Anonymous
05/18/2023 22:42
Subject: Do most parents have a 529 plan?
Anonymous wrote:or see it grow by 30%+ like it did a few years before that. That's how the market works. As your kid gets closer to college, plan to pull it back to cash based or bond funds where you wont be affected by the market swings. But long term, you will gain more by having it fully in the market.Anonymous wrote:Anonymous wrote:Anonymous wrote:A family member was surprised to hear we didn't have a 529 plan for our DC's college. We have other investments and savings we plan to use when the time comes but it got me wondering - do most people invest in 529 when they have children? Are we somehow missing out for not having one?
The biggest advantage is the tax free growth. It’s like a Roth. Your money grows and compound and if you use it for college you pay no taxes on all that profit. So in theory you could put in 100k and that money could grow to 250k and you would not pay taxes on that 150k profit. You also are paying 100k for a 250k education with compounding and no taxes This is based on conservative returns over 14-18 years.
Your other investments if it’s in brokerage, you will have to pay taxes on them. In addition, you also get tax breaks up to a certain amount in most states and DC in the 529.
If your money is in savings account, you are losing money right now. You should never keep your money in savings but rather invest and have your money work for you.
Yeah, and if you contributed in the past 2 years you can also see your money shrink by 15% like we did!
This. Who cares about short term changes if you are holding for the long run. Then when you get closer to withdrawal time, you re-allocate to lower risk investments.
Anonymous
05/18/2023 18:41
Subject: Do most parents have a 529 plan?
or see it grow by 30%+ like it did a few years before that. That's how the market works. As your kid gets closer to college, plan to pull it back to cash based or bond funds where you wont be affected by the market swings. But long term, you will gain more by having it fully in the market.Anonymous wrote:Anonymous wrote:Anonymous wrote:A family member was surprised to hear we didn't have a 529 plan for our DC's college. We have other investments and savings we plan to use when the time comes but it got me wondering - do most people invest in 529 when they have children? Are we somehow missing out for not having one?
The biggest advantage is the tax free growth. It’s like a Roth. Your money grows and compound and if you use it for college you pay no taxes on all that profit. So in theory you could put in 100k and that money could grow to 250k and you would not pay taxes on that 150k profit. You also are paying 100k for a 250k education with compounding and no taxes This is based on conservative returns over 14-18 years.
Your other investments if it’s in brokerage, you will have to pay taxes on them. In addition, you also get tax breaks up to a certain amount in most states and DC in the 529.
If your money is in savings account, you are losing money right now. You should never keep your money in savings but rather invest and have your money work for you.
Yeah, and if you contributed in the past 2 years you can also see your money shrink by 15% like we did!
Anonymous
05/18/2023 18:39
Subject: Re:Do most parents have a 529 plan?
Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:I think it's fairly common for UMC families to have a 529 plan--they are the ones who benefit most from the state tax advantage and have surplus money to invest and who will likely not qualify for much financial aid. Some frugal and foresighted MC families have one also.
This is right and PP who said *most* families have no savings is also right.
+1000
Also, if you are already saving with the intention of using those funds for college (and you don't need them as some kind of emergency funds) by not using a 529 you could be missing out on state tax deduction as well as tax-free growth of the investment.
This. Yes, we have savings and investments (including a couple of investment properties) we can cash out for DC’s college but you also don’t know what curveball life is going to throw at you.
When I suggested to DH that we set up a 529 plan when first DC was born he said we don’t need to. I guess there was some verbal commitment from DH’s parents that they would be paying for all of the grandchildren’s college education. Yes, he comes from a wealthy family and they have the funds but I feel like it’s risky to rely on that. I didn’t grow up in a financially secure family so it makes me very nervous.
Plus in a wealthy family, it makes sense to establish the 529 and have the grandparents "gift" each grandkid the $17K/person each year. It does not go against their lifetime gift exemption, so another way for wealthy to tax plan. The grandparents can still have control over it
Anonymous
05/18/2023 18:36
Subject: Do most parents have a 529 plan?
Anonymous wrote:According to the college forum, if you haven't saved at least 200k/child--you have failed as a MC/UMC parent.
Realistically, current costs for most instate schools are $25K-40K/year, and most T30 schools are ~$80K/year. There are other more cost effective ways to go to college, including "dropping down 1 tier" and getting merit at private schools/schools that offer great merit. But if you plan for your kid to go directly to a 4 year university you need to plan to have the $25-30K/year saved (in today's dollars). Nothing saying your kid cannot work and earn $10-12K/year (easy to do when you live places where min wage is over $12/13/hr). Your kid can also get ~5-6K in federal loans each year (max of $27K total for the 4 years). Otherwise you start at CC.
