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529 Plan Strategy Questions
Posted on 7/22/25 at 9:36 am
Posted on 7/22/25 at 9:36 am
I have two kids - age 5 and 1.
I've set up a 529 plan for both the moment we got a social security number for both. At the rate of contribution, we anticipating having between $160,000-$190,000 in each of their accounts by the time they are 18 years old.
Some questions that I have for the MT geniuses here:
Qualifed expenses for 529 plans include tuition, fees, room and board, books, and certain technology like computers and internet access.
- Can a beneficiary use funds from their 529 plan to pay rent for housing owned by a parent?
- What do you anticipate costs of college (4 year undergrad degree at an SEC school) 14 and 17 years from now?
- Other than transfering leftover funds into a ROTH for the beneficiary (up to $35,000 at the moment, but that may change later), what is the best strategy for handling an overfunding situation with a 529 plan even after a Roth conversion up to the max? Do you intend to transfer the balance to a grand child later?
My wife and I are on a very good path with our own retirement savings. Right now our projections are that we could potentially even retire early. No intent or anticipated need to pull any excess 529 funds back.
I've set up a 529 plan for both the moment we got a social security number for both. At the rate of contribution, we anticipating having between $160,000-$190,000 in each of their accounts by the time they are 18 years old.
Some questions that I have for the MT geniuses here:
Qualifed expenses for 529 plans include tuition, fees, room and board, books, and certain technology like computers and internet access.
- Can a beneficiary use funds from their 529 plan to pay rent for housing owned by a parent?
- What do you anticipate costs of college (4 year undergrad degree at an SEC school) 14 and 17 years from now?
- Other than transfering leftover funds into a ROTH for the beneficiary (up to $35,000 at the moment, but that may change later), what is the best strategy for handling an overfunding situation with a 529 plan even after a Roth conversion up to the max? Do you intend to transfer the balance to a grand child later?
My wife and I are on a very good path with our own retirement savings. Right now our projections are that we could potentially even retire early. No intent or anticipated need to pull any excess 529 funds back.
This post was edited on 7/22/25 at 9:38 am
9
Posted on 7/22/25 at 10:29 am to dewster
quote:
Can a beneficiary use funds from their 529 plan to pay rent for housing owned by a parent?
Using tax free gains to pay your RE P&I? Used for our daughter’s college apartment, and we did not have to prove ownership
of the apt. Officially, I don’t know.
quote:
What do you anticipate costs of college (4 year undergrad degree at an SEC school) 14 and 17 years from now?
Used 5% inflation rate in our planning. It was pretty accurate. However, in 14 and 17 years when there are no jobs b/c AI, they may be paying you for your kids to go to university.
My steer. Don’t overfund the 529.
Can transfer remaining balance to 2nd child, if not Roth. We did. Underfund plan worked well as 2nd will play a college sport so in full balance not needed.
Posted on 7/22/25 at 10:52 am to dewster
Seems like you're on track to overfund the 529 for what you think they'll actually use. I would divert some of that to maybe a UTMA/UGMA and start funding that. No difference to you, just where the money is going.
As long as unearned income is below $1,350 in those accounts you are good in terms of tax side of things (zero tax for you or the child). So either choose things with little to no dividend or I just buy 2 shares of SPLG (S&P 500) each month for our 2 year old and with an annual divided of 89 cents there would need in excess of $112k of SPLG just to dividend more than $1,350 where it would create a tax situation so nowhere close to that right now after just 2 years of doing that.
As long as unearned income is below $1,350 in those accounts you are good in terms of tax side of things (zero tax for you or the child). So either choose things with little to no dividend or I just buy 2 shares of SPLG (S&P 500) each month for our 2 year old and with an annual divided of 89 cents there would need in excess of $112k of SPLG just to dividend more than $1,350 where it would create a tax situation so nowhere close to that right now after just 2 years of doing that.
This post was edited on 7/22/25 at 10:53 am
Posted on 7/22/25 at 10:58 am to thunderbird1100
quote:
UTMA/UGMA and start funding that. No difference to you
Ownership of funds transfers to child when they turn certain age?
Posted on 7/22/25 at 11:02 am to Artificial Ignorance
when you have 35k in an account and the child is working, start transferring into a Roth IRA based on income limits.
Should grow to 1 million by their retirement age. 20% of what they will need to retire.
i am doing that for my grandkids
Should grow to 1 million by their retirement age. 20% of what they will need to retire.
i am doing that for my grandkids
Posted on 7/22/25 at 11:15 am to dewster
quote:
Do you intend to transfer the balance to a grand child later?
You can transfer it to your younger child. If I was a young Dad and my Dad said "I transferred your leftover 529 to your kid," I would be so thankful and have a positive outlook for my family's future.
Posted on 7/22/25 at 11:27 am to Artificial Ignorance
quote:
Ownership of funds transfers to child when they turn certain age?
Depends on state but typically 18-21
You can also use it for things leading up to that that is to their benefit.
For example we plan on paying for our child's bat mitzvah with the UTMA.
