How many here do not have a 529 savings account, on purpose?

[Anonymous]

have money in individual stocks (mostly), etfs, house, second home.

been very pleased with 529s for college. we have about 650k in there btw 3 kids and can pull it out tax-free, avoiding capital gains. I think we contributed 250k cash over the years, the rest is gains.

paying tuition out of your personal account and repaying yourself via 529 is hassle-free, on the honor system. I'm sure they can audit, but I dont believe how easy it is. we get a small deduction from NYS for contributions, but none of my kids go to school in NYS. that's not a thing.

I thought we'd end up using a combination of 529, kids' roths, our roths, and cash flow with some FA. maybe also selling second home.

Good news - assets and income have grown to the point we didn't tap either kids' roths or our own or sell second home. Bad news - full pay for private x3. ouch. but we cash flow and use 529s. will leave 35k in each for more roth contributions.

We have loads of stocks with very low cash basis. I'm glad we're not also getting hit with cap gains on top of all the rest. Or having to sell at all.

[Anonymous]

op - ur husband is arrogantly ill-informed.

just open a 529 plans. tax free growth is amazing.


let me BS his way

[Anonymous]

Anonymous wrote:Between the NY state tax break and tax-free growth, I didn't see a better option for us. I suppose if we were genius investors who had gotten into crypto 10 years ago or something, but we aren't those people.

Same here. I think this whole discussion is pointless unless people recognize the differences in different states.

In NY you can put in $10k a year that is exempt from state and local taxes. I live in NYC so my state and local taxes are about 10%. So I am saving $1k a year in taxes on my $10k contribution, or an immediate 10% ROI. Plus tax-exempt growth. Plus decent investment options. If you can afford to put away money and live in NY (particularly NYC), it is criminal not to at least do $10k a year. I don't care how good of an investor you think you are or how great you think your favorite stock is. This is tough to consistently beat (I'm sure some Bill Ackman wanna be will tell me stocks that have done better - ok, whatever).

For other states, or to fund beyond the limit where you get the up front tax benefit, the math is different. If you are getting no up front tax benefit then the argument is less compelling, though the tax free growth is still nice.

Note that I am also one who likes to keep things simple to minimize administrative hassle but there is almost no incremental effort here.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We were poor when kids were born. I did not want my kids college tuition in a 529 to tank if the stock market tanked, or if we were still poor, incapacitated or dead.

So, we bought the MD Prepaid College Trust for both kids for the maximum years allowed. This was guaranteed by the State Govt and money was kept aside to pay for it in the state budget. This Trust is not taking new enrollments anymore and not being offered anymore. If you had any money left in this program, you can also convert it into a Roth for your kid.

Our kids eventually went in-state, got full merit tuition scholarships, and much of the trust was not used. We also now are UMC, and to just pay from our cash flow for incidental expenses was very easy. So, now all that is over, we are in the process of converting it to Roth.

So long story short. We only bought for both kids tuition for 4 years of college each. Total cost for both kids was 80K. We spent around $60 K total for other costs (room, board, food, travel, socializing) for 4 years each. So, 2 kids, both did double majors in STEM subjects. In total it cost us 15K per year, per child - or $120K total for two kids for other college costs. We did not pay tuition.

Because they got free tuition from the college, the money invested for prepaid tuition will be converted to Roth for them. In retrospect, we saved the bare minimum ($80 K for both kids) for college and the opportunity cost of that money not being invested in stock market was not greater that the insurance factor of prepaid tuition or to hedge against increase in tuition.

To add - would we have invested in the MD Prepaid College Trust knowing what we know now? Probably yes. It was a good insurance policy for cheap. We did not know that both our kids would turn out to be such super high achieving kids in the public school system.

Wasn't there some crazy controversy over this program recently? https://marylandmatters.org/2023/04/07/lawmakers-moving-forward-with-plan-to-abolish-maryland-529-board-settle-claims-for-pre-paid-college-trust-accounts/

Pre-paid plans are very very very different than a normal 529. A normal 529 you can use for education ANYWHERE in the USA. The prepaid are rarely a good idea===you are tied to that state and specific universities typically.

[Anonymous]

I'm with your husband, but it's also very personal.
I don't pay taxes or rather, I pay them, but get them all back and then some as HH.
My own returns are 100%+ a year. I reached 100% in 6 months this year, so it's speeding up.
I did 20% just today in one account. I could never do this in 529. Every time I do this, I get better at it. All this money is tax free forever and can be used for many things.
I wouldn't have the patience for rules and slow growth of 529 or 401k,or the fees or customer service.
Our kid got 30 credits transferred from high school. I'd be stuck with one year's money in 529 now if I had continued to fund it.
He will get a tax refund that pays for his first semester. He will not be on my taxes. He needs to be independent in VA and get in-state in a year.
The refund wouldn't be possible if we touched the 529. We have a small 529, but it was a mistake. I'm glad it's there. That's how I know it's no good and we invested for growth.
He is working in a restaurant and we will open a Roth for him and max it out. Why would I want to transfer money from 529 to Roth if I can do it today and next week with every paycheck he brings in. Time is money.
I'm going to show my kid how I get 100% inside of my Roths. He was impressed with 401k match, but not for long.

[Anonymous]

Anonymous wrote:Well we have 529s, which I know is not what you asked.

BUT we were absolutely in your boat for years and didn't open the 529s until our kid was 6. And we still don't fund them as heavily as we do other investment vehicles. What pushed us to finally do it was the rule change that allows you to convert a 529 to a Roth IRA (the account must have been open for that beneficiary for 15 years and the investments must be at least 5 years old).

It's currently capped at 35k for roll over so we decided to fund them up to that amount for sure and will then reassess. We've only had them a year.

There has been discussion of a rule change that would also allow leftover 529 funds to be used for a down payment on a home. We'll be keeping an eye on that.

Theses additional uses combined with the tax benefits were enough to push us to do it, as part of a broader investment strategy. We have no intention of "fully funding" the accounts and don't view it as the primary way we will pay for college.

Then why answer? All these posts now will be about 529. Oh dcum humble brag away

[Anonymous]

Anonymous wrote:

Anonymous wrote:Well we have 529s, which I know is not what you asked.

BUT we were absolutely in your boat for years and didn't open the 529s until our kid was 6. And we still don't fund them as heavily as we do other investment vehicles. What pushed us to finally do it was the rule change that allows you to convert a 529 to a Roth IRA (the account must have been open for that beneficiary for 15 years and the investments must be at least 5 years old).

It's currently capped at 35k for roll over so we decided to fund them up to that amount for sure and will then reassess. We've only had them a year.

There has been discussion of a rule change that would also allow leftover 529 funds to be used for a down payment on a home. We'll be keeping an eye on that.

Theses additional uses combined with the tax benefits were enough to push us to do it, as part of a broader investment strategy. We have no intention of "fully funding" the accounts and don't view it as the primary way we will pay for college.

Then why answer? All these posts now will be about 529. Oh dcum humble brag away

That's a strange take. I think posters are just trying to remind OP to reconsider. Isn't that what DCUM is all about? Inform and educate?