Reply to Parents of little kids: What are your college savings goals?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous]HHI is 500K. We put $500 in a month. We max our retirement and also put money into a brokerage account.  We live in a state with no income tax so we don't get any state tax benefit from the 529.  Whatever isn't in there by the time they go to college we will just pay for.  I want them to go wherever they want - either state or private - and that we will cover it (something my parents were not able to do for me).

Now - will I pay for them to go to some crappy private college for 70K a year over our very good state school here? No. But if they get into an Ivy/same level, you better believe I will spring for it. [/quote]

Once again, the main benefit of the 529 isn't the state income tax deduction.  That's small potatoes.  The main benefit is that all of the earnings in the 529 are completely tax-free.  18 years of compounding can yield a lot of earnings -- normally would be taxed at the capital gains rate.  I mean very conservatively, if you put in $5k a year you could be looking at $90k in earnings very easily.  If you do that in a regular brokerage account, depending on your tax rate, you could be paying $13-18k in capital gains tax on that when it comes time to withdraw and pay for college. That's a lot of money!  Even moreso for people who intend to pay full freight for private school.[/quote]

PP here. That's a good point.  Will look into shifting more into 529's v. our investment account.[/quote]

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