How many here do not have a 529 savings account, on purpose?

[Anonymous]

Anonymous wrote:We owned Apple stock well before we had kids. When we saw it soaring, it really was a no-brainer to keep doing that instead of a 529, since you can't pick individual stocks in 529s. We did open 529s when our kids were born, because we thought we had to, but as time went on, we saw there really wasn't any point in putting too much into them.

Now we just sell stock to pay for our kids' education.

Me again. We've diversified over time, but it's still only in high tech/digital and companies we know well: Nvidia, Netflix, Amazon, Alphabet (Google), etc. But the largest portion by far is still Apple.

[Anonymous]

Anonymous wrote:This is for people who are educated about 529 accounts and can afford to set aside cash but have weighed the pros and cons, and decided not to set it up. If you are one of those- what were your reasons?

My DH and I have had this conversation so many times and he firmly believes that we can grow our money better elsewhere and not have to deal with the hassle- especially since we may have to move to different states for our job.

Thank you for the insights.

I don't use a 529.

I just pay the tuition from my income, or, if I need to, I will use my IRA (I have a SEP IRA, so contribution limits were pretty high)

There's no withdrawal penalty if used for educational purposes (of course, you pay income tax) and I can choose whatever stocks I want to invest in, so it's worked out well.

[Anonymous]

DH and I had the same argument, I am traditional/conservative and wanted to do the "right" MC/UMC thing and open a 529. He grew up wealthier and refused. He loves having the $$ to invest in stocks and they've done extremely well. I can't tell you the difference w/r/t taxes, but paying for college has not been an issue, thankfully.

[Anonymous]

The issue is whether the risk in higher-return investments is worth it vs tax-free growth in safer investments. The risk of losing too much can be tempered by a situation where the family can also cash-flow college costs if necessary. That is, the decision to have a 529 will depend on individual financial situations and risk tolerance.

We have fully funded 529s that will pay at least 4 years and probably grad school as well for all of our kids. We are retired and could also pay from other funds, but set up the 529s long before we were in our current financial position.

I see no reason we wouldn't do it again. Having finally set up an estate plan (after losing a child, which really brought the importance into focus), it is reassuring to have the 529s in place should something happen to us, just more straightforward than the administration of the rest of the estate under a trust.

[Anonymous]

Anonymous wrote:This is for people who are educated about 529 accounts and can afford to set aside cash but have weighed the pros and cons, and decided not to set it up. If you are one of those- what were your reasons?

My DH and I have had this conversation so many times and he firmly believes that we can grow our money better elsewhere and not have to deal with the hassle- especially since we may have to move to different states for our job.

Thank you for the insights.

Do you understand 529s? Moving to "different states" has nothing to do with having a 529. Ours were in a completely different state than we reside. The perks of 18+ years of tax free growth is huge. As long as you invest it in stock funds, and dont do the "age targeted funds", you will do well.

[Anonymous]

Anonymous wrote:

Anonymous wrote:This is for people who are educated about 529 accounts and can afford to set aside cash but have weighed the pros and cons, and decided not to set it up. If you are one of those- what were your reasons?

My DH and I have had this conversation so many times and he firmly believes that we can grow our money better elsewhere and not have to deal with the hassle- especially since we may have to move to different states for our job.

Thank you for the insights.

Do you understand 529s? Moving to "different states" has nothing to do with having a 529. Ours were in a completely different state than we reside. The perks of 18+ years of tax free growth is huge. As long as you invest it in stock funds, and dont do the "age targeted funds", you will do well.

+1. Quoting for emphasis. Moving states is not a reason not to do 529s.

[Anonymous]

Anonymous wrote:The issue is whether the risk in higher-return investments is worth it vs tax-free growth in safer investments. The risk of losing too much can be tempered by a situation where the family can also cash-flow college costs if necessary. That is, the decision to have a 529 will depend on individual financial situations and risk tolerance.

We have fully funded 529s that will pay at least 4 years and probably grad school as well for all of our kids. We are retired and could also pay from other funds, but set up the 529s long before we were in our current financial position.

I see no reason we wouldn't do it again. Having finally set up an estate plan (after losing a child, which really brought the importance into focus), it is reassuring to have the 529s in place should something happen to us, just more straightforward than the administration of the rest of the estate under a trust.

+1

Put it into SP500 stock funds in the 529 and let it ride. Sure you "could do better with stock picks" but you could also do much worse and loose money. Vast majority of people will do best with a 529 as long as it's invested in stock funds and not just the "target funds" which go less risk way too soon for most people. Once you include the tax benefits, most people will do best in 529. And if you have the $$$ to over fund, just leave it there for grad school or your grand kids education. Not a worry

[Anonymous]

Anonymous wrote:

Anonymous wrote:This is for people who are educated about 529 accounts and can afford to set aside cash but have weighed the pros and cons, and decided not to set it up. If you are one of those- what were your reasons?

My DH and I have had this conversation so many times and he firmly believes that we can grow our money better elsewhere and not have to deal with the hassle- especially since we may have to move to different states for our job.

Thank you for the insights.

I did the opposite after researching it, and I think we made the right decision. For context, I work professionally in finance, and I was also weighing the pros/cons. We also have a Goldman Sachs financial advisor, and he recommended the 529 from the jump. I was the hesitant one.