Anonymous
05/18/2023 17:07
Subject: Do most parents have a 529 plan?
I will never in my life understand why they don’t have one. Just $100 a month will give you so much
Anonymous
05/18/2023 14:50
Subject: Re:Do most parents have a 529 plan?
Anonymous wrote:I have them for my kids. Started it after the daycare years when I could afford to. Will end up with about 70,000 in each. Going to state school so there will be a combo of using 529 and cash flowing it. It is important for me to have my kids graduate without debt. That wouldn’t be possible without the 529 (or some type of long term savings).
I was however talking to a co-worker today whose kid is starting high school and there is no 529 or other savings. That would stress me out.
That would stress me out too. We have two kids in college which is $135k all in for the two years they overlap. We had saved about half for one kid and 3/4s of the other and are cash flowing the rest. We are very HHI but it would have been miserable paying it all via cash flow.
Anonymous
05/18/2023 11:57
Subject: Re:Do most parents have a 529 plan?
I have them for my kids. Started it after the daycare years when I could afford to. Will end up with about 70,000 in each. Going to state school so there will be a combo of using 529 and cash flowing it. It is important for me to have my kids graduate without debt. That wouldn’t be possible without the 529 (or some type of long term savings).
I was however talking to a co-worker today whose kid is starting high school and there is no 529 or other savings. That would stress me out.
I was however talking to a co-worker today whose kid is starting high school and there is no 529 or other savings. That would stress me out.
Anonymous
05/18/2023 10:35
Subject: Do most parents have a 529 plan?
There are about 16 million 529 plans nationwide according to https://nast.org/wp-content/uploads/529-accounts-surpass-16-million-for-the-first-time-ever.pdf based on that, the average balance is around $26k.
Of course, many of the families that have a 529 plan have more than one--for multiple kids, or grandparent and parent are each saving, etc. So I don't think it's accurate to say that most parents have one. About half of young children qualify for WIC, for example, which makes me think their parents are unlikely to be putting aside money for college or trying to minimize their tax burdens.
Of course, many of the families that have a 529 plan have more than one--for multiple kids, or grandparent and parent are each saving, etc. So I don't think it's accurate to say that most parents have one. About half of young children qualify for WIC, for example, which makes me think their parents are unlikely to be putting aside money for college or trying to minimize their tax burdens.
Anonymous
05/18/2023 10:31
Subject: Re:Do most parents have a 529 plan?
Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:I think it's fairly common for UMC families to have a 529 plan--they are the ones who benefit most from the state tax advantage and have surplus money to invest and who will likely not qualify for much financial aid. Some frugal and foresighted MC families have one also.
This is right and PP who said *most* families have no savings is also right.
+1000
Also, if you are already saving with the intention of using those funds for college (and you don't need them as some kind of emergency funds) by not using a 529 you could be missing out on state tax deduction as well as tax-free growth of the investment.
This. Yes, we have savings and investments (including a couple of investment properties) we can cash out for DC’s college but you also don’t know what curveball life is going to throw at you.
When I suggested to DH that we set up a 529 plan when first DC was born he said we don’t need to. I guess there was some verbal commitment from DH’s parents that they would be paying for all of the grandchildren’s college education. Yes, he comes from a wealthy family and they have the funds but I feel like it’s risky to rely on that. I didn’t grow up in a financially secure family so it makes me very nervous.
Wait. You’ve never asked again? What if the grandparents think paying for college means $10k/year? They could have no idea college might be $75k/year!
+1
Wealthy family or not, I'd have one just in case. Even if it was only $250/ month. The kids could always use it later for help with some sort of certification or advanced degree later on. Also, the tax deduction for the parent's would be nice. If you can afford it, I don't see why you wouldn't.
This is my thinking as well. It's certainly not going to hurt but DH just doesn't seem to see the point.
Anonymous
05/18/2023 10:29
Subject: Re:Do most parents have a 529 plan?
Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:I think it's fairly common for UMC families to have a 529 plan--they are the ones who benefit most from the state tax advantage and have surplus money to invest and who will likely not qualify for much financial aid. Some frugal and foresighted MC families have one also.
This is right and PP who said *most* families have no savings is also right.
+1000
Also, if you are already saving with the intention of using those funds for college (and you don't need them as some kind of emergency funds) by not using a 529 you could be missing out on state tax deduction as well as tax-free growth of the investment.
