How much to put into 529s?

[Anonymous]

Anonymous wrote:What are all you people with 400k for a 10 year old going to do when they go to a cheaper state school?

most of them are trolls, but you can transfer the money to someone else if they don't use it all, or they don't attend college.

[Anonymous]

Anonymous wrote:What are all you people with 400k for a 10 year old going to do when they go to a cheaper state school?

We don't have quite that much and have two kids, but I'm not really worried about overfunding -- we live in D.C., so there really isn't a cheaper state school option out there like there would be in a lot of other places. And if our kids get scholarships or something, we could either take some of the money out penalty-free or save it for grad school. Our retirement savings are on track anyway, so basically the question is would we rather save the money now for college or spend it. Happy not to spend it.

[Anonymous]

You can now a $35,000 Roth IRA rollover if the beneficiary owns it for 15 years…clearly you can do that for DC but you might be able to redesignate yourself as the 529 beneficiary then 15 years down the road use that Roth rollover option for yourself with any leftover funds. This started this year. So, maybe the IRS will soon issue guidance to clarify what’s what…

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Is the $400k your whole inheritance or is that just the intended (inherited) 529 funds?

If you’re inheriting $400k, I’d be concerned by front loading 529s, you’re effectively gifting your inheritance to your kids. In the event of a divorce, that money is gone to you. Why not just keep the bulk in your separate name? If you don’t commingle the funds, you can always use it for college but it’s yours otherwise if you divorce.

This seems bizarre to me. I would never treat an inheritance like this as though it’s not mine and my husband’s jointly. And it would still be going to the kids’ college fund anyway. What difference does it make? It’s eye opening that some people treat family finances this way, so glad my DH and I don’t.

Check back in if you ever have the misfortune of going through a divorce, and let us know if you still feel this way, assuming you are the person inheriting money from your parents.

Well couples who jointly merge their finances are much less likely to end up divorced. Having a mindset from the start of "we are a couple, and we do things together and for each other" goes a long way towards a healthy relationship. I've been a SAHP for almost 25 years, I manage the finances and have no concerns. It is all equally mine as it is my partners. Because we are a family and have always thought that way (hint: I wouldn't have been a SAHP if my spouse thought "the money they earn is theirs and not the families", then again, I wouldn't' have married someone who thought that way)

If the inheritance was large enough (ie way more than $400K IMO) the persons giving you the inheritance would have set up stipulations thru a trust if they cared about "keeping it in the blood family"---I can see that happening for millions but not for $400K.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Is the $400k your whole inheritance or is that just the intended (inherited) 529 funds?

If you’re inheriting $400k, I’d be concerned by front loading 529s, you’re effectively gifting your inheritance to your kids. In the event of a divorce, that money is gone to you. Why not just keep the bulk in your separate name? If you don’t commingle the funds, you can always use it for college but it’s yours otherwise if you divorce.

This seems bizarre to me. I would never treat an inheritance like this as though it’s not mine and my husband’s jointly. And it would still be going to the kids’ college fund anyway. What difference does it make? It’s eye opening that some people treat family finances this way, so glad my DH and I don’t.

Check back in if you ever have the misfortune of going through a divorce, and let us know if you still feel this way, assuming you are the person inheriting money from your parents.

Well couples who jointly merge their finances are much less likely to end up divorced. Having a mindset from the start of "we are a couple, and we do things together and for each other" goes a long way towards a healthy relationship. I've been a SAHP for almost 25 years, I manage the finances and have no concerns. It is all equally mine as it is my partners. Because we are a family and have always thought that way (hint: I wouldn't have been a SAHP if my spouse thought "the money they earn is theirs and not the families", then again, I wouldn't' have married someone who thought that way)

If the inheritance was large enough (ie way more than $400K IMO) the persons giving you the inheritance would have set up stipulations thru a trust if they cared about "keeping it in the blood family"---I can see that happening for millions but not for $400K.

+1

[Anonymous]

Anonymous wrote:What are all you people with 400k for a 10 year old going to do when they go to a cheaper state school?

Well it depends. Save it for grad school or other kids or grandkids. If they go private and get merit (or state and get merit), you can pull out $$$ from the 529 equal to the merit without penalties.
Really, most that can afford to save that much have no issues passing it onto the next generation, after doing the Roth backdoor option if you desire. Us personally, we plan to fund our grandkids education, so anything left in the kid's 529s will just stay there and continue to grow. One kid is done with education (for now) and has $60K just sitting there growing for future use.

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP: It will be about $400K, to me as the spouse. We already have 529s started in VA- Invest 529s. Balances are not large, though.

13 y.o- ~$75K
10 y.o.- ~ $30K
7 y.o.~ $20K

Have strong retirement and other savings, but this is where we need to fill in.

