess you'd get a bigger advantage front loading over spacing out to take the tax deduction.

Our plan is to put 4 years of cost of attendance for our flagship state school into a 529 for each kid. That's roughly $150k per kid in today's dollars/costs. We figure if both kids go to less expensive options, we can make the balance available for grad school or withdraw it with the penalty. We're in an income bracket where we will get very little in financial aid, so it makes sense to us to save aggressively.

[Pilsy]

Hi, noodleoo !

You might be tired of hearing about Vanguard, but I was using this one until I reached the point of realizing all the calculating in the world doesn't give me the answer I want. lol  

vanguard.wealthmsi.com/csp.php

[noodleoo]

Mar 14, 2021 16:14:24 GMT -5 Pilsy said:

Hi, noodleoo !

You might be tired of hearing about Vanguard, but I was using this one until I reached the point of realizing all the calculating in the world doesn't give me the answer I want. lol  

vanguard.wealthmsi.com/csp.php

Haha!  I couldn't even find this one on the Vanguard site, so thank you for the link!  Oh boy, I shouldn't have started looking.  It lets you look up in state tuition by school and my college is listed at $70K per year!!!!     That's insane and double what it was when I went to college.  I don't understand how anyone pays for college unless they are super wealthy.  For both my kids, I'd need to be saving about $600 per month to pay for half of the cost for an in state, state school (!).  I guess at some point I should have H ask his parents what they mean when they say they want to "help" pay for the kids college.

[Pilsy]

noodleoo, I can't like your post. hahaha

Truly, the costs are obscene. I hope your H's parents have stockpiles of money they plan to share.