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What percentage of NW should be the 529?

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  • What percentage of NW should be the 529?

    Assuming you want to pay the whole enchilada.Yes there are different factors which include age of child, how many kids, if you/they are set on private college, is professional/graduate school likely? But what's a good ballpark percentage? Or should it just be more of a function of target amount? Get as much in as possible because of it's taxed advantaged status?

  • #2
    Target amount. And it’s not part of your net worth.

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    • #3




      Target amount. And it’s not part of your net worth.
      Click to expand...


      Apologies, what I meant is should the 529 amount be a function of how much you've accumulated for yourself. If it's purely a function of achieving a target amount(like paying off a student loan), then should you save up to 150-200k(whatever is the superfunded amount) before putting dime one into your retirement? Of course not.

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      • #4
        No

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        • #5
          ^^

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          • #6
            I think most people decide the level of contribution (ie a public or private enchilada, a whole or a half one) based on their income and to some extent net worth (but not as a percentage). But no need to overthink it in my opinion.

            If you decide to pay for four years at your state flagship school, then you can front load & top up as needed, or you can fund smaller increments every month. If you have the money (or higher net worth) I’d front load to maximize the tax benefits of growth, but others may chose to spread it out if the get a state tax benefit.

            A good rule of thumb is to have one year saved up at age five, two years at age 10, 3three years at age 15 & four years at age 20. Makes it pretty easy to know whether you are on track or not. You just check at age five, ten & fifteen to see if you are on track for current costs and can increase or decrease savings rate if needed.

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            • #7
              I have a college age son and a HS junior. Both maxed out around $200k.

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              • #8
                A 529 belongs to the owner until it is spent. It is part of the net worth.
                If your kid doesn't use it. Either full ride or doesn't go to college you can roll it into your own after paying penalty and taxes. I get it that it is money with a purpose but so is all your money. If you save 20k for Vacation it is part of your net worth until you spend it. If you do not go or do not spend it all it is still your money.

                I think the better question is how much of anticipated costs should be in the 529.
                I am aiming for 75% of estimated undergrad costs. Plan to cash flow the rest.
                I will not be able to put 4 kids though graduate school so we will help as much as we can if it comes to that.

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                • #9




                  A 529 belongs to the owner until it is spent. It is part of the net worth.
                  If your kid doesn’t use it. Either full ride or doesn’t go to college you can roll it into your own after paying penalty and taxes. I get it that it is money with a purpose but so is all your money. If you save 20k for Vacation it is part of your net worth until you spend it. If you do not go or do not spend it all it is still your money.

                  I think the better question is how much of anticipated costs should be in the 529.
                  I am aiming for 75% of estimated undergrad costs. Plan to cash flow the rest.
                  I will not be able to put 4 kids though graduate school so we will help as much as we can if it comes to that.
                  Click to expand...


                  Hard to know if you will be able to fund grad school - or if you will even need to or even how much for college - 5+ years away from the event. All we can do is make an educated guess. Too many factors beyond our control, such as grades, where their friends go, where they live at the time (state v out-of-state), what they decide to do with their lives, inflation, evolution of education models, etc. etc. etc. I agree with the 75% funding, due to the points you stipulated and we offer as an alternative for clients.

                  We typically include the 529 funds in projections for the reasons you mentioned. It is simply practical to include in net worth if you are planning to pay for higher ed.
                  Financial planning, investment management and CPA services for physicians, dentists, and medical professionals | 270-247-6087

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                  • #10
                    This seems to be one of the biggest and most frustrating areas in PF.

                    No one knows how much to save.

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                    • #11
                      Rule 1:  If contributing to a 529 impairs your own retirement savings/contribution, don't contribute to a 529.

                      IMO there are two basic approaches to 529 funding planning; a. contributions amounts are targeted based upon several factors (public/private), school specific cost (plus estimated inflation), estimated real cost of tuition/room/board (versus sticker), undergrad/undergrad plus graduate/undergrad plus law/medical. b. making a specific contribution amount (monthly/annually) and see what happens in 18'ish years when your children are college-age.  Actually helping your children be prepared/capable of college is also valuable.  Insuring your children are putting in the effort in schooling/completing homework, workload planning, study time, etc.

                      Though I include my children's 529 in my 'Quicken' NW, I have never thought the 529's should have a particular percentage target of overall NW as I use approach b. above, saving a particular amount each month since my children were born.

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                      • #12
                        I would suggest 529 savings RATE out of your spending is more important than percent of NW. Hit your target and contributions no longer needed, can be spent.

                        Once you target is met, your prefunded obligation is zero.

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                        • #13
                          The 529 is my money.  It is to make it easier for me to pay for college when the time comes around.  I could put the money in taxable and mentally keep track of it but then I would lose the tax free growth.

                          If I was gifting money to my children I would put it in a savings account in their name or in a UGMA.  Then it would not be part of my NW.

                          The 529 is a not a guarantee.  I want to pay for my kids college but in no way am I forced too.  I can change my mind at any time.

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                          • #14




                            I have a college age son and a HS junior. Both maxed out around $200k.
                            Click to expand...


                            200k per kid? Wow that's impressive and is making me a bit anxious because I feel like I'm falling behind.

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                            • #15
                              You probably shouldn't ask around here or at least understand some of us are overboard...If You Make a Moose a Muffin and what have you

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