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Is overfunding a 529 plan enabling?

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  • FIREshrink
    replied
    We could also take classes in retirement or sooner, more tax free withdrawal options. If going to school half time, two classes, might be able to withdraw money for living expenses up to approved amount. Can be rich uncle to nieces and nephews. Many options. Barring major change in the rules, which can happen with anything, we do not expect to pay and taxes or penalties on this money. Kids are 7th and 4th grade and we have full amount saved for private schools each.

    Leave a comment:


  • ZZZ
    replied
    So, you fund it but your in-laws take the tax break?

    "That s correct. Did it for a few years with both parents and in laws. They just give me the difference at tax "

    Ok.

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  • molar roller
    replied
    That s correct. Did it for a few years with both parents and in laws. They just give me the difference at tax time

    Leave a comment:


  • ZZZ
    replied
    "my in-laws get 10% (higher tax jurisdiction), up to $10K/yr each. I will continue to fund my plan to the max, and will resume funding theirs as well"

    So, you fund it but your in-laws take the tax break?

    Leave a comment:


  • molar roller
    replied




    WCI,

     

    Just saw this. Posted a blog this AM about the 529 retirement plan for FIRE. I’d bet about 1% of FIRE and 0% of traditional retirees would want to overfund 529 for retirement (unless they knew they were going to Europe for 6m to take classes!).

     

    I read your last update about this in 2014. I’ll be interested to read your new post. Especially interested to see if you changed from such a tax-efficient investment (is it really fair to say 100% VTI or S&P500 Index ETF?) and didn’t consider more creative ways to get the money out tax- and penalty-free.
    Click to expand...


    found your post.. very informative, thanks for the hard work that went into putting it together!

    The replies have been very helpful, thank you all!
    I've decided that superfunding is probably not something I want to do at this time.  The advantages seem minor at best, and the risks are greater.   Grandchildren are questionable at this time, so multigenerational wealth transfer are not a priority right now.

    On the other hand, my own contributions earn immediate 7% state tax break, and my in-laws get 10% (higher tax jurisdiction), up to $10K/yr each.   I will continue to fund my plan to the max, and will resume funding theirs as well for as long as my FIL works (74 now, been planning to retire "next year" forever).  The funds were always aggressively invested, but switched to a much more conservative allocation shortly before college started last year.  If I continue to fund it, I may consider a more aggressive allocation in my in-laws account.

    Leave a comment:


  • Lordosis
    replied
    There can be a lot of discordant couples where one had parents they paid and the other who didn't or only partially.

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  • Panscan
    replied
    Their only option * silly phone autocorrect

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  • Panscan
    replied
    Lol so if your kid doesn't go to grad school they're only option is bagging groceries? Interesting.

    Also I'm not sure why someone's parents paying for education means it's morally right for them to do the same for their kids. That makes no sense to me. Just because ones parents did something doesn't mean you should or should not. Very illogical train of thought.

    Leave a comment:


  • FiPhysician
    replied
    WCI,

     

    Just saw this. Posted a blog this AM about the 529 retirement plan for FIRE. I'd bet about 1% of FIRE and 0% of traditional retirees would want to overfund 529 for retirement (unless they knew they were going to Europe for 6m to take classes!).

     

    I read your last update about this in 2014. I'll be interested to read your new post. Especially interested to see if you changed from such a tax-efficient investment (is it really fair to say 100% VTI or S&P500 Index ETF?) and didn't consider more creative ways to get the money out tax- and penalty-free.

    Leave a comment:


  • molar roller
    replied





    kids have legitimately earned income in excess of the the amount you are putting in their Roth IRAS… 
    Click to expand…


    Why in excess? Roth contribution should be just be equal to or less than their earned income, right?
    Click to expand...


    Not since last year.  With the new tax bill, up to $11K is not taxable, but Roth limits are still the same.

    Leave a comment:


  • SLC OB
    replied


    kids have legitimately earned income in excess of the the amount you are putting in their Roth IRAS…
    Click to expand...


    Why in excess? Roth contribution should be just be equal to or less than their earned income, right?

    Leave a comment:


  • The White Coat Investor
    replied













    I just ran the numbers again for investing for retirement in a 529. I assure you it still doesn’t make sense. If you overfund a 529, plan to change the beneficiary to the grandkids.
    Click to expand…


    would you mind sharing your math?
    Click to expand…


    Yea, when the blog post I wrote for it runs. You think I run numbers for fun without any ulterior motive?
    Click to expand…


    cheeky.

    since you’re always so far ahead with your writing, what are the odds that your blog post comes out before the 529 turns into a 629? ?
    Click to expand...


    Or a 329 the way this week is going. Seriously though, expect it in the 4th quarter. I think I'm writing for December right now.

    It's not that hard to run the numbers though. If you do it right, you won't invest for retirement in a 529.

    Leave a comment:


  • G
    replied










    I just ran the numbers again for investing for retirement in a 529. I assure you it still doesn’t make sense. If you overfund a 529, plan to change the beneficiary to the grandkids.
    Click to expand…


    would you mind sharing your math?
    Click to expand…


    Yea, when the blog post I wrote for it runs. You think I run numbers for fun without any ulterior motive?
    Click to expand...


    cheeky.

    since you're always so far ahead with your writing, what are the odds that your blog post comes out before the 529 turns into a 629?

    Leave a comment:


  • The White Coat Investor
    replied







    I just ran the numbers again for investing for retirement in a 529. I assure you it still doesn’t make sense. If you overfund a 529, plan to change the beneficiary to the grandkids.
    Click to expand…


    would you mind sharing your math?
    Click to expand...


    Yea, when the blog post I wrote for it runs. You think I run numbers for fun without any ulterior motive?

    Leave a comment:


  • molar roller
    replied




    I just ran the numbers again for investing for retirement in a 529. I assure you it still doesn’t make sense. If you overfund a 529, plan to change the beneficiary to the grandkids.
    Click to expand...


    would you mind sharing your math?

    Leave a comment:

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