Where to put college money after you max out 529 state tax deduction?

[Anonymous]

Anyone think we should put some money into a plain vanilla savings account, in order not have all our college eggs in the stock market basket?

[Anonymous]

Anonymous wrote:This is OP. Income is too high for a Roth, but we can do a backdoor Roth. Is a backdoor Roth the next best step? I have not done because it sounds like too many steps and paperwork to track, but would if it is better than putting more money into our 529.

Yes, I think backdoor Roth is your next step. I would use Vanguard - I think it is fairly easy to execute.

[Anonymous]

Anonymous wrote:Anyone think we should put some money into a plain vanilla savings account, in order not have all our college eggs in the stock market basket?

You can diversify a 529. There are more hands-on options, but these seem good to me:

https://investor.vanguard.com/529-plan/age-based-options

[Anonymous]

You should always put any 529 money initially into your own state's 529, no matter how bad it is. It's a benefit on your state income taxes. Then, transfer it to another state a year later.

As for excess money when you've maxed your 529:
1. "Gift" the money to grandparents (since it would be under the limit for gift tax), then have them open 529s for your kids, which they can do as grandparents. They get a tax deduction too then.
2. Overfund your 529 above the deductible limit. You can carry over the unused deduction to future years, and then the money starts growing tax-free sooner.

[Anonymous]

Anonymous wrote:

Anonymous wrote:How maxed out? I think the state limits are for each owner/beneficiary pair: mom->mom, Mom->dad, Mom->kid. That's 3 accounts you can max out on. then later you change the beneficiary.

OP here - we have 2 kids, and each parent has an account for each kid, for a total of 8,000 in 4 accounts. I dont get the mom to dad one, are you saying we should open accounts for just the parents and change the beneficiary later? Is that legit?

Wh wouldn't you have a total of 16,000 in 4 accounts. 1). Dad to child 1=4000 deduction 2) dad to child 2= 4000 deduction 3) mom to child 1= 4000 deduction and 4) mom to child 2 =4000 deduction. $16,000 would be your max deduction if you have 4 accounts. 8,000 would not be the max in your case

If I am wrong, someone please correct me but this is what I am planning to do and is what someone suggested on another VA 529 thread.

[Anonymous]

Anonymous wrote:Anyone think we should put some money into a plain vanilla savings account, in order not have all our college eggs in the stock market basket?

You don't have to do all stock. Those are the aggressive growth funds.

[Anonymous]

I got this from the other 529 thread:

Anonymous wrote:The va invest has several vanguard funds, so I would not expect vanguard index funds in one program to outperform/underperform the same vanguard index funds in another program.

For va invest you can deduct up to 4K per contributor/beneficiary/investment combination. So if you put 4K into each of the following you could deduct 24k/year:

Husband/child/investment 1
Husband/child/investment 2
Husband/child/investment 3
Wife/child/investment 1
Wife/child/investment 2
Wife/child/investment 3

With vanguard index funds, a very generous deduction (5.75% immediate return on your investment), and only a small admin fee, there really isn't a reason not to do the invest program.

[Anonymous]

Anonymous wrote:Anyone think we should put some money into a plain vanilla savings account, in order not have all our college eggs in the stock market basket?

Age-based 529 plans shift more and more out of stocks as the child nears college age.

[Anonymous]

Anonymous wrote:

Anonymous wrote:How maxed out? I think the state limits are for each owner/beneficiary pair: mom->mom, Mom->dad, Mom->kid. That's 3 accounts you can max out on. then later you change the beneficiary.

OP here - we have 2 kids, and each parent has an account for each kid, for a total of 8,000 in 4 accounts. I dont get the mom to dad one, are you saying we should open accounts for just the parents and change the beneficiary later? Is that legit?

Per the IRS website, you can change beneficiaries to a member of the same family without a tax consequence. So you can set up an account with yourself as the beneficiary before a child is born or adopted, for example.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:How maxed out? I think the state limits are for each owner/beneficiary pair: mom->mom, Mom->dad, Mom->kid. That's 3 accounts you can max out on. then later you change the beneficiary.