This. Yes, we have savings and investments (including a couple of investment properties) we can cash out for DC’s college but you also don’t know what curveball life is going to throw at you.
When I suggested to DH that we set up a 529 plan when first DC was born he said we don’t need to. I guess there was some verbal commitment from DH’s parents that they would be paying for all of the grandchildren’s college education. Yes, he comes from a wealthy family and they have the funds but I feel like it’s risky to rely on that. I didn’t grow up in a financially secure family so it makes me very nervous.
Wait. You’ve never asked again? What if the grandparents think paying for college means $10k/year? They could have no idea college might be $75k/year!
They're aware of how expensive colleges are nowadays but unless I see something in writing I don't feel comfortable relying on it. And I'm certainly not comfortable asking for something in writing.
Anonymous
05/18/2023 10:21
Subject: Do most parents have a 529 plan?
Anonymous wrote:Anonymous wrote:A family member was surprised to hear we didn't have a 529 plan for our DC's college. We have other investments and savings we plan to use when the time comes but it got me wondering - do most people invest in 529 when they have children? Are we somehow missing out for not having one?
The biggest advantage is the tax free growth. It’s like a Roth. Your money grows and compound and if you use it for college you pay no taxes on all that profit. So in theory you could put in 100k and that money could grow to 250k and you would not pay taxes on that 150k profit. You also are paying 100k for a 250k education with compounding and no taxes This is based on conservative returns over 14-18 years.
Your other investments if it’s in brokerage, you will have to pay taxes on them. In addition, you also get tax breaks up to a certain amount in most states and DC in the 529.
If your money is in savings account, you are losing money right now. You should never keep your money in savings but rather invest and have your money work for you.
Yeah, and if you contributed in the past 2 years you can also see your money shrink by 15% like we did!
Anonymous
05/18/2023 10:19
Subject: Do most parents have a 529 plan?
Anonymous wrote:According to the college forum, if you haven't saved at least 200k/child--you have failed as a MC/UMC parent.
Nah - that's bull
Anonymous
05/18/2023 10:18
Subject: Do most parents have a 529 plan?
Anonymous wrote:Anonymous wrote:I doubt it.
Growing up, I sure didn't nor did my spouse.
Our kids have one but a lot of our neighbors and friends don't have them for their kids.
How old are you? They were introduced in 1996. I didn’t have one growing up because I had already graduated from college.
+1
I am too told for these. I also went to our state flagship when they offered it for free to anyone scoring over 33 on the ACT. Those were the days....
I have one for each of my kids. We are UMC and plan to not fully fund it and save money in an investment account and ibonds on the side. I don't want to lose money by over funding it. I'm not in DC and our state flagship is nearly impossible to get in, let alone get academic scholarships!
Anonymous
05/18/2023 09:56
Subject: Do most parents have a 529 plan?
Anonymous wrote:Anonymous wrote:I doubt it.
Growing up, I sure didn't nor did my spouse.
Our kids have one but a lot of our neighbors and friends don't have them for their kids.
How old are you? They were introduced in 1996. I didn’t have one growing up because I had already graduated from college.
Before 529, many people had "prepaid tuition plans" for their state college system.
Anonymous
05/18/2023 09:53
Subject: Re:Do most parents have a 529 plan?
Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:Anonymous wrote:I think it's fairly common for UMC families to have a 529 plan--they are the ones who benefit most from the state tax advantage and have surplus money to invest and who will likely not qualify for much financial aid. Some frugal and foresighted MC families have one also.
This is right and PP who said *most* families have no savings is also right.
+1000
Also, if you are already saving with the intention of using those funds for college (and you don't need them as some kind of emergency funds) by not using a 529 you could be missing out on state tax deduction as well as tax-free growth of the investment.
This. Yes, we have savings and investments (including a couple of investment properties) we can cash out for DC’s college but you also don’t know what curveball life is going to throw at you.
When I suggested to DH that we set up a 529 plan when first DC was born he said we don’t need to. I guess there was some verbal commitment from DH’s parents that they would be paying for all of the grandchildren’s college education. Yes, he comes from a wealthy family and they have the funds but I feel like it’s risky to rely on that. I didn’t grow up in a financially secure family so it makes me very nervous.
Wait. You’ve never asked again? What if the grandparents think paying for college means $10k/year? They could have no idea college might be $75k/year!
+1
Wealthy family or not, I'd have one just in case. Even if it was only $250/ month. The kids could always use it later for help with some sort of certification or advanced degree later on. Also, the tax deduction for the parent's would be nice. If you can afford it, I don't see why you wouldn't.