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College Savings and 529 plans

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DeacHoops

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pit, talk to me about college savings. i don't want this to be one of those threads that winds up with everybody complaining about how expensive wake is. i'm honestly wondering about how people save or plan to save for kids' college funds.

1. did you start saving when your kid was born? before the kid was born? is your kid 15 and you still haven't started saving?
2. do you have a set amount that gets saved each month, or do you just put in what you can each month?
3. are you saving enough for private school, or just public?
4. what assumptions do you use when trying to determine how much needs to be saved? like what % do you use for inflation? what kind of return do you expect to get on your savings?
 
My understanding (which might be 100% off) is that you're best off fully funding your own retirement, maxing out every possible vehicle, before you start putting money in a 529. The 529 is going straight to the Expected Family Contribution. Retirement savings aren't considered as part of the family's resources for paying for college. Worst case you can withdraw the principal from a Roth IRA to have some cash for paying school bills.
 
DeacHoops said:
pit, talk to me about college savings. i don't want this to be one of those threads that winds up with everybody complaining about how expensive wake is. i'm honestly wondering about how people save or plan to save for kids' college funds.

1. did you start saving when your kid was born? before the kid was born? is your kid 15 and you still haven't started saving?
2. do you have a set amount that gets saved each month, or do you just put in what you can each month?
3. are you saving enough for private school, or just public?
4. what assumptions do you use when trying to determine how much needs to be saved? like what % do you use for inflation? what kind of return do you expect to get on your savings?
Click to expand...

We started a NC 529 plan for the little one this year when we moved back here just for the sake of starting one and giving family a place to put money if they want to do that kind of thing as a gift. So far, we're not putting set amounts in at any given time because we're more focused on paying off some other debts first.

I'm not sure we'll ever switch to being goal-oriented on saving money in that fund - it just seems impossible to know how much college is going to be by the time he's ready or what kind of school he'll want to go to. I know that probably doesn't help.
 
You cant open the 529 until the kid is born because they have to be named as the beneficiary. You can always save money though and open the 529 after the kid is born.

Are you pregnant? Better move up the wedding date.

Don't save for private school. Save for public and cash flow the rest or tap other savings or home equity to pay the rest. You don't want to have too much money in the 529 in the case of the kid not going to private school, foregoing grad school, or getting a scholarship. There are some penalties to be paid for retrieving leftover money, so if you're unsure of whether you're putting in too much money, put it in an IRA.
 
TuffaloDeac10 said:
My understanding (which might be 100% off) is that you're best off fully funding your own retirement, maxing out every possible vehicle, before you start putting money in a 529. The 529 is going straight to the Expected Family Contribution. Retirement savings aren't considered as part of the family's resources for paying for college. Worst case you can withdraw the principal from a Roth IRA to have some cash for paying school bills.
Click to expand...

i was told that you can put the 529 for the benefit of your child but it be titled in the name of a relative which makes it off limits from financial aid consideration. our 529 plan for birdie is in my FIL's name. one article i'm reading says that private schools can ask the students to disclose all 529 plans they are the beneficiaries for. not sure why that would be a public/private thing. i'd guess by the time my daughter goes to college, that loophole will be closed but we didn't see any issue with setting it up that way.
 
HeavyPetter said:
You cant open the 529 until the kid is born because they have to be named as the beneficiary. You can always save money though and open the 529 after the kid is born.

Are you pregnant? Better move up the wedding date.

Don't save for private school. Save for public and cash flow the rest or tap other savings or home equity to pay the rest. You don't want to have too much money in the 529 in the case of the kid not going to private school, foregoing grad school, or getting a scholarship. There are some penalties to be paid for retrieving leftover money, so if you're unsure of whether you're putting in too much money, put it in an IRA.
Click to expand...

definitely not pregnant, and definitely not planning on trying for at least a year or so after the wedding. but we want to get a head start on this. and from what i've read, it's kind of a pain in the ass, but the kid doesn't HAVE to be the beneficiary at first. you can open it in your own name and change it after the kid is born.
 
HeavyPetter said:
You cant open the 529 until the kid is born because they have to be named as the beneficiary. You can always save money though and open the 529 after the kid is born.
Click to expand...

DeacHoops said:
definitely not pregnant, and definitely not planning on trying for at least a year or so after the wedding. but we want to get a head start on this. and from what i've read, it's kind of a pain in the ass, but the kid doesn't HAVE to be the beneficiary at first. you can open it in your own name and change it after the kid is born.
Click to expand...

