Anonymous wrote:Another benefit to 529s - in many states, you put pretax money. So for Maryland, each parent can put $2500 per year tax-free into the account per child. We have two kids - that's $10K tax free into savings, which grows tax free as well.

You guys are lucky. I’m a California parent. We use a 529, but like many things we get no tax benefits.

I don't use 529s. I have various retirement accounts. It's because I am divorced and I don't know how much their dad will contribute. Could be a lot, could be almost nothing. It's very stressful, but I just try to earn and save as much as I can.

Anonymous wrote:It took me maybe a half hour to set up the accounts. I’m not sure what hassle is to you but I don’t believe this is a valid point.

Maybe if your husband is super talented at picking stocks he could do better. Is really hard to say without knowing what he’s going to invest in instead. Usually with high reward comes higher risk and that’s not where I want college funds, but only you can decide that.

We’re in a really high tax bracket. I am confident I can’t do better after paying taxes on growth, so 529 it is.

NP. Also, I think it's good to have some diversity in your portfolio. We have a rental property + stocks + 401k + 529. I wouldn't want it all to be in stocks.

We owned Apple stock well before we had kids. When we saw it soaring, it really was a no-brainer to keep doing that instead of a 529, since you can't pick individual stocks in 529s. We did open 529s when our kids were born, because we thought we had to, but as time went on, we saw there really wasn't any point in putting too much into them.

Now we just sell stock to pay for our kids' education.

It took me maybe a half hour to set up the accounts. I’m not sure what hassle is to you but I don’t believe this is a valid point.

Maybe if your husband is super talented at picking stocks he could do better. Is really hard to say without knowing what he’s going to invest in instead. Usually with high reward comes higher risk and that’s not where I want college funds, but only you can decide that.

We’re in a really high tax bracket. I am confident I can’t do better after paying taxes on growth, so 529 it is.

Another benefit to 529s - in many states, you put pretax money. So for Maryland, each parent can put $2500 per year tax-free into the account per child. We have two kids - that's $10K tax free into savings, which grows tax free as well.

We have about $450k in 529s for two kids (ages 15 and 18), so I'm obviously not the person you're speaking to, but here's my take: Either you save for college in a 529 OR, if there's a possibility you might qualify for need-based aid, you take that money and put it into a retirement account, so it won't screw up your financial aid.

Anonymous wrote:we didn't put money in 529 .. instead we bought investment properties. then gave the kid the property to pay for tuition or whatever.

This is an interesting approach but demonstrably more risky than just getting a 529.

I would not say I am particularly educated about 529s but I will just share why we decided to go the 529 route even though we knew we would likely be moving often.

We have moved states several times (4 states for my oldest dc) and we still decided to do 529s. We have them in our home state of NY. We have since lived in NH (no income tax), MO (has parity), and VA (for just a year). Even without any state tax advantages, though, the 529 still grows tax free, and (approved) use of the funds is tax free. That is really quite a benefit.

I feel like people like the idea of a brokerage because of "freedom" and "flexibility" but you will have to put in a lot of time and work to make a different investment vehicle do matter than a 529, especially with capital gains taxes. Unless you are really worried about stranded funds in the 529, I don't know why you wouldn't pick a 529. (FWIW, my youngest has a disability, so we just moved his money to an ABLE account once he was diagnosed, in case college won't be in the cards for him.)

Another benefit of 529s- my parents put in 2K /grandkid each year. I don't think they would be as keen to give us 6K a year for the mortgage of our investment property or contribution to our brokerage account.

Anonymous wrote:This is for people who are educated about 529 accounts and can afford to set aside cash but have weighed the pros and cons, and decided not to set it up. If you are one of those- what were your reasons?

My DH and I have had this conversation so many times and he firmly believes that we can grow our money better elsewhere and not have to deal with the hassle- especially since we may have to move to different states for our job.

Thank you for the insights.

I did the opposite after researching it, and I think we made the right decision. For context, I work professionally in finance, and I was also weighing the pros/cons. We also have a Goldman Sachs financial advisor, and he recommended the 529 from the jump. I was the hesitant one.

The biggest pros are:

1. Account earnings grow tax free per federal tax law
2. Earnings are now able to used for non-educational expenses (with some limits)
3. Most good plans offer a variety of investment options that are similar to a 401K
4. You can use them regardless of your home state, though some states also give residents additional state tax benefits

If you all change your mind, look into the Utah 529. It is one of the most well regarded ones, and you don’t have to live in Utah to participate.

Anonymous wrote:

Anonymous wrote:This is for people who are educated about 529 accounts and can afford to set aside cash but have weighed the pros and cons, and decided not to set it up. If you are one of those- what were your reasons?

My DH and I have had this conversation so many times and he firmly believes that we can grow our money better elsewhere and not have to deal with the hassle- especially since we may have to move to different states for our job.

Thank you for the insights.

I'm sorry to inform you that your husband is not, in fact, "educated about 529 accounts." It's always people who don't understand them who proselytize about how bad they are.

This PP is right -- you don't have to open the 529 in the state where you live and a lot of people open them in other states.

Sometimes you need to open them in your home state in order to get certain tax benefits, but you can also just open a new one in the new state you move to if you move. You can have a bunch of 529s for the same child.

So moving shouldn't really be a factor, though where you live may impact the decision of whether to open the 529 in your state or to get one of the others.

Anonymous wrote:This is for people who are educated about 529 accounts and can afford to set aside cash but have weighed the pros and cons, and decided not to set it up. If you are one of those- what were your reasons?

My DH and I have had this conversation so many times and he firmly believes that we can grow our money better elsewhere and not have to deal with the hassle- especially since we may have to move to different states for our job.

Thank you for the insights.

I'm sorry to inform you that your husband is not, in fact, "educated about 529 accounts." It's always people who don't understand them who proselytize about how bad they are.

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.

we didn't put money in 529 .. instead we bought investment properties. then gave the kid the property to pay for tuition or whatever.

This is for people who are educated about 529 accounts and can afford to set aside cash but have weighed the pros and cons, and decided not to set it up. If you are one of those- what were your reasons?

My DH and I have had this conversation so many times and he firmly believes that we can grow our money better elsewhere and not have to deal with the hassle- especially since we may have to move to different states for our job.

Thank you for the insights.