I really like this calculator: https://www.savingforcollege.com/calculators/college-savings-calculator

Assuming you want them to go in-state, you need to contribute enough to get the 13 year old's account to $85k, the 10 y/o to $75k, and the 7 y/o to $60k. Put the rest ($305k) into a brokerage and you will have flexibility to help with OOS or private, if that comes up down the line.

This is what we did. Aimed for 4 years public in-state in the 529 and were willing to pull from brokerage account if needed. Both kids are in college now and had about $120k/kid. Both are able to cover college fully from that, one at a public U and the other at a private with merit aid.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Is the $400k your whole inheritance or is that just the intended (inherited) 529 funds?

If you’re inheriting $400k, I’d be concerned by front loading 529s, you’re effectively gifting your inheritance to your kids. In the event of a divorce, that money is gone to you. Why not just keep the bulk in your separate name? If you don’t commingle the funds, you can always use it for college but it’s yours otherwise if you divorce.

This seems bizarre to me. I would never treat an inheritance like this as though it’s not mine and my husband’s jointly. And it would still be going to the kids’ college fund anyway. What difference does it make? It’s eye opening that some people treat family finances this way, so glad my DH and I don’t.

Check back in if you ever have the misfortune of going through a divorce, and let us know if you still feel this way, assuming you are the person inheriting money from your parents.

Well couples who jointly merge their finances are much less likely to end up divorced. Having a mindset from the start of "we are a couple, and we do things together and for each other" goes a long way towards a healthy relationship. I've been a SAHP for almost 25 years, I manage the finances and have no concerns. It is all equally mine as it is my partners. Because we are a family and have always thought that way (hint: I wouldn't have been a SAHP if my spouse thought "the money they earn is theirs and not the families", then again, I wouldn't' have married someone who thought that way)

If the inheritance was large enough (ie way more than $400K IMO) the persons giving you the inheritance would have set up stipulations thru a trust if they cared about "keeping it in the blood family"---I can see that happening for millions but not for $400K.

$400k is enough to justify a trust. This is either a naive or a self-serving way to look at things, depending on where you're coming from. My friends who divorced or are divorcing in their 40s had joint accounts and expectations that their marriage would last until death. In any case, I think if OP transferred the gifted money directly into a 529 plan for the kids, you'd argue that it is a completed gift and not part of the marital estate if you end up divorcing. In other words, it belongs to the kids rather than either spouse and can't be considered in a later division of assets. I'd briefly run it by an estate planning attorney on this point, but I like the idea and think it's a nice way to pass money to the next generation and relieve pressure for OP and OP's spouse to have to continue saving for college.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Is the $400k your whole inheritance or is that just the intended (inherited) 529 funds?

If you’re inheriting $400k, I’d be concerned by front loading 529s, you’re effectively gifting your inheritance to your kids. In the event of a divorce, that money is gone to you. Why not just keep the bulk in your separate name? If you don’t commingle the funds, you can always use it for college but it’s yours otherwise if you divorce.

This seems bizarre to me. I would never treat an inheritance like this as though it’s not mine and my husband’s jointly. And it would still be going to the kids’ college fund anyway. What difference does it make? It’s eye opening that some people treat family finances this way, so glad my DH and I don’t.

Check back in if you ever have the misfortune of going through a divorce, and let us know if you still feel this way, assuming you are the person inheriting money from your parents.

Well couples who jointly merge their finances are much less likely to end up divorced. Having a mindset from the start of "we are a couple, and we do things together and for each other" goes a long way towards a healthy relationship. I've been a SAHP for almost 25 years, I manage the finances and have no concerns. It is all equally mine as it is my partners. Because we are a family and have always thought that way (hint: I wouldn't have been a SAHP if my spouse thought "the money they earn is theirs and not the families", then again, I wouldn't' have married someone who thought that way)

If the inheritance was large enough (ie way more than $400K IMO) the persons giving you the inheritance would have set up stipulations thru a trust if they cared about "keeping it in the blood family"---I can see that happening for millions but not for $400K.

$400k is enough to justify a trust. This is either a naive or a self-serving way to look at things, depending on where you're coming from. My friends who divorced or are divorcing in their 40s had joint accounts and expectations that their marriage would last until death. In any case, I think if OP transferred the gifted money directly into a 529 plan for the kids, you'd argue that it is a completed gift and not part of the marital estate if you end up divorcing. In other words, it belongs to the kids rather than either spouse and can't be considered in a later division of assets. I'd briefly run it by an estate planning attorney on this point, but I like the idea and think it's a nice way to pass money to the next generation and relieve pressure for OP and OP's spouse to have to continue saving for college.

529s don't belong to the kids, though -- I guess you could try to argue that in a divorce proceeding, but they have both owners and beneficiaries, and I'm not sure putting the money into a 529 would shield it from divorce proceedings.

I don't think $400,000 is enough to justify a trust, nor did my grandparents when they gave my wife and me that amount several years ago as part of their estate plan. I put it in a joint account, which their lawyer confirmed with me but didn't argue against. If we split up one day, I don't see why my wife shouldn't have a claim on that money, which I did nothing to earn other than pick the right rich grandparents.

