More 529 questions

[Anonymous]

What is a reasonable amount to save a month in a 529 account if you anticipate paying 100% of DC education costs? I have 30K in 529 for 5 year old, and just getting started on 529 account for 2 year old. Having a hard time determining wha is realistic and just wondering how other people are doing with their college savings goals.

[Anonymous]

For private? We were told $1000/month for each child. About half if you want to do public.

[Anonymous]

Public or private? Do you want to pay for all living expenses (transportation, dorm, apartment, food, going out) too? How many years? 4? 5 (typical for engineering)? Are you planning to pay for grad school too? What about study abroad? Will you pay for those additional expenses?

[Anonymous]

We have 200K (total) saved for an 8, 6 and 3 YO.

We expect (hope) this will cover public.

If they all go private, we expect we will have to pay for at least 6 years (of the 12) out of pocket.

[Anonymous]

OP here. Planning to pay for 4 years tuition, room, and board. Realistically speaking, think we will go public. 2k a month? Wow, I better get on the ball. Thanks all.

[Anonymous]

Try this: http://www.savingforcollege.com/college-savings-calculator/index.php?current_cost=25000&years_until_college=16&years_attendance=4&attendance_rate=100&coverage_rate=100&save_until=ends&starting_balance=0&contribution_rate=12&inflation_rate=5&investment_performance=6&page=inputs

We will only be saving $4k per child per year until they get into elementary (and we get rid of some debt). Then we will bump it up to $650/ month plus a portion of our bonuses through middle school, then reasses.

[Anonymous]

What if I saved the same amount of money in a savings account or invested in an index fund? What would I be losing? How much is the tax benefit if I earn about $200K?

[Anonymous]

Our plan is to save $50k/child (which was at just 5 years old for DD), and then put the money into an account we can use for retirement or college. We plan to retire before 59 1/2, so we won't be able to access actual retirement accounts. We don't anticipate needing this money for retirement, but it will be available if we do or we can use it for college if needed.

I estimate the $50k will be $80k when needed for college. We are in VA, so good state schools are always an option, but we want to let the kids go where they choose, so we know out of state may be a possibility.

[Anonymous]

Anonymous wrote:What is a reasonable amount to save a month in a 529 account if you anticipate paying 100% of DC education costs? I have 30K in 529 for 5 year old, and just getting started on 529 account for 2 year old. Having a hard time determining wha is realistic and just wondering how other people are doing with their college savings goals.

We are planning to pay for private. Have contributed the max for the first four years - will probably do one more year which should put us at around $400K by the time it is needed. If he goes to a public, I will likely have an overfunding issue but then DC can have that cash for grad school or even his kid someday.

[Anonymous]

Anonymous wrote:What if I saved the same amount of money in a savings account or invested in an index fund? What would I be losing? How much is the tax benefit if I earn about $200K?

The main tax benefit of 529s is that the growth is untaxed (if used for valid educational expenses), much like a Roth IRA for retirement.

In some states you can get a small deduction on state taxes for some small amount of yearly contributions, depending on the 529 in which you invest. However, if you plan to invest a nontrivial amount, then the expense ratio of the fund you choose is much more important that the possible state tax deduction.

[Anonymous]

Have contributed the max for the first four years

What is "the max"? $10,000 per year per kid?

[Anonymous]

Anonymous wrote:

Have contributed the max for the first four years

What is "the max"? $10,000 per year per kid?

If you're married, then probably $28,000 per child, which would be the sum of two $14,000 gift tax free transfers? I think you might also be able to front load future gifts, maybe up to 5 years?

Sorry for all the uncertainty.

[Anonymous]

I don't think there is an upper limit to what you can donate in one year. I don't believe gift transfers apply to funding your own child's 529. We put about $47,000 into a Maryland 529 (divided between a prepaid and an investment acct) when my son was 2 (an inheritance). Later we opened a second investment acct with a $15,000 lump sum. You are only allowed to deduct 5000 per year on Maryland state income tax for a couple (2500 per individual), but can deduct that over many years up to (I think) about $27,000. We did this with the advice of a fee based financial planner and a tax CPA. The financial planner does not recommend saving too much in 529 accts as they are inflexible ( can only be used for higher ed), so we also have other money we might tap on for college.

[Anonymous]

Anonymous wrote:I don't think there is an upper limit to what you can donate in one year. I don't believe gift transfers apply to funding your own child's 529. We put about $47,000 into a Maryland 529 (divided between a prepaid and an investment acct) when my son was 2 (an inheritance). Later we opened a second investment acct with a $15,000 lump sum. You are only allowed to deduct 5000 per year on Maryland state income tax for a couple (2500 per individual), but can deduct that over many years up to (I think) about $27,000. We did this with the advice of a fee based financial planner and a tax CPA. The financial planner does not recommend saving too much in 529 accts as they are inflexible ( can only be used for higher ed), so we also have other money we might tap on for college.

There is an upper limit.

$14,000 per child, per parent. You can donate five years worth at once, so you could cut a check for $140,000 but then no more contributions for five years.

[Anonymous]

The gift tax limit is per individual so if there are grandparents each grandparent can contribute $14,000 into the 529: Example 4 grandparents, $56K per yr into the 529 in addition to the parents' contribution.

Also, the gift tax limit does not apply to things like school tuition as long as the individual pays the school directly.