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Started By
Message
529 START Funds
Posted on 8/22/22 at 11:31 am
Posted on 8/22/22 at 11:31 am
We had a baby a few months ago and have set up a 529 Plan for college. What is the best breakdown for funds for optimal growth assuming she wont be using it for 18+ years. If it helps, we are planning on contributing ~$1k annually and increasing by a couple of hundred every year.
14
Posted on 8/22/22 at 11:39 am to couyon2
It really helped us out. I can't tell you which one is best but it does help to put as much money as possible in early.
Posted on 8/22/22 at 11:52 am to couyon2
I have one for my son. The way I understand $2400 a year is tax deductible and the state matches 14%.
Posted on 8/22/22 at 12:22 pm to TrouserTrout
quote:
The way I understand $2400 a year is tax deductible and the state matches 14%.
The state match is basic on your income. If have decent income, you aren't getting anywhere close to that 14% match.
Posted on 8/22/22 at 12:27 pm to TrouserTrout
quote:
The way I understand $2400 a year is tax deductible
Deductible from your Louisiana state taxes not your federal. It is not that much of a benefit as your state taxes are pretty low compared to federal although every little bit helps.
quote:
the state matches 14%.
This is based on income and decent incomes only get 2%.
I tried to copy the table below.
Reported AGI Rate_____________Earnings Enhancement
$0 to $29,999________________14%
$30,000 to $44,999______________12%
$45,000 to $59,999______________9%
$60,000 to $74,999______________6%
$75,000 to $99,999______________4%
$100,000 and above_____________2%
In reality the biggest benefit is the tax free growth. The growth is tax free federally I believe so that is where you big savings/benefit applies. With that being said, I have 1 for each of my kids and contribute but don't go crazy with it. There are also a million unknowns around scholarships, future costs, future benefit of college, kid's desire to go to college, etc.
This post was edited on 8/22/22 at 12:32 pm
Posted on 8/22/22 at 12:31 pm to Hammond Tiger Fan
quote:
If have decent income, you aren't getting anywhere close to that 14% match.
If you've even heard of a 529 you aren't getting anywhere close to the 14%
Posted on 8/22/22 at 12:50 pm to bod312
quote:
Reported AGI Rate_____________Earnings Enhancement
$0 to $29,999________________14%
$30,000 to $44,999______________12%
$45,000 to $59,999______________9%
$60,000 to $74,999______________6%
$75,000 to $99,999______________4%
$100,000 and above_____________2%
This. Tax free growth. If you file married, you can put 4800 in a year on same account if you want. Between us and family gifts we will usually get close to that max. This is a decision after you take care of your retirement first. There's an order of operations to each investment vehicle to maximize your money for those that are salaried employees and not business owners.
This post was edited on 8/22/22 at 12:51 pm
Posted on 8/22/22 at 12:50 pm to JohnnyKilroy
quote:Yep. I’m not getting 14%. People in the 14% range can probably qualify for college for free so there no point in their parents saving.
If you've even heard of a 529 you aren't getting anywhere close to the 14%
Posted on 8/24/22 at 3:39 pm to couyon2
Does anyone know if you can use the Start K12 program and still use the tuition deduction on state taxes? Seems like it would be double dipping...
Posted on 8/24/22 at 5:14 pm to tigergal918
You can't take the deduction for K12
Posted on 8/24/22 at 8:35 pm to couyon2
You are doing a great thing.
Others have provided state match info. Nothing to add from me except don’t overfund it.
Our words to our kids: we will provide you with $100k towards your college education (we too started right out of womb at $100-200 per month at increasing rate across their lives).
If they want private school, earn the difference. If they can graduate before using $100k, they have grad start on their kids 529 as will transfer to them (or grad school).
Great start on Start!
Others have provided state match info. Nothing to add from me except don’t overfund it.
Our words to our kids: we will provide you with $100k towards your college education (we too started right out of womb at $100-200 per month at increasing rate across their lives).
If they want private school, earn the difference. If they can graduate before using $100k, they have grad start on their kids 529 as will transfer to them (or grad school).
Great start on Start!
