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How much, and how will you use the 529 money

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  • How much, and how will you use the 529 money

    I see about contributions to 529 plan in many threads, and sometimes people state their monthly contribution but most don't post how much their expected amount to be when the child plans to use it.

    1. How much do you plan to contribute in total for one child.

    2. How much money do you expect to see at the end when the child is ready for college.

    3. Is it going to be used for just undergrad education or grad / professional school or both ?

     

    I will post my own thoughts later

  • #2
    1. I contributed, monthly, to the limit amount of the state tax deduction, sometimes a little more and sometimes a little less.

    2. My high school senior and freshman each have about $170,000, split between two accounts. My younger child will end up with more, as we continue to contribute, due to sequence of returns and the fact that we are getting less aggressive with the allocation as we approach the college years (so the elder has had lower returns, especially recently).

    3. The 529 account is intended to pay for undergrad. For my son, whose first year of tuition, room, and board, will be $52,000, I plan to supplement with current income, and, if need be, withdrawals from his UTMA accounts (currently $110,000). I do not have a plan for grad school but should be able to help or pay wholly, if need be, also using the UTMA account, loans, work, etc.

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    • #3
      I personally don't feel the need to fully fund college for them (no bio kids yet) but should have enough between 529s (doing just about NY state tax deduction max now) and cashflow to pay for college. Grad school prolly not as I started attending life late and need to get my own financial house in order first.

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      • #4
        Very interesting, I came to the forums to start this exact topic because it's something I've been mulling over for a while.

        1) If you could contribute as much as you want to a 529, how much would you contribute? Up to state tax deduction, up to gift tax exemption, or some other limit? Right now we are contributing to state tax deduction for oldest child and a bit less for the younger.

        2) Are you using a benchmark to decide how much you need, and what is your benchmark? State university, alma mater, most expensive college, or something else? We are using my alma mater (nationally known private school, not most expensive but in that ballpark) as our benchmark. Given 4% annual tuition inflation, that works out to $125k/year tuition in 15 years-ow

        3) Undergrad only, undergrad+any leftover for grad/professional school, or planning for both? This is hard for us as both sets of parents assisted with med school and we would love to help our kids as well, but it's hard to predict what path their lives will take 15+ years in the future.

        4) If the kids are young, at what point would you stop funding the 529 to avoid overfunding it?

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        • #5
          I get no state deduction. I plan to have $200,000 between two 529 plans within two years, when our 2 boys will be 8 & 10. Potentially, there could be $300,000 to $400,000 total when the funds are first accessed 8 to 10 years later. I'm invested aggressively, because it's not money we're absolutely depending on, and I'd like to give it the best chance to generate solid returns.

          We could be underfunded or overfunded, and there's no way to know in advance. They could burn through it all in a couple years or never touch it. Any leftovers could be left to grow for another 2 to 3 decades for potential grandkids.

           

           

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          • #6
            I have frontloaded and now suspended contributions.

            I have about $400,000 total for four kids, ages 2-10.

            I believe one should keep 529s aggressive, mostly stocks, and frontload if possible to maximize tax free growth and compensate for loss of flexibility.

            Perhaps I'll restart contributions again in the future, depending on how things look. If I end up with too much, it will go towards grad school or estate planning.

            My state only has tiny state deduction up to $100 max benefit, so not worried about that.

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            • #7
              I had about 100K per kiddo.  After asking around on this forum I added 40K more to each.  I want them to get scholarships, to work, and to go to public schools if possible.  I don't want them to have student loans though.  I won't pay it all but I want to help.  Not sure how to divide this up with grad school.  Some programs (like PhD) can do work study and get tuition waiver.  MD is obviously the most expensive route.  We'll see how it goes.....

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              • #8
                Our goal was to end up with $100k per child. My oldest is in college now, and that won't end up being enough money for her, even with a significant scholarship, so we are cash flowing the difference. My middle child is a senior in HS. She will get a full tuition scholarship if she goes in state, so she will use only about $50k over 4 years, with the rest most likely for grad school. I plan on increasing my target for the youngest to $125k at least (10th grade). She plans on going to an in-state public university.

                $100k per child to me is bare minimum for kids nearing college, and most likely won't be enough, even for a public university. Private colleges cost at least $200-300k over 4 years just for undergrad. Younger kids obviously will need more by the time they graduate HS, especially if tuition keeps increasing at the current rate- probably double those numbers if you have very young kids.

                 

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                • #9
                  I'm trying to hit $200k for my first, but since he'll have my GI bill most of that will get transferred to the second, so I won't have to save as much for the second if/when they come.  The plan is for 3.  We'll see.  We invest enough to the point to where if we can't use it for education, the 10% penalty should hopefully not hurt particularly much.

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                  • #10


                    We invest enough to the point to where if we can’t use it for education, the 10% penalty should hopefully not hurt particularly much.
                    Click to expand...


                    I should do the math on that -- could the tax-free growth eventually allow you to reach a break-even point on the 10% penalty?

                    I'd have to make some baseline assumptions and I'm guessing it would take many years, but avoiding a ~ 0.5% tax drag to later pay a 10% penalty could actually be a smart play over decades.

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                    • #11





                      We invest enough to the point to where if we can’t use it for education, the 10% penalty should hopefully not hurt particularly much. 
                      Click to expand…


                      I should do the math on that — could the tax-free growth eventually allow you to reach a break-even point on the 10% penalty?

                      I’d have to make some baseline assumptions and I’m guessing it would take many years, but avoiding a ~ 0.5% tax drag to later pay a 10% penalty could actually be a smart play over decades.
                      Click to expand...


                      Hmm interesting.  I am also not sure if the state tax deductions have to be repaid?

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                      • #12
                        Interesting thought. Of course, there is no time limit on using the money so you could theoretically let the money grow and gift it to grandkids if it is not all used up with kids' education rather than withdrawing with 10% penalty.

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                        • #13




                          Interesting thought. Of course, there is no time limit on using the money so you could theoretically let the money grow and gift it to grandkids if it is not all used up with kids’ education rather than withdrawing with 10% penalty.
                          Click to expand...


                          Or take some college courses in retirement (or with your free time).

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                          • #14
                            I have young kids, oldest age 3.

                            1. How much do you plan to contribute in total for one child.  10k/year per child until age 8 (~80k frontloaded) then 2k/year for the tax break until age 18 (another ~20k)... total about 100k/child, with 10 years for the first 80k to grow 

                            2. How much money do you expect to see at the end when the child is ready for college.  I hope the 80k doubles. It sure would be nice to have 180k in there when they start. Will it be enough? Room and board for our in state school is 20k this year (pretty nice, right?). 

                            3. Is it going to be used for just undergrad education or grad / professional school or both? The plan is for undergrad in-state public university. Not planning for and will probably actively discourage private school. Waaay to early to plan for professional school at this point. 

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                            • #15
                              16k/year for each child (3). My kids are 1, 3, 5. I will probably theottle back at age 10 and assess. Want to have 200K per child at 18. Trying to front load.

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