What's the point of a 529 Plan?

Tax free growth for qualified expenses - which is basically all expenses you can think of within reason - room & board, meal plan, computers, books, etc.

Match based on income and state tax deduction. (eta. no idea on GA, but in LA this is true. 2nd eta. GA does offer a $8k deduction per year per child - didn't dig deep enough to find out matching)

Taxes and penalties on growth only. Or transfer it to another kid or family member.

:micdropemoticon:

The money is invested (so in theory it should earn more than the measly interest savings accounts offer) and it grows tax-free and can be withdrawn tax-free.

But the same thing can be said of your Roth IRA, which can be used for education expenses but doesn't have the education-only restrictions of a 529.

Some states offer a tax deduction if you contribute to their 529 plan. My state doesn't have state income tax so this is irrelevant for me.

The are great. Do it. Tax free growth. State tax deductible in LA for $4800 a year for a married couple. The LA Start Savings Plan is so easy and can all be done on line. There are several great mutual funds you can invest in. Ours have generated close to 20% returns for the past few years. The state also contributes “earnings enhancements”. I have 5 grandchildren on them 15 down to 8 months. The 15 year old has close to $200,000 in hers. I might buy her a condo with the money in a few years.

Start one the day they are born or as soon as they can get a SS number. No brainer.

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Also, what if my kid doesn't want to go to college, or dies in a car wreck or some unimaginable shite, then what happens to all that money?

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529 are flexible as to beneficiaries.
Other children, spouse, nieces and nephews and even you can be named the beneficiary.

I had 529s and I have money left.

My thoughts:
1. Fully fund every retirement vehicle you can.
2. 529 IF you have money leftover after 1.

The main advantage of 529 is the earnings are tax free IF you use funds for school- including private elementary, middle or high school.

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My thoughts:
1. Fully fund every retirement vehicle you can.
2. 529 IF you have money leftover after 1.

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I just never liked this blanket advice. For a lot of people, fully funding a 401k ($20.5k for 2022, under 55) and IRA ($6k) is just not a realistic option. That's $26.5k to fully fund both for EACH person. If you're married and both working, now you're talking $53k to fund both. This is not that difficult for someone say making a combined $200k+, but you're talking some higher income earners there and a very small subset of population (a person making six figures or more).

I think there needs to be balance and have said that on the past in here. Take a couple who are both 30 about to have their first kid. They make a combined $140k gross which is already a healthy income, lets say they live in GA for tax purposes so their take home pay after tax is about $105k. Now to fully fund both 401ks and 2 roth IRAs in 2022 you're talking $53k. 105-53 = $52k to pay for an entire year of expenses and savings including housing etc...That's not a ton of money left over for a couple who make $140k. Hardly anyone making even that kind of income is maxing out all retirement accounts. Sure there are some frugal people doing it, but again, not a reality for most.

I'd much rather be throwing amounts in taxable brokerage, 401k and roth IRA in that instance. Then when the kid comes out, also start funding a 529 right away. Let's say they still "invest" $53k overall, but only put 10% into their 401ks to get a 5% match (really good match in this scenario. That's only $14k/yr going into 401k, but getting $7k in match as well. They also both fully fund roth IRAs at $12k/yr. So that's $26k/yr of their own money going into retirement accounts. Let's say they also want to put $2k/yr into the 529 starting when baby is born. So that's now $28k of the $53k invested in either retirement or education savings. They now have $25k (or over $2k/mo) still to put into a taxable brokerage account they can get access to whenever they need it as bigger expenses arise and dont feel like they are living on edge maxing out all their retirement accounts and still needing to fund savings/education on top of that.

Even if they dont get a raise for the next 30 years, and contribute that $21k ($14k of their money plus $7k match) to 401k and $12k to ROTH IRA...and assuming they had ZERO in retirement prior to 30...by age 60 at 8% growth they would have over $4M in retirement accounts which is great. If they got a crappy return of 6% they would still have almost $2.8M and if they had a good return of 10% now we're talking $6.3M. All while having plenty of access to brokerage account money and putting in a good bit into a 529 without breaking their backs.

It's easy to say max out retirement to people making huge incomes. It's a harder sell for people who are middle class or upper middle class and trying to fund taxable accounts for savings and 529s for kids.

Does the 529 plan have to be in the child's name?
Do you have to set one up for each child or can it go into one account?

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Does the 529 plan have to be in the child's name?

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You are the owner, the child is the "Beneficiary".

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Do you have to set one up for each child or can it go into one account?

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You create an account for each "Beneficiary". But your spouse can do the same. Accounts can be transferred to a member of the same family (sibling, step-sibling, parent, first cousin, etc)

LA Start
Can my spouse and I set up a joint account?
No. One individual or entity must own each account. You and your spouse may each establish separate accounts for the same beneficiary or for different beneficiaries. You may name your spouse as your successor owner in the event you die, if you so desire. If you and your spouse open separate accounts and file your Louisiana Income Tax Return jointly, you will be able to deduct deposits to START accounts from Louisiana State Taxable Income up to a maximum of $4,800 per year, per beneficiary.

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It's easy to say max out retirement to people making huge incomes. It's a harder sell for people who are middle class or upper middle class and trying to fund taxable accounts for savings and 529s for kids.

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I was not trying to say my way is the only way.

In general, retirement savings should be a priority. I agree that “at least do the match” is a baseline because it is free money.

To each his own. I see your point, but I still think priority 1 is retirement funding.

This thread was a 529 question. Yes the 529 plan is a great deal and the point is you should have one for your kids or grandkids if you can afford it. I agree you should fully fund your HSA, retirement account, have some emergency money, a Heloc and once you have those in place fund a 529 to the extent you can afford. If nothing else in LA at least you can deduct the income that is LA state taxable which could be an immediate 6% (max) return. Married filing jointly can deduct $4800 a year in LA State taxed income per beneficiary.

Once this money starts growing TAX FREE it accumulates very quickly. If you live in LA or GA or any state that allows the deduction the point is, if you can afford it, it’s a no brainer.

One person already said it in the thread, but a Roth in the child’s name might be the way to go if you want more flexibility. It can be used towards education, but if your concerned about you child not going to college it’s a great jumpstart for their savings.