formerexpat
Senior Member
Joined: Dec 18, 2010 12:09:05 GMT -5
Posts: 4,079
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Post by formerexpat on Jan 6, 2012 23:09:18 GMT -5
529s are transferable between your own children and even to the next generation [doesn't even have to be the designated child's child] so it's not a total loss.
Check your state and see if they require you to contribute to their state to get the state tax deduction. That should be a decent discount if you're phased out of the roth [i.e. over $177k in AGI]. It's a day one 8% discount for me, so I'm taking it - since I'm also phased out of Roth.
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lurkernomore
Initiate Member
Joined: Jan 1, 2012 17:22:02 GMT -5
Posts: 95
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Post by lurkernomore on Jan 6, 2012 23:26:16 GMT -5
I personally am not a fan of 529 Plans. In a perfect world, they are great - but what if your child decides not to go to college? My son was very fortunate that his grandmother funded a 529 Plan - but he's tried college twice and it's just not his thing (and he's now 25, gainfully employed, and has bought his own house, so he's not a deadbeat...just not college material). He's the only grandchild. If grandma had put that money into something else that was mentally earmarked for him, she could either now spend that money on herself or gifted him that money. Instead, she now either has to pay a penalty to withdraw it - or let it stay and maybe fund her not-yet-conceived-and-maybe-never-will-be great-grandchild. This is also something that troubles me about the 529 plans, ideally you think that the person you're doing it for will go to college but what if they don't or they get a scholarship and you're stuck with all this money and no option to utilize it for something else without penalties. I don't like the idea of being pigeon holed.
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Deleted
Joined: May 2, 2024 23:41:47 GMT -5
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Post by Deleted on Jan 7, 2012 0:21:17 GMT -5
I personally am not a fan of 529 Plans. In a perfect world, they are great - but what if your child decides not to go to college? My son was very fortunate that his grandmother funded a 529 Plan - but he's tried college twice and it's just not his thing (and he's now 25, gainfully employed, and has bought his own house, so he's not a deadbeat...just not college material). He's the only grandchild. If grandma had put that money into something else that was mentally earmarked for him, she could either now spend that money on herself or gifted him that money. Instead, she now either has to pay a penalty to withdraw it - or let it stay and maybe fund her not-yet-conceived-and-maybe-never-will-be great-grandchild. This is also something that troubles me about the 529 plans, ideally you think that the person you're doing it for will go to college but what if they don't or they get a scholarship and you're stuck with all this money and no option to utilize it for something else without penalties. I don't like the idea of being pigeon holed. If your child gets a scholarship you can withdraw an equal amount from the 529 penalty free. Plus, it can be used for other expenses the scholarship might not cover, like room, board and books. If they don't go entirely you can change the beneficiary to another child or grandchild (anyone really, even yourself). I figure, worst case scenario, both my kids get other funding for school or choose other options after high school and I'm "stuck" with a wad of cash I wasn't expecting. If that's the case, I'll gladly pay the 10% penalty (on earnings only) and use it towards a lakeshore cabin. ;D
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gooddecisions
Senior Member
Joined: Dec 22, 2010 13:42:28 GMT -5
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Post by gooddecisions on Jan 7, 2012 9:01:27 GMT -5
"If that's the case, I'll gladly pay the 10% penalty (on earnings only) and use it towards a lakeshore cabin. ;D" My thoughts exactly, except it might be ocean front.
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Deleted
Joined: May 2, 2024 23:41:47 GMT -5
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Post by Deleted on Jan 7, 2012 12:34:17 GMT -5
or they get a scholarship and you're stuck with all this money Scholarships rarely cover everything - room and board, books, and fees. Tuition is usually just one of many costs.
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telephus44
Well-Known Member
Joined: Dec 23, 2010 10:20:21 GMT -5
Posts: 1,259
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Post by telephus44 on Jan 10, 2012 20:09:19 GMT -5
We have a 529 plan for our son. Our state is one of the very few that doesn't offer a tax break for it, but DH wanted to go with our state plan and it wasn't worth fighting about for me. Otherwise I'd have picked one of the states that runs a Vanguard fund. Ours is through Fidelity and I think the fees are a little high.
I believe that also you can use the funds for a parent (so if DS didn't want to go to college, but DH wanted to go back and get a masters at 60, he could use it).
Overall, we're funding it but not overly so. My son has autism, so we are unsure exactly what higher education opportunities are likely for him. He's high functioning enough that I didn't outright stop contributing, but we aren't setting aside enough to cover tuition in full or anything that crazy.
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wewillsee
Established Member
Joined: Mar 8, 2011 14:12:19 GMT -5
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Post by wewillsee on Jan 11, 2012 11:39:36 GMT -5
So, I have to watch out for if a state's 529 plan has a requirement for attending a college in that state? Is that common? Illinois, for example, has 2 plans that fall under the 529 plan. 1) Pre-paid college tuition is locking your tuition payments in TODAY for state-colleges (in your state). I personally wouldn't do that. The rates have gone through the roof in most states because they underestimated the costs for early sign-ups. So they are much higher now..plus you need to go to a state-school..plus you still have room/board. 2) 529 college savigns--This is more like the ROTH IRA of college savings. Put money in, after-tax, and the "earnings" (or profits) are tax-free. You also, depending on the state), get a state-tax deduction. In IL, it's $22K max per child if you're married. Check your states plans. If you can deduct the contributions, then join their plan. If not and they have a good low-cost plan, then still join it. If it's not low-cost, then look out of state. IL gives the deduction and they have Vanguard funds, so they are low-cost. Davebo, like you I live in IL. I've done a bit of research into the 529s and one thing that concerns me is what happens if we move to a different state - isn't the state income tax that was excluded from our contributions open to a clawback from the state of IL? The way things are going in IL, that could be a big deal.
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