What does "maxing" college fund look like?

[Anonymous]

I see a lot of people saying this. What does it mean?

[Anonymous]

Probably contributing enough to get the max tax deduction for their state.

[Anonymous]

I guess it could mean either maxing out the tax benefit or it could mean that the speaker has run a projection of the amount they need to contribute each month to hit their desired account total on the date the kid matriculates.

The latter number is almost always much, much higher than the former number. If you donate up to the tax benefit from the date of your child's bith you will still be far short of having enough money in the account to pay for a four year private college.

[Anonymous]

Oh, maybe they could also mean the maximum they can contribute without blowing the gift threshold?

Point is: it could mean a lot of things.

[Anonymous]

To me it means being in a position to fully fund 4 years of private college. As I have one starting next year that means about $240,000. We are not "maxed", but not far off. We also don't have all of it in a 529 - about $40,000 is in a mutual fund that we had established before opening the 529. So I have not maxed our 529, even if I have close to maxed college savings. We wanted the cushion not in the 529 in case DC got a merit scholarship, went to a less expensive school, or whatever.

Others may intend to fund only for in state schools so being fully funded may look different.

[Anonymous]

Anonymous wrote:I see a lot of people saying this. What does it mean?

living on a diet of tuna in a can and water with the occasional trip to DQ for a Frosty.

[Anonymous]

Isn't there a maximum amount you can put in there each year? I thought I saw that somewhere - like 17k or something? Maybe I'm making that up, but we put in $500-1000/month and I wouldn't say we're maxing it out since we're allowed to put in even more.

[Anonymous]

Anonymous wrote:Isn't there a maximum amount you can put in there each year? I thought I saw that somewhere - like 17k or something? Maybe I'm making that up, but we put in $500-1000/month and I wouldn't say we're maxing it out since we're allowed to put in even more.

I thought the 17k was for a 401k

[Anonymous]

There is a maximum account balance for 529s. For example, in Maryland, once the balance hits $350,000, you can't contribute any more, although the balance can continue growing beyond that through investments. That's what maxing out means to me.

[Anonymous]

There is no annual contribution limit, except that if you contribute more than the gift allowance you will incur additional tax penalties. There is maximum lifetime contribution limit but I hope not that many people hit that because it's higher than the cost of four years of private college so hitting that limit will guarantee you overpaid and will incur a withdrawal penalty. I guess if you are paying for both private college and grad school and you are certain your kid will go to private grad school it could make sense. And I suppose it's kind if a first world problem.

[Anonymous]

Use this calculator to estimate how much your college costs will be.

http://www.savingforcollege.com/college-savings-calculator/

I would say if you have whatever they estimate you save per month for 4 years of college per kid, you are "maxing out".

[Anonymous]

My ipad ate my earlier post.

For us, "maxing" out college savings meant buying the in-state prepaid tuition (VA) and setting up a 529 to cover expected R&B and book costs ($50-$60k). Then setting up a traditional savings account/vehicle for expected out of state costs (~$100k each). Our children are in HS now.

We haven't saved for the most expensive possibilities as we would hope that merit funding would put the actual costs closer to the expected out of state outlay (~$30-35k for tuition and fees). If they end up going to a more expensive school, we would either make them pay for the differential or pay for it out of current income (or a mix) - depending on the reasons why the school is their choice.

If they both end up going in state, we will consider helping some in grad school. Whatever their choice, they will be responsible for their own spending money. Eldest is gunning for Engineering at Va Tech and wants to be a co-op. One of our ideas is, if it goes as planned, he will be able to pay for R&B through is co-op. Then, we will would put that money (he would have needed) into a ROTH IRA for him. The dominoes have to fall just right for that to happen.

[Anonymous]

For me it meant doing what the calculators suggested. But since expenses outstripped returns now it means up to gift tax in 529 and a bit extra in a mutual fund just in case

[Anonymous]

Sorry increase in costs not expenses. Plus i expect i will still need to contribute even after the child enrolls

[Anonymous]

We started contributing $250/pp (26/year) to 529s and any gift money when our kids were born. We plan to contribute until they have $50k and then we will save the money in something that can be used for college OR retirement.

I never heard about a max contribution so I'm not really sure what people mean, other than they think they are contributing enough.