529 Money --Too Much?

[Anonymous]

The other issue is that not all expenses can be paid by a 529. It is hard to predict an amount that will be too much. Yes, generational planning is okay in theory BUT this could happen, too:

You're the owner and your 7 year old is the beneficiary. He grows up, goes to school and uses 2/3 the money. Your intent is his kids use the remainder for school. You die and he becomes the owner and names his 2 kids as the beneficiaries. One gets a scholarship and the other uses 1/2 of the money. Your son dies and his wife becomes the owner. She names her grandchild from her first marriage as sole beneficiary. Done with passing it on to educate your heirs as a trust would...

[Anonymous]

Anonymous wrote:The other issue is that not all expenses can be paid by a 529. It is hard to predict an amount that will be too much. Yes, generational planning is okay in theory BUT this could happen, too:

You're the owner and your 7 year old is the beneficiary. He grows up, goes to school and uses 2/3 the money. Your intent is his kids use the remainder for school. You die and he becomes the owner and names his 2 kids as the beneficiaries. One gets a scholarship and the other uses 1/2 of the money. Your son dies and his wife becomes the owner. She names her grandchild from her first marriage as sole beneficiary. Done with passing it on to educate your heirs as a trust would...

the horror...

[Anonymous]

Anonymous wrote:The other issue is that not all expenses can be paid by a 529. It is hard to predict an amount that will be too much. Yes, generational planning is okay in theory BUT this could happen, too:

You're the owner and your 7 year old is the beneficiary. He grows up, goes to school and uses 2/3 the money. Your intent is his kids use the remainder for school. You die and he becomes the owner and names his 2 kids as the beneficiaries. One gets a scholarship and the other uses 1/2 of the money. Your son dies and his wife becomes the owner. She names her grandchild from her first marriage as sole beneficiary. Done with passing it on to educate your heirs as a trust would...

But by this point, you and your son are both dead, so you neither know nor care.

[Anonymous]

I've been running through scenarios on this recently because my parents just gave us a lump sum to add to each kid's 529. We had a savings plan in place that would cover 4 years VA in-state but between the gift and the strong returns lately, we'll be significantly over what was planned. For now, I'm not adjusting. We can afford what we've been saving so I figure the grandparents' gift will just increase their options for OOS/private schools or help with grad school. And, if the kids' end up not needing it, we'll leave it alone to grow tax-free for future grandchildren (or grand nieces/nephews if our kids choose not to have kids).

[Anonymous]

Anonymous wrote:

Anonymous wrote:The other issue is that not all expenses can be paid by a 529. It is hard to predict an amount that will be too much. Yes, generational planning is okay in theory BUT this could happen, too:

You're the owner and your 7 year old is the beneficiary. He grows up, goes to school and uses 2/3 the money. Your intent is his kids use the remainder for school. You die and he becomes the owner and names his 2 kids as the beneficiaries. One gets a scholarship and the other uses 1/2 of the money. Your son dies and his wife becomes the owner. She names her grandchild from her first marriage as sole beneficiary. Done with passing it on to educate your heirs as a trust would...

But by this point, you and your son are both dead, so you neither know nor care.

But that's not the intent so...it is something to consider. Those that are over funding thinking it WILL go towards future generations are not guaranteed of that.

[Anonymous]

Anonymous wrote:

Anonymous wrote:$5,500 per year..

I was 32 when my child was born (and when I opened the 529), and plan to retire at 65. So that gives me 33 years of needing the state tax deduction (which is the real benefit of a 529 plan).

In Virginia, you have unlimited carry-forward, but I am not going to fund a 529 after he graduates from grad school, so my assumption is I will stop funding when he is 24.

So $4,000 x 33 years is $132k. This is my maximum lifetime state tax deduction. $132k/24 years is $5500 per year.

I'll spend the 529 first, then cash flow and/or take from my Roth IRA or other, taxable investments.

The real benefit of a 529 plan is tax deferred growth. State deduction is a rounding error.

We have one kid. Currently 7 but we are stuffing it full and will pass the balance to his kids if we can. Currently have about 250K in there.

We see it as a generational tax shelter.

Most state deductions are peanuts. Plus, the fees charged by the 529 plans operated on behalf of states are higher than fees charged by 529 plans operated by Vanguard or Fidelity.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:$5,500 per year..

I was 32 when my child was born (and when I opened the 529), and plan to retire at 65. So that gives me 33 years of needing the state tax deduction (which is the real benefit of a 529 plan).

