Funding a 529 in one payment?

[Anonymous]

Anonymous wrote:

Anonymous wrote:Not OP, but we did this math last month using a few online resources (ex. Fidelity College Cost Calculator). We decided that we'd need about $240K now (for our 2yo) to go to a college that currently costs ~$60K a year. Roughly.

Are you saying they need to superfund 240k now to cover private tuition? What assumptions are you running?

NP. You can go into the college calculators and input that you have X now and plan o make zero contributions and get these estimates based on the type of school you want to cover.

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP, I would leave it alone. Pay the capital gains when you take the money out later. If you continue earning as you are, you may not even need to use savings to pay for college, and then you'll have to pay additional taxes on the 529 money that you already paid capital gains on to use it for other purposes.

Better to each of you "gift" the max tax-free amount in your brokerage account to your child each year, just transferring it.to a new account at the same bank/house without selling anything. No capital gains until your child needs it.

+1. This is the smarter option.

OP here. Thanks, this is helpful.

[Anonymous]

Anonymous wrote:OP, I would leave it alone. Pay the capital gains when you take the money out later. If you continue earning as you are, you may not even need to use savings to pay for college, and then you'll have to pay additional taxes on the 529 money that you already paid capital gains on to use it for other purposes.

Better to each of you "gift" the max tax-free amount in your brokerage account to your child each year, just transferring it.to a new account at the same bank/house without selling anything. No capital gains until your child needs it.

holy crap, this, and how is DCUM so effing bad at taxes

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP, I would leave it alone. Pay the capital gains when you take the money out later. If you continue earning as you are, you may not even need to use savings to pay for college, and then you'll have to pay additional taxes on the 529 money that you already paid capital gains on to use it for other purposes.

Better to each of you "gift" the max tax-free amount in your brokerage account to your child each year, just transferring it.to a new account at the same bank/house without selling anything. No capital gains until your child needs it.

holy crap, this, and how is DCUM so effing bad at taxes

Yeah this one isn't hard. Fund to the gift max and don't pay extra taxes.

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP, I would leave it alone. Pay the capital gains when you take the money out later. If you continue earning as you are, you may not even need to use savings to pay for college, and then you'll have to pay additional taxes on the 529 money that you already paid capital gains on to use it for other purposes.

Better to each of you "gift" the max tax-free amount in your brokerage account to your child each year, just transferring it.to a new account at the same bank/house without selling anything. No capital gains until your child needs it.

holy crap, this, and how is DCUM so effing bad at taxes

OP here. I'm bad at taxes because I didn't grow up rich, and neither did my husband. Reaching the max contribution for a "gift" was never a problem I had to know about. We are in law, not finance, and we went from spending all of our disposable income on student loans to having 200k+ extra in our pockets over the course of two years. So forgive me for having to learn this stuff on the fly.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP, I would leave it alone. Pay the capital gains when you take the money out later. If you continue earning as you are, you may not even need to use savings to pay for college, and then you'll have to pay additional taxes on the 529 money that you already paid capital gains on to use it for other purposes.

Better to each of you "gift" the max tax-free amount in your brokerage account to your child each year, just transferring it.to a new account at the same bank/house without selling anything. No capital gains until your child needs it.

holy crap, this, and how is DCUM so effing bad at taxes

OP here. I'm bad at taxes because I didn't grow up rich, and neither did my husband. Reaching the max contribution for a "gift" was never a problem I had to know about. We are in law, not finance, and we went from spending all of our disposable income on student loans to having 200k+ extra in our pockets over the course of two years. So forgive me for having to learn this stuff on the fly.

You aren't middle class as you stated in your original post. You are rich.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP, I would leave it alone. Pay the capital gains when you take the money out later. If you continue earning as you are, you may not even need to use savings to pay for college, and then you'll have to pay additional taxes on the 529 money that you already paid capital gains on to use it for other purposes.

Better to each of you "gift" the max tax-free amount in your brokerage account to your child each year, just transferring it.to a new account at the same bank/house without selling anything. No capital gains until your child needs it.

holy crap, this, and how is DCUM so effing bad at taxes

OP here. I'm bad at taxes because I didn't grow up rich, and neither did my husband. Reaching the max contribution for a "gift" was never a problem I had to know about. We are in law, not finance, and we went from spending all of our disposable income on student loans to having 200k+ extra in our pockets over the course of two years. So forgive me for having to learn this stuff on the fly.

You aren't middle class as you stated in your original post. You are rich.