This post was edited on 7/22/25 at 11:29 am
Posted on 7/22/25 at 11:49 am to dewster
quote:
- Other than transfering leftover funds into a ROTH for the beneficiary (up to $35,000 at the moment, but that may change later), what is the best strategy for handling an overfunding situation with a 529 plan even after a Roth conversion up to the max? Do you intend to transfer the balance to a grand child later?
You can also use up to $10k/yr to pay for private school k-12 if you want to go that route before college.
Posted on 7/22/25 at 12:19 pm to natsoundup1
quote:
when you have 35k in an account and the child is working, start transferring into a Roth IRA based on income limits.
Should grow to 1 million by their retirement age. 20% of what they will need to retire.
i am doing that for my grandkids
I am 100% trying to do that the second they start working.
Posted on 7/22/25 at 12:31 pm to natsoundup1
What is the significance of 35k? Is that a limit?
Posted on 7/22/25 at 1:06 pm to dewster
The new Trump accounts might be something to look into. They essentially behave as a traditional IRA in the long term, and will do a lot of the same things a 529 will do but with different limits.
Ideally, fund 529 to pay for college and convert to Roth, then maybe fund the Trump account because it might offer a bigger boost to retirement savings later. It also allows for a down payment on a house or money to start a business, don't know the mechanics of how that will all work yet, but it's worth watching.
Ideally, fund 529 to pay for college and convert to Roth, then maybe fund the Trump account because it might offer a bigger boost to retirement savings later. It also allows for a down payment on a house or money to start a business, don't know the mechanics of how that will all work yet, but it's worth watching.
This post was edited on 7/22/25 at 9:55 pm
Posted on 7/22/25 at 1:31 pm to dewster
quote:
Can a beneficiary use funds from their 529 plan to pay rent for housing owned by a parent?
Yes, schools provide a cost of attendance that includes room and board as well as misc fees like technology, etc. You can spend up to that amount on those items. If the school says room and board is $20k a year, you can use up to that amount from the 529, even on off-campus housing.
Posted on 7/22/25 at 3:17 pm to dewster
Can a beneficiary use funds from their 529 plan to pay rent for housing owned by a parent? YES, but document
- What do you anticipate costs of college (4 year undergrad degree at an SEC school) 14 and 17 years from now?
Higher, but I’d guess it would double twice at worst.
- Other than transfering leftover funds into a ROTH for the beneficiary (up to $35,000 at the moment, but that may change later), what is the best strategy for handling an overfunding situation with a 529 plan even after a Roth conversion up to the max? Do you intend to transfer the balance to a grand child later?
I’ve been doing their Roth IRAs will residual 529 monies. They had scholarships.
- What do you anticipate costs of college (4 year undergrad degree at an SEC school) 14 and 17 years from now?
Higher, but I’d guess it would double twice at worst.
- Other than transfering leftover funds into a ROTH for the beneficiary (up to $35,000 at the moment, but that may change later), what is the best strategy for handling an overfunding situation with a 529 plan even after a Roth conversion up to the max? Do you intend to transfer the balance to a grand child later?
I’ve been doing their Roth IRAs will residual 529 monies. They had scholarships.
Posted on 7/22/25 at 3:52 pm to makersmark1
Dont you have to pay tax on the rental income somewhat negating the tax benefit of using 529? Also read something saying charging child rent may make them ineligble to claim as your dependent (perhaps good or bad depending on situation.)
Posted on 7/22/25 at 4:06 pm to TorchtheFlyingTiger
In general, as long as you keep expenses below “cost of attendance” you can take out the 529 monies.”
You don’t have to provide receipts for every meal and bill.
Each school has a “cost of attendance” worksheet. I sent that to my accountant.
My kids lived in apartments.
I did not use all of the money we saved.
Did the Roths last year. Will partially fund one Roth to close that account this year and fully fund the other one.
You don’t have to provide receipts for every meal and bill.
Each school has a “cost of attendance” worksheet. I sent that to my accountant.
My kids lived in apartments.
I did not use all of the money we saved.
Did the Roths last year. Will partially fund one Roth to close that account this year and fully fund the other one.
Posted on 7/22/25 at 4:51 pm to dewster
quote:
What do you anticipate costs of college (4 year undergrad degree at an SEC school) 14 and 17 years from now?
Posted on 7/22/25 at 5:48 pm to secondandshort
current limit to transfer to Roth is 35k. you need 35k in come to do it…probably a 5 or six year transfer plan
This post was edited on 7/22/25 at 5:51 pm
Posted on 7/23/25 at 6:37 am to thunderbird1100
quote:
Seems like you're on track to overfund the 529 for what you think they'll actually use.
Maybe, but maybe not. My daughter is in college now. She received a decent aid package, and our payments over four years are going to be right around his anticipated numbers.
Posted on 7/23/25 at 7:51 am to dewster
When people save for college with these high numbers, are they talking living expenses too? Or this just the school costs?
Posted on 7/24/25 at 12:02 am to Billy Blanks
quote:
When people save for college with these high numbers, are they talking living expenses too? Or this just the school costs?
Technology, tuition, fees, books, supplies, room and board.
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