Where to put kids college savings

[Poppy]

Does your state have a tax break for 529 contributions?

If so, I would do the 529. I probably would not be very aggressive with investments for the 13yo.

Otherwise, a low cost 529 is probably still a good option since the growth will be federal tax free.

[wanderingback]

There should be absolutely no judgment!! Why would someone judge you for saving some? Be proud of that!
In my state we get up to $5,000 for tax break for 529. So when we get to the point that we want to save some Im gonna look in to a 529. I just want to read the fine details closely in case she doesn’t go to college before opening an account.

[quesyrah]

Nov 4, 2023 13:49:19 GMT -5 wanderingback said:

There should be absolutely no judgment!! Why would someone judge you for saving some? Be proud of that!
In my state we get up to $5,000 for tax break for 529. So when we get to the point that we want to save some Im gonna look in to a 529. I just want to read the fine details closely in case she doesn’t go to college before opening an account.

Ha. I know, it’s my own insecurity about our finances.

Years and years ago on the old MM board I felt so poor compared to most of the other posters and I’m never quite sure how the current board skews.

I don’t know about our state’s 529 plan (CA).
So I’ll look into that.

But I have the same concern you mention- what if they don’t go to college…what happens to the money? Something to look into for sure.

[sadlebred]

quesyrah I'll raise you poor and .... well, I'm broke. So. I earn very little compared to most here.

If a kid doesn't go to college, the money can be used for a lot of things. Maybe including job training. If not, it can be cashed out with a 10% penalty.

www.consumerreports.org/money/paying-for-college/what-to-do-with-a-529-plan-if-your-kid-doesnt-go-to-college-a2649254053/

[quesyrah]

Nov 4, 2023 15:21:39 GMT -5 sadlebred said:

quesyrah I'll raise you poor and .... well, I'm broke. So. I earn very little compared to most here.

If a kid doesn't go to college, the money can be used for a lot of things. Maybe including job training. If not, it can be cashed out with a 10% penalty.

www.consumerreports.org/money/paying-for-college/what-to-do-with-a-529-plan-if-your-kid-doesnt-go-to-college-a2649254053/

Hang in there!

We are celebrating 17 years of marriage this month and spent 15 of them going from broke to a deep hole to financial stability.

Life is freaking hard, man!

[mrsGreeko]

529 money can now be rolled into a retirement account if your kid doesn’t go to college and you don’t want to take the 10% hit.

We split the money we were able to save for our kids. Half into a 529 and half into UTMA accounts. We weren’t able to save a ton, but some. My oldest is staying college in January, 7 months earlier than anticipated after telling us for years there was no way she was going to college. 😂 we have enough to cover 2 years completely at the school she chose in her 529. But she will get access to her UTMA account when she turns 21 and it will have about the amount she will need to take in loans so she could use it to pay off loans.

[wanderingback]

Nov 4, 2023 16:48:47 GMT -5 mrsGreeko said:

529 money can now be rolled into a retirement account if your kid doesn’t go to college and you don’t want to take the 10% hit.

We split the money we were able to save for our kids. Half into a 529 and half into UTMA accounts. We weren’t able to save a ton, but some. My oldest is staying college in January, 7 months earlier than anticipated after telling us for years there was no way she was going to college. 😂 we have enough to cover 2 years completely at the school she chose in her 529. But she will get access to her UTMA account when she turns 21 and it will have about the amount she will need to take in loans so she could use it to pay off loans.

I could be misremembering but I thought the money had to be in the 529 for 10 or 15 years for the roll over in to a retirement account?

[quesyrah]

Nov 4, 2023 17:57:34 GMT -5 wanderingback said:

Nov 4, 2023 16:48:47 GMT -5 mrsGreeko said:

529 money can now be rolled into a retirement account if your kid doesn’t go to college and you don’t want to take the 10% hit.

We split the money we were able to save for our kids. Half into a 529 and half into UTMA accounts. We weren’t able to save a ton, but some. My oldest is staying college in January, 7 months earlier than anticipated after telling us for years there was no way she was going to college. 😂 we have enough to cover 2 years completely at the school she chose in her 529. But she will get access to her UTMA account when she turns 21 and it will have about the amount she will need to take in loans so she could use it to pay off loans.

I could be misremembering but I thought the money had to be in the 529 for 10 or 15 years for the roll over in to a retirement account?