I did not state we are middle class, I said that we work hard to live a middle-class lifestyle - as in, we don't live like we are rich. But, I am well-aware of the fact that we are very rich.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP, I would leave it alone. Pay the capital gains when you take the money out later. If you continue earning as you are, you may not even need to use savings to pay for college, and then you'll have to pay additional taxes on the 529 money that you already paid capital gains on to use it for other purposes.

Better to each of you "gift" the max tax-free amount in your brokerage account to your child each year, just transferring it.to a new account at the same bank/house without selling anything. No capital gains until your child needs it.

holy crap, this, and how is DCUM so effing bad at taxes

OP here. I'm bad at taxes because I didn't grow up rich, and neither did my husband. Reaching the max contribution for a "gift" was never a problem I had to know about. We are in law, not finance, and we went from spending all of our disposable income on student loans to having 200k+ extra in our pockets over the course of two years. So forgive me for having to learn this stuff on the fly.

Then you need to hire a financial advisor. There are fee-only ones who aren't going to try to sell you something. They will help you avoid costly mistakes, however.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP, I would leave it alone. Pay the capital gains when you take the money out later. If you continue earning as you are, you may not even need to use savings to pay for college, and then you'll have to pay additional taxes on the 529 money that you already paid capital gains on to use it for other purposes.

Better to each of you "gift" the max tax-free amount in your brokerage account to your child each year, just transferring it.to a new account at the same bank/house without selling anything. No capital gains until your child needs it.

holy crap, this, and how is DCUM so effing bad at taxes

OP here. I'm bad at taxes because I didn't grow up rich, and neither did my husband. Reaching the max contribution for a "gift" was never a problem I had to know about. We are in law, not finance, and we went from spending all of our disposable income on student loans to having 200k+ extra in our pockets over the course of two years. So forgive me for having to learn this stuff on the fly.

You're quoting me and I could be you. My parents are still poor as hell, I'm a lawyer, which means I know how to look up stuff like tax law. Which is how I know that the whole point of 529s are the tax advantages.

[Anonymous]

OP, there is some really bad advice here about funding 529s, how the gift tax applies to educational expenses and capital gains in the context of 529s. Please do some background research on 529s and how they are set up. If you aren’t comfortable with doing the research, I second the suggestion for a fee only advisor.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP, I would leave it alone. Pay the capital gains when you take the money out later. If you continue earning as you are, you may not even need to use savings to pay for college, and then you'll have to pay additional taxes on the 529 money that you already paid capital gains on to use it for other purposes.

Better to each of you "gift" the max tax-free amount in your brokerage account to your child each year, just transferring it.to a new account at the same bank/house without selling anything. No capital gains until your child needs it.

holy crap, this, and how is DCUM so effing bad at taxes

OP here. I'm bad at taxes because I didn't grow up rich, and neither did my husband. Reaching the max contribution for a "gift" was never a problem I had to know about. We are in law, not finance, and we went from spending all of our disposable income on student loans to having 200k+ extra in our pockets over the course of two years. So forgive me for having to learn this stuff on the fly.

You're quoting me and I could be you. My parents are still poor as hell, I'm a lawyer, which means I know how to look up stuff like tax law. Which is how I know that the whole point of 529s are the tax advantages.

OP - I, too, feel your pain. In my mid-40s, I am finally forgiving myself for not "being good with money," accepting that I learned zero in financial intelligence growing up (except for fear and mystery around it and my family never having enough but also spending a lot on stupid sh*t) and reframing my narrative around money and my ability to understand and manage my financial life.

[Anonymous]

A perfect case for a financial advisor. I know DCUM thinks they are as useless as realtors, but they do provide benefits for people in certain situations for sure. Yours is one of them. Now that you have a lot of extra income, time to come up with a long-term plan for how to manage that.

[Anonymous]

Btw there is a private school 529 good for places like Stanford, etc. lock in future tuition

[Anonymous]

Anonymous wrote:

Anonymous wrote:I did this last year. Super funded 100k all at one time, figuring that would get to 300k by the time i needed it in 17 years, only putting in the 4k (x2) per year for the DC deduction. do i think this is enough for college? No way. However, i'm nervous about the market right now, and regardless of what people say about 18 years of growth etc...I still don't want everything to just tank in the next year or two.

I'm not following. You put the $100k in all at once or you're putting in $4k per year for the tax deduction?

I put in 100k last year. Each year, i will put in only 4k per the DC tax deduction.