Anonymous
09/23/2013 10:58
Subject: Re:Saving for college: keep in your reg investments or separate just for college
We do "zero coupon bonds" instead of the 529 at the advice of our financial advisor. It's been a pretty good ride so far. She's four and we have $80,000 (value at the time of maturity) in it, and believe me, we aren't rich.
Can you elaborate? Where do you buy them?
I agree, OP, that the money needs to be set aside. Mixing it all together makes it too easily available for other things.
Anonymous
09/23/2013 09:48
Subject: Saving for college: keep in your reg investments or separate just for college
We do "zero coupon bonds" instead of the 529 at the advice of our financial advisor. It's been a pretty good ride so far. She's four and we have $80,000 (value at the time of maturity) in it, and believe me, we aren't rich.
Anonymous
09/23/2013 09:27
Subject: Re:Saving for college: keep in your reg investments or separate just for college
But there's a limit to the amount you can contribute to IRA, $5,500 i think, and that's not enough for both retirement and college $ goals. We have 529s and IRAs (traditional converted to Roths).
Anonymous
09/23/2013 08:32
Subject: Re:Saving for college: keep in your reg investments or separate just for college
Anonymous wrote:Thanks. Interesting. Gives me a little "duh" feeling for not knowing this.
But the 529 gives a state income tax deduction. So to the extent that I'm confident the money is going to be spent on college, and to the extent of the tax deduction, the 529 still seems like the better deal. Without that, I understand that the flexibility of what you spend it on is the advantage of the backdoor Roth, with the tax-deferred income feature being a wash between the two.
Do I have it, or am I missing something else?
Thanks!
529s affect your FAFSA, Roths don't until the year after you take a distribution. I
Anonymous
09/23/2013 08:26
Subject: Saving for college: keep in your reg investments or separate just for college
We have both--we use a 529 for the tax benefit, but also have some regular investments.
Anonymous
09/22/2013 23:42
Subject: Re:Saving for college: keep in your reg investments or separate just for college
Thanks. Interesting. Gives me a little "duh" feeling for not knowing this.
But the 529 gives a state income tax deduction. So to the extent that I'm confident the money is going to be spent on college, and to the extent of the tax deduction, the 529 still seems like the better deal. Without that, I understand that the flexibility of what you spend it on is the advantage of the backdoor Roth, with the tax-deferred income feature being a wash between the two.
Do I have it, or am I missing something else?
Thanks!
But the 529 gives a state income tax deduction. So to the extent that I'm confident the money is going to be spent on college, and to the extent of the tax deduction, the 529 still seems like the better deal. Without that, I understand that the flexibility of what you spend it on is the advantage of the backdoor Roth, with the tax-deferred income feature being a wash between the two.
Do I have it, or am I missing something else?
Thanks!
Anonymous
09/22/2013 23:38
Subject: Re:Saving for college: keep in your reg investments or separate just for college
Anonymous wrote:Well, the best way to save for college is in a Roth IRA. You can use a backdoor Roth IRA if your income is too high.
Second best would be 529s.
I'm not sure what he means about how there's no benefit. There's the tax benefit, and I'm not sure how financial aid decisions are affected by the classfiication of the investments.
I know I can google, but if it's not too complicated, could you elaborate?
Our income is too high for Roth IRAs. We're maxing 401k's and saving enough in a 529 to get the state tax deduction, but could do more.
Anyone can contribute money to an IRA (after tax), pay tax on it, then convert to a Roth. Money grows tax free. Better than a 529 because you can use the money for more than educational purposes.
Anonymous
09/22/2013 23:30
Subject: Saving for college: keep in your reg investments or separate just for college
23:01 My understanding is the cap on Roth IRA's is now gone. we, too, could not contribute to them because we made too much money. That cap is no longer there so we can now convert our traditional IRAs to Roths but have to pay the taxes so haven't decided what to do anymore. Check with your accountant.
Anonymous
09/22/2013 23:01
Subject: Re:Saving for college: keep in your reg investments or separate just for college
Well, the best way to save for college is in a Roth IRA. You can use a backdoor Roth IRA if your income is too high.
Second best would be 529s.
I'm not sure what he means about how there's no benefit. There's the tax benefit, and I'm not sure how financial aid decisions are affected by the classfiication of the investments.
I know I can google, but if it's not too complicated, could you elaborate?
Our income is too high for Roth IRAs. We're maxing 401k's and saving enough in a 529 to get the state tax deduction, but could do more.
Anonymous
09/22/2013 22:51
Subject: Saving for college: keep in your reg investments or separate just for college
Well, the best way to save for college is in a Roth IRA. You can use a backdoor Roth IRA if your income is too high.
Second best would be 529s.
I'm not sure what he means about how there's no benefit. There's the tax benefit, and I'm not sure how financial aid decisions are affected by the classfiication of the investments.
Second best would be 529s.
I'm not sure what he means about how there's no benefit. There's the tax benefit, and I'm not sure how financial aid decisions are affected by the classfiication of the investments.
Anonymous
09/22/2013 22:45
Subject: Saving for college: keep in your reg investments or separate just for college
Well, there is something to be said for fungibility, but I would put the minimum you are certain you will be spending on college in a 529 because of the significant tax benefits - capital gains etc. not taxed.
Anonymous
09/22/2013 22:44
Subject: Re:Saving for college: keep in your reg investments or separate just for college
529: income is tax-deferred; contributions are tax-deductible up to a certain limit in most states (5K annually in MD).
Regular investments: taxable, no tax benefits.
The "no difference" theory doesn't really wash.
Regular investments: taxable, no tax benefits.
The "no difference" theory doesn't really wash.
Anonymous
09/22/2013 22:41
Subject: Saving for college: keep in your reg investments or separate just for college
We have a 529 plan. Like the tax benefit.
Anonymous
09/22/2013 22:41
Subject: Saving for college: keep in your reg investments or separate just for college
We have 529 plans, but aren't wealthy. Meaning, we don't have tons of investments. Retirement savings, emergency savings, and college savings. That's about it.
Anonymous
09/22/2013 22:39
Subject: Saving for college: keep in your reg investments or separate just for college
We still have not set up college savings for our two kids. My husband argues that there is no difference if college funds comes out of our regular Investments down the road. Meanwhile we are renovating our house, "investment" opportunities come up now and then, his company needs additional money put into it, and/ or an emergency could come up- i would rather have money set aside just for college (ie 529) vs. have money in investment vehicles. What do you do?