[Anonymous]

Is it bad that I'm skeptical about 529s? It seems like the investment options are so limited and the fees can be kind of nuts. I wonder if the tax advantage is worth it.

[Anonymous]

Anonymous wrote:Is it bad that I'm skeptical about 529s? It seems like the investment options are so limited and the fees can be kind of nuts. I wonder if the tax advantage is worth it.

If all your information about 529s comes from the single weirdo who yells "the fees are high and limited investement choices" on every 529 post, this is what you will believe. If you do even two minutes of googling and realize it's not 2005, you'll realize that one weirdo is not a reliable source.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Is it bad that I'm skeptical about 529s? It seems like the investment options are so limited and the fees can be kind of nuts. I wonder if the tax advantage is worth it.

If all your information about 529s comes from the single weirdo who yells "the fees are high and limited investement choices" on every 529 post, this is what you will believe. If you do even two minutes of googling and realize it's not 2005, you'll realize that one weirdo is not a reliable source.

Fortunately, it doesnt! I just want more control over my investments (and the fees associated with 529s seem a little much when you can buy stocks for free).

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Is the $400k your whole inheritance or is that just the intended (inherited) 529 funds?

If you’re inheriting $400k, I’d be concerned by front loading 529s, you’re effectively gifting your inheritance to your kids. In the event of a divorce, that money is gone to you. Why not just keep the bulk in your separate name? If you don’t commingle the funds, you can always use it for college but it’s yours otherwise if you divorce.

This seems bizarre to me. I would never treat an inheritance like this as though it’s not mine and my husband’s jointly. And it would still be going to the kids’ college fund anyway. What difference does it make? It’s eye opening that some people treat family finances this way, so glad my DH and I don’t.

Check back in if you ever have the misfortune of going through a divorce, and let us know if you still feel this way, assuming you are the person inheriting money from your parents.

Well couples who jointly merge their finances are much less likely to end up divorced. Having a mindset from the start of "we are a couple, and we do things together and for each other" goes a long way towards a healthy relationship. I've been a SAHP for almost 25 years, I manage the finances and have no concerns. It is all equally mine as it is my partners. Because we are a family and have always thought that way (hint: I wouldn't have been a SAHP if my spouse thought "the money they earn is theirs and not the families", then again, I wouldn't' have married someone who thought that way)

If the inheritance was large enough (ie way more than $400K IMO) the persons giving you the inheritance would have set up stipulations thru a trust if they cared about "keeping it in the blood family"---I can see that happening for millions but not for $400K.

$400k is enough to justify a trust. This is either a naive or a self-serving way to look at things, depending on where you're coming from. My friends who divorced or are divorcing in their 40s had joint accounts and expectations that their marriage would last until death. In any case, I think if OP transferred the gifted money directly into a 529 plan for the kids, you'd argue that it is a completed gift and not part of the marital estate if you end up divorcing. In other words, it belongs to the kids rather than either spouse and can't be considered in a later division of assets. I'd briefly run it by an estate planning attorney on this point, but I like the idea and think it's a nice way to pass money to the next generation and relieve pressure for OP and OP's spouse to have to continue saving for college.

529s don't belong to the kids, though -- I guess you could try to argue that in a divorce proceeding, but they have both owners and beneficiaries, and I'm not sure putting the money into a 529 would shield it from divorce proceedings.

I don't think $400,000 is enough to justify a trust, nor did my grandparents when they gave my wife and me that amount several years ago as part of their estate plan. I put it in a joint account, which their lawyer confirmed with me but didn't argue against. If we split up one day, I don't see why my wife shouldn't have a claim on that money, which I did nothing to earn other than pick the right rich grandparents.

Yup! and 400K is very different than $5-10M. Had it been $5M+ I suspect your grandparents would have put trust rules in place to ensure otherwise (or not---it's their choice)

[Anonymous]

Anonymous wrote:Zero. Horrible investment choices, high fees, bad customer service, and lots of rules.
High growth stocks, some funds because one kid is 13 and pay as needed.

In DC, you get a state tax break on the first $2k invested per child. You might want to consider that.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Is it bad that I'm skeptical about 529s? It seems like the investment options are so limited and the fees can be kind of nuts. I wonder if the tax advantage is worth it.

If all your information about 529s comes from the single weirdo who yells "the fees are high and limited investement choices" on every 529 post, this is what you will believe. If you do even two minutes of googling and realize it's not 2005, you'll realize that one weirdo is not a reliable source.

Fortunately, it doesnt! I just want more control over my investments (and the fees associated with 529s seem a little much when you can buy stocks for free).

There are low fee 529 plans. Utah last I checked had fees of around 0.2% and offered access to DFA funds, which makes some people happy. If you’d rather buy stocks for free and pay tax on your gains feel free — reduces the deficit for me.