Are we suckers for diligently saving in our kids' 529s?

[Anonymous]

We fund 529s to the point of maximizing the tax breaks and then put the rest in other investmestments. At our income there are few tax breaks available so we will take whatever we can get.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Also, if my child becomes ill suddenly or disabled or injured and can't go to college, no matter how bright they were through school, it doesn't make sense to have that $200k just for college when we could use it for medical care and care for that child.

There are exceptions to the 10% penalty. One is disability of your child. Look it up.

Also, you do have access to that money for other things; you just have to take the penalty (which is not enormous---it's only on the earnings and only 10%).

Personally, I was more worried about paying for my child's education than about needing money for medical care. We have pretty good health insurance. Also, I would say that the 529 is probably not for people who are not funding their retirement accounts first. We were able to do both. So I guess we are fortunate. It has definitely made a difference for our son. He has no loans.

My point was that saving $200k in an account without any penalties for its use and then assessing the entire family's situation at the time of college makes more sense than just saving in a 529 and having to pay 10% if life does not go according to plan.

In an IRA, the entire amount of donations can be taken out without penalty (any money earned is taxed).

So therefore, if life is great and everyone is healthy and retirement accounts are on track like we are dutifully saving at 15%, then that hypothetical $200k (I have 2 kids so that is my goal) goes to their college.
If my husband or I get multiple sclerosis/bad car accident/cancer and can't work past 55 and need daily medical care and a power wc to get around, then that money will have to go towards that.

Off topic, Health insurance does not cover all costs of living for someone with a progressive medical condition that renders them unable to work and contribute to retirement. Loss of one spouses income in their 50's will significantly alter not just cash flow but retirement savings as well, even of some magical health insurance policy covers all the actual costs of care.

Sounds like everything worked out in your family's plan and that is wonderful! I just wanted to provide another point of view.

You shouldn't be saving for college unless your retirement is funded. That is a given. I would expect a family able to save 200k in a 529 would know that. A 529 is far preferable to an after tax brokerage account.

[Anonymous]

Anonymous wrote:We fund 529s to the point of maximizing the tax breaks and then put the rest in other investmestments. At our income there are few tax breaks available so we will take whatever we can get.

Are any of these other investments Roth IRAs--or back door Roth IRAs?

[Anonymous]

Anonymous wrote:

Anonymous wrote:We fund 529s to the point of maximizing the tax breaks and then put the rest in other investmestments. At our income there are few tax breaks available so we will take whatever we can get.

Are any of these other investments Roth IRAs--or back door Roth IRAs?

No. My DH (45) and (43) I have been dutifully saving for retirement since we were 22 (attended grad school at night) and we're lucky to work at places that have good match programs so retirement wise we are in good shape so we use other investments. I often wonder if we are making a mistake.

Any advice welcome.