Why should I have a 529?

[Anonymous]

Have a 3 year old DC and one on the way. We max out our 401ks and have emergency funds and now are about to start a 529 for DC #1 with 5k a year. My question is why I am better off putting money into a 529 now rather than just putting more into an IRA or other retirement account?

[Anonymous]

Anonymous wrote:Have a 3 year old DC and one on the way. We max out our 401ks and have emergency funds and now are about to start a 529 for DC #1 with 5k a year. My question is why I am better off putting money into a 529 now rather than just putting more into an IRA or other retirement account?

One obvious answer is you can put more into a 529 than an IRA.

[Anonymous]

A Roth IRA actually might be a good way to save for college/retirement depending on your circumstances (including how much you are saving).

[Anonymous]

I can't figure it out either. DH and I save 17,000 in a 403b (around 11% of what me make). We both have pension plans. We have another 7,000 a year we can put in a 529 or in a 403b. We moved to a state with no tax benefits for 529's. Isn't retirement savings sheltered from any type of financial aid? How are 529's treated? We have two preschoolers and are thinking we plow money into retirement now and when they go to college pay up to 24,000 a year and stop retirement contributions, the rest is up to them. What if they end up in not in college, or in a service academy, or a community college? Of course I think thy are brilliant and will attend top tier universities but who really can predict where a kid will end up?

[Anonymous]

Would your child be attending college before you are retirement age? If so getting the money out of a 529 would be easier. If you are planning on financial aid the answer might be different. We max out retirement plans so 529s give us another option for at least tax exempt growth. But we are fully funding college so aid is not a factor.

[Anonymous]

Why do it?

1. Once you've maxed out contributions to your tax-protected retirement accounts (401k, IRA, etc), the 529 provides another alternative route for tax-protected savings.

2. It provides a separate conceptual bucket to store college savings, which is more helpful for some people to have than a full intermingling of savings.

3. Once you've put the money in, it's harder to get out for non-college reasons, so it becomes sort of a forced-savings mechanism.

#1 is the primary reason, IMO. If you've still got some head-space in your retirement accounts, then continue to contribute to those first, before you start contributing to a 529.

[Anonymous]

what happens if your kids don't go to college? what happens to the money?

[Anonymous]

Anonymous wrote:what happens if your kids don't go to college? what happens to the money?

You can transfer it to a grand kid or to yourself. Or you can take money out at some penalty for a non qualified disbursement.

Timing is the issue most overlooked. If you won't be 59.5 by the time your kids are in college then it makes more sense to put in a 529. If you are over that then 401k and IRA would make more sense

[Anonymous]

Anonymous wrote:

Anonymous wrote:what happens if your kids don't go to college? what happens to the money?

You can transfer it to a grand kid or to yourself. Or you can take money out at some penalty for a non qualified disbursement.

Timing is the issue most overlooked. If you won't be 59.5 by the time your kids are in college then it makes more sense to put in a 529. If you are over that then 401k and IRA would make more sense

I will be 57 and 61 when my kids hit college (my DH 59 and 63) . what should make more sense for us? we are thinking now to start a 529 - we are in DC. would an IRA make more sense? why?

[Anonymous]

In DC you get a tax write-off up to $4k a year if you put money into a 529. Your husband also gets a $4k a year write-off. I would each put in $4 k a year, at least.