The biggest pros are:

1. Account earnings grow tax free per federal tax law
2. Earnings are now able to used for non-educational expenses (with some limits)
3. Most good plans offer a variety of investment options that are similar to a 401K
4. You can use them regardless of your home state, though some states also give residents additional state tax benefits

If you all change your mind, look into the Utah 529. It is one of the most well regarded ones, and you don’t have to live in Utah to participate.

Good post. Our 529s for our kids are the NH ones, and my mom opened Utah ones for them. None of us has or will live in those states. There is zero hassle in opening one and very little hassle involved in withdrawals. The fact that your DH has brought up the hassle factor and potential state moves for you as obstacles makes me worried he is not financially sophisticated enough to be making these decisions on his own.

I will say that we have been able to invest plenty of funds in our retirement accounts, non-retirement investment accounts, and 529s along the way, so we felt pretty diversified between that and real estate holdings. The 529s have grown very well, and one of our kids has a large athletic scholarship now. It’s great to know that the extra funds will continue to grow tax free and be available for grad school and/or grandkids down the road.

[Anonymous]

Between the NY state tax break and tax-free growth, I didn't see a better option for us. I suppose if we were genius investors who had gotten into crypto 10 years ago or something, but we aren't those people.

[Anonymous]

We don’t. My husband was very uncertain and not really convinced, and I’m not totally sure why. I sort of regret not at least pushing harder to look into it, but my husband is also older and we can tap an IRA that he has (planned for this purpose).

[Anonymous]

Anonymous wrote:

Anonymous wrote:Another benefit to 529s - in many states, you put pretax money. So for Maryland, each parent can put $2500 per year tax-free into the account per child. We have two kids - that's $10K tax free into savings, which grows tax free as well.

You guys are lucky. I’m a California parent. We use a 529, but like many things we get no tax benefits.

Agree! I’m the PP who decided after some thought to fund a 529. I’m also in Cali. Annoying that there are no state benefits, but the 529 was still the best play. I also agree with another poster who said diversification is key, and a good 529 allocation mix allows for that.

[Anonymous]

Just to be clear, it doesn’t matter what state your kid goes to college in either. Op, you need to read up on 529s. They are simple and work well for most people. Not having to pay tax on gains is a big benefit.

[Anonymous]

We were poor when kids were born. I did not want my kids college tuition in a 529 to tank if the stock market tanked, or if we were still poor, incapacitated or dead.

So, we bought the MD Prepaid College Trust for both kids for the maximum years allowed. This was guaranteed by the State Govt and money was kept aside to pay for it in the state budget. This Trust is not taking new enrollments anymore and not being offered anymore. If you had any money left in this program, you can also convert it into a Roth for your kid.

Our kids eventually went in-state, got full merit tuition scholarships, and much of the trust was not used. We also now are UMC, and to just pay from our cash flow for incidental expenses was very easy. So, now all that is over, we are in the process of converting it to Roth.

So long story short. We only bought for both kids tuition for 4 years of college each. Total cost for both kids was 80K. We spent around $60 K total for other costs (room, board, food, travel, socializing) for 4 years each. So, 2 kids, both did double majors in STEM subjects. In total it cost us 15K per year, per child - or $120K total for two kids for other college costs. We did not pay tuition.

Because they got free tuition from the college, the money invested for prepaid tuition will be converted to Roth for them. In retrospect, we saved the bare minimum ($80 K for both kids) for college and the opportunity cost of that money not being invested in stock market was not greater that the insurance factor of prepaid tuition or to hedge against increase in tuition.

[Anonymous]

Anonymous wrote:We were poor when kids were born. I did not want my kids college tuition in a 529 to tank if the stock market tanked, or if we were still poor, incapacitated or dead.

So, we bought the MD Prepaid College Trust for both kids for the maximum years allowed. This was guaranteed by the State Govt and money was kept aside to pay for it in the state budget. This Trust is not taking new enrollments anymore and not being offered anymore. If you had any money left in this program, you can also convert it into a Roth for your kid.

Our kids eventually went in-state, got full merit tuition scholarships, and much of the trust was not used. We also now are UMC, and to just pay from our cash flow for incidental expenses was very easy. So, now all that is over, we are in the process of converting it to Roth.

So long story short. We only bought for both kids tuition for 4 years of college each. Total cost for both kids was 80K. We spent around $60 K total for other costs (room, board, food, travel, socializing) for 4 years each. So, 2 kids, both did double majors in STEM subjects. In total it cost us 15K per year, per child - or $120K total for two kids for other college costs. We did not pay tuition.

Because they got free tuition from the college, the money invested for prepaid tuition will be converted to Roth for them. In retrospect, we saved the bare minimum ($80 K for both kids) for college and the opportunity cost of that money not being invested in stock market was not greater that the insurance factor of prepaid tuition or to hedge against increase in tuition.

To add - would we have invested in the MD Prepaid College Trust knowing what we know now? Probably yes. It was a good insurance policy for cheap. We did not know that both our kids would turn out to be such super high achieving kids in the public school system.

[Anonymous]

Anonymous wrote:We owned Apple stock well before we had kids. When we saw it soaring, it really was a no-brainer to keep doing that instead of a 529, since you can't pick individual stocks in 529s. We did open 529s when our kids were born, because we thought we had to, but as time went on, we saw there really wasn't any point in putting too much into them.

Now we just sell stock to pay for our kids' education.

Doing something similar. My kids do have modest 529s (funded by a grandma), but I have money in Nvidia that is growing like crazy and have mentally set aside some for their college (they are now 8 and 11). It's growing so much faster than our 529s or index funds, feels like a "high risk high reward" way to allot our money.