You’re correct. I just read that today.

[midwestmama]

DH and I have a 529 for each of our kids. The accounts automatically move to lower risk investments as the kids get older. Right now, I think they adjust every 2 years. (I think there was a 0-5 years old tier, 6-9 years old tier, and then at 10 years old, it switched to two years.) DH and I are not completely aligned with how much we are willing to pay for college, but it really depends on where they want to go. I'd like to pay around 75% and DH is thinking 50%. I think for each of them we have maybe 1 year of tuition saved (assuming a mid-range cost state university and not including books or room & board), and DS is 14 (but in 8th grade) and DD is 12 (7th grade), and we've been contributing since they were babies.

[Poppy]

Nov 4, 2023 15:21:39 GMT -5 sadlebred said:

If a kid doesn't go to college, the money can be used for a lot of things. Maybe including job training. If not, it can be cashed out with a 10% penalty.

AND, just to be clear, the penalty is only on any growth in the account. So your contributions would not have the 10% fee. It's really not so bad. Also there are some alternatives to avoid the fees (vocational training, change beneficiary to another person, that retirement rollover, etc).


CA doesn't offer a state tax break so you could choose any state's plan. Looks like CA's is good, though. www.savingforcollege.com/article/which-529-plan-should-california-residents-choose

[quesyrah]

Nov 5, 2023 8:36:33 GMT -5 Poppy said:

Nov 4, 2023 15:21:39 GMT -5 sadlebred said:

If a kid doesn't go to college, the money can be used for a lot of things. Maybe including job training. If not, it can be cashed out with a 10% penalty.

AND, just to be clear, the penalty is only on any growth in the account. So your conditions would not have the 10% fee. It's really not so bad. Also there are some alternatives to avoid the fees (vocational training, change beneficiary to another person, that retirement rollover, etc).


CA doesn't offer a state tax break so you could choose any state's plan. Looks like CA's is good, though. www.savingforcollege.com/article/which-529-plan-should-california-residents-choose

Thanks for these links

[purplepenguin7]

2k per kid per year is AMAZING. No one should be judgy about that!

[holly116]

Our state doesn't offer any tax advantages for contributions to its plan, so we chose a neighboring state's 529 plan because it does offer a deduction for residents who contribute. Three of the four grandparents and most aunts/uncles/godparents live in that state.

I figure if someone in their life wants to in the future, might as well give them a bit of a tax break.  

[EvieEthelGarland]

Nov 4, 2023 18:07:30 GMT -5 quesyrah said:

Nov 4, 2023 17:57:34 GMT -5 wanderingback said:

I could be misremembering but I thought the money had to be in the 529 for 10 or 15 years for the roll over in to a retirement account?

You’re correct. I just read that today.

I believe the limit is $35k

Does it have to be 10-15 years since the account opened or the money was deposited? My parents opened a 529 for my 15yo when he was a toddler and continue to deposit monthly. I can't imagine it'd be 15 years from last deposit--not many of us have the funds to lump sum for a 3 year old. 

Also, is there any reason the funds can't just sit until the kid is 30 and then roll over? It's not like anything has to be done by 22, right? 

[mae0111]

We have 529s for both kids. We went with our state’s plan even though there is no tax incentive here. But we were able to get a credit card that allows us to earn point toward deposits into the accounts. DH uses that card for all business expenses, so before COVID when he was on a plane/in a hotel/renting a car every week, we were able to rack up a good amount of extra deposits without a lot of effort. That might be something to look into if you’re not earning points elsewhere…

[quesyrah]

Nov 6, 2023 12:20:20 GMT -5 EvieEthelGarland said:

Nov 4, 2023 18:07:30 GMT -5 quesyrah said:

You’re correct. I just read that today.

I believe the limit is $35k

Does it have to be 10-15 years since the account opened or the money was deposited? My parents opened a 529 for my 15yo when he was a toddler and continue to deposit monthly. I can't imagine it'd be 15 years from last deposit--not many of us have the funds to lump sum for a 3 year old. 

Also, is there any reason the funds can't just sit until the kid is 30 and then roll over? It's not like anything has to be done by 22, right? 

I am by no means an expert, but this is the info I found.

The account has to be more than 15 years old, the rollover amount cannot exceed annual IRA contribution limits and the eligible rollover amount must have been in the account for at least 5 years.