OP here - we have 2 kids, and each parent has an account for each kid, for a total of 8,000 in 4 accounts. I dont get the mom to dad one, are you saying we should open accounts for just the parents and change the beneficiary later? Is that legit?

Wh wouldn't you have a total of 16,000 in 4 accounts. 1). Dad to child 1=4000 deduction 2) dad to child 2= 4000 deduction 3) mom to child 1= 4000 deduction and 4) mom to child 2 =4000 deduction. $16,000 would be your max deduction if you have 4 accounts. 8,000 would not be the max in your case

If I am wrong, someone please correct me but this is what I am planning to do and is what someone suggested on another VA 529 thread.

OP here - you are right, we do $16,000/ year to maximize the VA deduction for 2 kids. I was thinking $8k per kid and misspoke.

[Anonymous]

Anonymous wrote:I got this from the other 529 thread:

Anonymous wrote:The va invest has several vanguard funds, so I would not expect vanguard index funds in one program to outperform/underperform the same vanguard index funds in another program.

For va invest you can deduct up to 4K per contributor/beneficiary/investment combination. So if you put 4K into each of the following you could deduct 24k/year:

Husband/child/investment 1
Husband/child/investment 2
Husband/child/investment 3
Wife/child/investment 1
Wife/child/investment 2
Wife/child/investment 3

With vanguard index funds, a very generous deduction (5.75% immediate return on your investment), and only a small admin fee, there really isn't a reason not to do the invest program.

OP here - i saw this too but didnt understand it. I think this was for one kid, but if so this is not how i understand how the deduction works. Please someone explain.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I got this from the other 529 thread:

Anonymous wrote:The va invest has several vanguard funds, so I would not expect vanguard index funds in one program to outperform/underperform the same vanguard index funds in another program.

For va invest you can deduct up to 4K per contributor/beneficiary/investment combination. So if you put 4K into each of the following you could deduct 24k/year:

Husband/child/investment 1
Husband/child/investment 2
Husband/child/investment 3
Wife/child/investment 1
Wife/child/investment 2
Wife/child/investment 3

With vanguard index funds, a very generous deduction (5.75% immediate return on your investment), and only a small admin fee, there really isn't a reason not to do the invest program.

OP here - i saw this too but didnt understand it. I think this was for one kid, but if so this is not how i understand how the deduction works. Please someone explain.

VA code section 58.1-322(D)(7) allows a deduction for up to 4K per prepaid contract or savings trust account with the Va college savings plan (VSCP). According to the VSCP, each investment in the Invest program by the same account owner establishes a separate savings trust account if the account owner, beneficiary, or portfolio (investment option/fund) is different. See Tax Commissioner ruling 10-240, transaction 2 for confirmation in writing by the department, or page 4 of the invest program description: "Virginia taxpayers filing an individual income tax return may deduct their contributions to each Virginia529 account they own, up to 4,000 per account each year..."

VA invest has over 20 fund options - 9 age based funds, 8 passively managed funds (all vanguard funds), 4 actively managed funds, and 2 savings account options. So, in theory, each parent could deduct over 80k per child per year by putting 4K into each available invest fund. That would likely mean filing a gift tax return, but it could be done.

[Anonymous]

The state deduction's not really worth that much anyway.

At $8,000 in contributions, you're talking about $400.

[Anonymous]

OP: I suggest talking to a financial planner for guidance b/c this sounds like you make enough money to open up other financial saving options. We use one with NW Mutual and he's great. He doesn't charge anything and I don't ever feel like we have to take his recommendations. I feel like he has our best interests in mind vs making sure he makes his commission. It's also nice to talk to a professional who knows the ins and outs, pros and cons.

[Anonymous]

Anonymous wrote:The state deduction's not really worth that much anyway.

At $8,000 in contributions, you're talking about $400.

It is 5.75%, so 460 on 8k for nothing. It is basically a year's growth with no risk, for putting money in the same fund I would likely put that money into anyway. We have been putting 16k/year in, so 920 of that is free and the earnings won't be taxed. They do add an admin fee of 0.15% on top of the vanguard 0.04%, but that's negligible. If we put in 180k lifetime (60/kid for our 3), VA pays for 10k of that, after growth closer to 20k, free money.