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Is overfunding a 529 plan enabling?

Home Personal Finance and Budgeting Is overfunding a 529 plan enabling?

  • Avatar Panscan 
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    Their only option * silly phone autocorrect

    #239538 Reply
    Lordosis Lordosis 
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    Status: Physician
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    Joined: 02/11/2019

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

    “Never let your sense of morals prevent you from doing what is right.”

    #239539 Reply
    Avatar molar roller 
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    Status: Dentist
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    Joined: 05/31/2018

    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.

    #239555 Reply
    Avatar ZZZ 
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    “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?

    #239625 Reply
    Avatar molar roller 
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    That s correct. Did it for a few years with both parents and in laws. They just give me the difference at tax time

    #239643 Reply
    Avatar ZZZ 
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    Status: Spouse
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    Joined: 06/18/2018

    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.

    #239653 Reply
    Avatar FIREshrink 
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    Status: Physician
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    Joined: 01/11/2017

    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.

    #239979 Reply
    Liked by ZZZ

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