Posted on 8/24/22 at 8:57 pm to couyon2
Did UTMA accounts for my kids. Has it’s benefits and it’s shortcomings.
The 529 is the best choice if education is your goal. Tax advantaged for those going to college for sure.
I chose the UTMA because I believe that having the choice to invest in Index Funds or ETF’s like VTI or VOO will outperform the 529 especially on a long term of 10-15+ years despite the tax sheltering of 529’s. The better variable rate of return paying off over the fixed rate associated with many 529 plans.
The UTMA also gives them the ability to use the funds for something other than education like a home or starting a small business.
It’s my belief that college educations are going to become both less prevalent and also less expensive in the near future.
As an added benefit; if my bet proves wrong you can move from a UTMA to a 529 easily.
The 529 is the best choice if education is your goal. Tax advantaged for those going to college for sure.
I chose the UTMA because I believe that having the choice to invest in Index Funds or ETF’s like VTI or VOO will outperform the 529 especially on a long term of 10-15+ years despite the tax sheltering of 529’s. The better variable rate of return paying off over the fixed rate associated with many 529 plans.
The UTMA also gives them the ability to use the funds for something other than education like a home or starting a small business.
It’s my belief that college educations are going to become both less prevalent and also less expensive in the near future.
As an added benefit; if my bet proves wrong you can move from a UTMA to a 529 easily.
This post was edited on 8/24/22 at 9:06 pm
Posted on 8/24/22 at 9:30 pm to JohnnyKilroy
quote:
If you've even heard of a 529 you aren't getting anywhere close to the 14%
Hahaha so true
Posted on 8/25/22 at 7:30 am to wiltznucs
quote:
UTMA
Who 'owns' those funds?
How does the capability of transferring between beneficiaries compare to 529?
Posted on 8/25/22 at 8:07 am to couyon2
Just have them take out loans. Whatever democrat is in office at the time will just forgive them eventually. Keep that money and go on vacations and buy 80K SUVs.
Posted on 8/25/22 at 8:32 am to couyon2
While 529 funds are great, you should look into other IRA and UTMA options. They can be used towards the coat of education. What if your child decides not to go to college? They can use that towards a business startup or down payment on a home. Just speak to an advisor that can give you the pros and cons of each. As you can tell from the responses on this board, they each have their benefits.
Posted on 8/25/22 at 10:28 am to wiltznucs
quote:
I chose the UTMA because I believe that having the choice to invest in Index Funds or ETF’s like VTI or VOO will outperform the 529 especially on a long term of 10-15+ years despite the tax sheltering of 529’s
You can invest in 529s in mutual funds. It is limited for sure but the LA one has total US stock, total world stock, total international stock, age based moderate/growth/aggressive funds, and small/mid/large cap index funds. So in general you can put the money into the total us stock fund and do the same as the VTI. There are definitely limitations and hence why I am not going crazy but putting some amount in that I feel comfortable will get spent on "educational expenses" at some point.
Posted on 8/25/22 at 10:32 am to Tomcat
quote:
While 529 funds are great, you should look into other IRA and UTMA options.
UTMA sure but again there are pros/cons compared to 529.
IRA is a completely different ball game because I think it needs to be earned income. I also think technically chores around the house don't count. There are definitely ways that you can find earned income for relatively young kids but the vast majority of kids won't have any real amount until just before college which doesn't give any time for growth.
Posted on 8/25/22 at 10:33 am to Turf Taint
quote:
Who 'owns' those funds?
Legally; it’s fully owned by the child as soon as it’s funded. You get to act as the custodian. Meaning you control how the money is invested and are also obligated to pay taxes on any capital gains until they take over the account.
This is sort of a nonissue if using a buy and hold strategy as I am.
Every State varies; but, there is an age at which point you have to transfer sole ownership to the child. In Florida, it’s age 25.
At which point the money is theirs free and clear and any tax obligations fall to them as well. Your role as the custodian is over.
Posted on 8/25/22 at 1:56 pm to wiltznucs
Yes, recall this now. Had a buddy of mine in NY whose daughter took full ownership at 25. He had to briber her to give it back and I bet that was expensive bribe (kidding).
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