In Virginia, you have unlimited carry-forward, but I am not going to fund a 529 after he graduates from grad school, so my assumption is I will stop funding when he is 24.

So $4,000 x 33 years is $132k. This is my maximum lifetime state tax deduction. $132k/24 years is $5500 per year.

I'll spend the 529 first, then cash flow and/or take from my Roth IRA or other, taxable investments.

The real benefit of a 529 plan is tax deferred growth. State deduction is a rounding error.

We have one kid. Currently 7 but we are stuffing it full and will pass the balance to his kids if we can. Currently have about 250K in there.

We see it as a generational tax shelter.

Most state deductions are peanuts. Plus, the fees charged by the 529 plans operated on behalf of states are higher than fees charged by 529 plans operated by Vanguard or Fidelity.

A Roth IRA offers the same tax deferred growth, and the money isn't locked up for educational expenses.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:For child's 529, we will meet the maximum investment, currently $370k with Vanguard. If child doesn't use all the funds, the funds will remain available for child's future children.

We are also using other saving vehicles for child's future expenses, but your question pertains to 529.

Thanks...this is what I was leaning towards. I think it is likely that at least one would go for advanced degrees, or so I hope. I'm not concerned about other expenses. We can handle them.

Op, if you have the ability to set aside $370k for your child's education, did you really even need to ask the question? Jeez.

We may have that much saved but only because we compromise other place (condo rather than house, no SAHM), so not a trivial effort just different priorities

[Anonymous]

We funded VA prepaid, that's all. Both of my kids went to the Naval Academy. So instead, just bought an investment property Hilton Head and its cash flow positive.

[Anonymous]

There are lifetime limits (max 500k) per beneficiary that vary state by state

There are annual limits (unless you file a gift tax return) of $14,000 per individual (28k per couple) for contributors

How is it a generational wealth deferral strategy? I thought funds have to be used by age 35 or so of the original beneficiary?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:$5,500 per year..

I was 32 when my child was born (and when I opened the 529), and plan to retire at 65. So that gives me 33 years of needing the state tax deduction (which is the real benefit of a 529 plan).

In Virginia, you have unlimited carry-forward, but I am not going to fund a 529 after he graduates from grad school, so my assumption is I will stop funding when he is 24.

So $4,000 x 33 years is $132k. This is my maximum lifetime state tax deduction. $132k/24 years is $5500 per year.

I'll spend the 529 first, then cash flow and/or take from my Roth IRA or other, taxable investments.

The real benefit of a 529 plan is tax deferred growth. State deduction is a rounding error.

We have one kid. Currently 7 but we are stuffing it full and will pass the balance to his kids if we can. Currently have about 250K in there.

We see it as a generational tax shelter.

Most state deductions are peanuts. Plus, the fees charged by the 529 plans operated on behalf of states are higher than fees charged by 529 plans operated by Vanguard or Fidelity.

Neither of these things is true in VA.

[Anonymous]

Anonymous wrote:There are lifetime limits (max 500k) per beneficiary that vary state by state

There are annual limits (unless you file a gift tax return) of $14,000 per individual (28k per couple) for contributors

How is it a generational wealth deferral strategy? I thought funds have to be used by age 35 or so of the original beneficiary?

You can't contribute after $500K. The fund can grow win excess of $500K.


two parents, four grandparents, $14K each per year. Adds up quickly. If the original designee doesn't use it, you can assign it to another person so Get the account up to $500K as quickly as possible and in theory, one day a grandchild is going to college on tax free earnings of dollars invested 40 years earlier.

[Anonymous]

We do 1250 a month per kid. Comes out to 15k a year per kid (we have three).

We're planning to save about 200k into their 529s and then put the rest into a regular taxed investment vehicle. The likelihood of them using the 200k even just for state school and grad school is high. Our oldest is 8 and has ~ 130k.

We'll continue saving after that but then it'll be in accounts we control but is mentally earmarked for them for weddings, down payments, etc. We don't feel the ~4k coming out of our monthly budget so our thinking is we'll just continue to save it until they are completely independent (which probably won't be until their late twenties going by what I see nowadays).

[Anonymous]

There's no such 14k limit per year. This is because the donor can set it up that he's the owner even if the kid is the beneficiary. That means the donor can still withdraw it at anytime as it is technically his money.

[Anonymous]

We have 2 kids and saved 200K (total). At present, we pay $70K in private school tuition each year so we are used to paying. Also, our income would support paying tuition in full. We didn't want to oversee in a 529 so we would have flexibility. We figure that is a little less than half of the total we will need, but we could be wrong.