College Savings Plan – 529

[Coronita]

[quote=bibsoconner]My apologies Flu. For some reason I thought all your kids were in college. I’m trying to make you older than you are :).

Like you, I’ve been pretty happy with Vanguard for my own retirement and mutual funds so I just went with them for the 529s. I went with the “age” funds where they start out almost all in stock and now (for my 12th grader) are almost all in cash/bonds.

Like you, I’m not particularly interested in gaming the system. I’m too lazy for those games and I think the money is needed for those less fortunate. I don’t consider getting residency in another state gaming the system. Besides living there for four years, based on my experience, one often ends up settling down near the university or grad school. If the kid has a condo in that state, he/she really does have a vested interest in that state and is paying into it (ex: property taxes).

However, my brief research indicates that it is not trivial to establish residency for purposes of in state tuition. I’d be interested to hear from folks whose kids are recently in university if they considered getting residency in another state and if they were successful.[/quote]

I don’t have a problem of taking advantage of every tax benefit legally 🙂 That said. You do bring up a good point. Hypothetically if my kid goes to a local school, could I rent a condo to my kid, and have they cost of rent be deducted from my kids 529k account? Obviously not above the amount that is how much room and board would be at the university dorms.

Stay focus on personal finance. Short of the rest of the world is exploding, no point worrying about it.

[gzz]

Flu, I got the same 529 offer from tiaa, $100 for a $1000 deposit.

I have a niece in Michigan who is 5. If I put in $1000, she gets $1100 and I get $300-400 off my taxes. Are there any fees or downsides I am missing?

[Hobie]

Bibbs: At your income level, fin aid will just be loan offers. The parent contribution portion will be high.

Any 529 is considered liquid cash. Your retirement funds are noted, but are not a factor in the fin aid calc. Same with home ownership and business assets.

They will tell you you don’t have to sell your house, nor dip into retirement to pay for college.

Flu is spot on regarding the 529 advise.

Of course at private univ, residency doesn’t matter.

The emancipated minor angle is legit and will qualify kid for more grant money as he has no income nor assets. I don’t agree on doing this just to save a buck.

[spdrun]

^^^

Why not agree to it? Defense contractors, Wall Street firms, law enforcement contractors, and other social parasites take handouts from the government without qualms. Why shouldn’t the little guy maximize their handouts?

[scaredyclassic]

[quote=spdrun]^^^

Why not agree to it? Defense contractors, Wall Street firms, law enforcement contractors, and other social parasites take handouts from the government without qualms. Why shouldn’t the little guy maximize their handouts?[/quote]

It’s actually an interesting issue, why an individual might be troubled while a group or entity would not

[temeculaguy]

FLU, at our next lunch I want to pick your brain on this issue. With 10 current grand kids and a projected 14 when it’s all said and done, education 529’s are on my front burner. I’ve got them all on Scholarshare with a 50/50 blend of S&P 500 and age appropriate (lowers risk as they get closer to college). I have my fears about the market and about sibling transfers. They are all very different even at young ages and I can see some show aptitude, but some do not. I have misgivings about “betting” on some kids and not on others when my kids defied predictions in different ways. I made huge errors in saving for my kids college, trying not to repeat that and hopefully you ca help.

p.s., don’t buy EE bonds for college, when you cash them in you are taxed on the profits if you earn over 6 figures. Doesn’t matter what you earned when you bought them, it only matters when you cash them in. Learned that one the hard way.

[Hobie]

Remember, you control the 529 until the designee turns 18yr. Up until then you can very easily change the designee as you see fit.

After they turn 18 they control the account you are locked out so have the kid add you so you have visibility on the account.

They are not attuned to managing a ‘portfolio’ so you can help them while they focus on studies.

We had the situation where all of the 529 was not spent and grandpa wanted the rest to be used for a down payment. (no one else to transfer to) Say hello to 10% penalty and tax.

[temeculaguy]

Hobie, thanks for the tip, I did not know that once they are 18 they gain control. With bonds, I had physical control as they were in my safe deposit box. But after getting hosed on having to pay income tax on the profits due to tax free “phase out at certain income levels” I chose to go 529 with the grandkids. A lot of people don’t realize that college is not deductible at certain income levels. For so cal that bar gets reached at middle class levels. Every year I paid tuition for kids and I threw away 9 different 1099-T’s because I got no deductions for them. Higher education tax deductions phase out completely a 80k single and 160k married.

from the IRS website:

“Education savings bond program. For 2018, the amount of your education savings bond interest exclusion is gradually reduced (phased out) if your MAGI is between $79,550 and $94,550 ($119,300 and $149,300 if you file a joint return). You can’t exclude any of the interest if your MAGI is $94,550 or more ($149,300 or more if you file a joint return). See chapter 10.”

So 94k single or 149k married and you get taxed on that college savings plan. In some parts of the country that could be defined as rich people, but not in so cal.

529 for it’s faults is the only way to go at income levels above those.But when you are in your 20’s, have a kid and star saving for college you can’t predict your future income.

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