DeacHoops is right. I opened a 529 after I found out my wife was pregnant. I designated myself as the beneficiary, and then changed it to my daughter once her SSN arrived. The switch was very easy and done without penalty.

I've since stopped contributing to the 529. As Tuffalo indicated, our advisor told us that their are better investments that are more versatile and are more beneficial vis-a-vis taxes. We're currently using VULs to double as both retirement accounts and a college savings means. And, of course, it's life insurance to boot.
 
My bad then, but really, what's the point of opening a 529 for a kid that hasn't been born when you can still save the money and move it into the 529 at your convenience? We should only be talking about a few months in the investment or in cash where you're missing out on the benefits of the 529. On top of all that, you don't even know for sure that you can have children.
 
HeavyPetter said:
My bad then, but really, what's the point of opening a 529 for a kid that hasn't been born when you can still save the money and move it into the 529 at your convenience? We should only be talking about a few months in the investment or in cash where you're missing out on the benefits of the 529. On top of all that, you don't even know for sure that you can have children.
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fair enough. but we've talked about adoption, and if we are unable to have kids, we intend to adopt. regardless, there would be college costs to worry about.

i had not considered the financial aid aspect, and wanting to shelter that income from being considered for financial aid. the sources i had looked at said to hit 15% going into retirement savings, and once you've done that, the rest can go into college savings. but after tuffalo's post, i did some googling, and the argument for pouring more into retirement is compelling. definitely something to consider.
 
HeavyPetter said:
My bad then, but really, what's the point of opening a 529 for a kid that hasn't been born when you can still save the money and move it into the 529 at your convenience? We should only be talking about a few months in the investment or in cash where you're missing out on the benefits of the 529. On top of all that, you don't even know for sure that you can have children.
Click to expand...

Because the growth within the 529 is not taxed by the federal government. Otherwise, assuming you've maxed out contributions to tax-sheltering retirement accounts, you'd have to pay taxes on the growth from the money you've earmarked to go into the 529 while waiting for your child to be born.
 
HeavyPetter said:
On top of all that, you don't even know for sure that you can have children.
Click to expand...

Exactly. Your insides could be a rocky place where your man's seed could find no purchase.

Likewise, there could be a 5 year wait to adopt a healthy white baby. There are other options for adoption, but they are troubling.
 
Say Hey Deac said:
Exactly. Your insides could be a rocky place where your man's seed could find no purchase.

Likewise, there could be a 5 year wait to adopt a healthy white baby. There are other options for adoption, but they are troubling.
Click to expand...

Yeah, Hoops, you might have to choose between two Koreans and a Negro born with his heart on the outside.
 
HeavyPetter said:
My bad then, but really, what's the point of opening a 529 for a kid that hasn't been born when you can still save the money and move it into the 529 at your convenience? We should only be talking about a few months in the investment or in cash where you're missing out on the benefits of the 529. On top of all that, you don't even know for sure that you can have children.
Click to expand...

In NC you also potentially get the state income tax deduction for up to $5,000 (married) of annual contributions, which you may want to take earlier in a year where you don't already have the other deductions for the kid.
 
DeacinBama said:
Because the growth within the 529 is not taxed by the federal government. Otherwise, assuming you've maxed out contributions to tax-sheltering retirement accounts, you'd have to pay taxes on the growth from the money you've earmarked to go into the 529 while waiting for your child to be born.
Click to expand...

Yeah, but, like I said, you're just planning to have a kid, at a certain time, based on the assumption that all you have to do is roll around naked a few times. Most people in their 20's haven't maxed out contributions to their tax sheltered retirement accounts, retired all consumer debt, and found a home suitable for raising a kid.
 
Your insides could be a rocky place where your man's seed could find no purchase.

One of the funniest movies ever. Part of the hilarity trinity with Holy Grail and Idiocracy.
 
HeavyPetter said:
Yeah, but, like I said, you're just planning to have a kid, at a certain time, based on the assumption that all you have to do is roll around naked a few times. Most people in their 20's haven't maxed out contributions to their tax sheltered retirement accounts, retired all consumer debt, and found a home suitable for raising a kid.
Click to expand...

Absolutely true. It's a risk that most people either aren't in a position or willing to take. You asked what the point was, so I just offered an potential reason.
 
Also, I didn't mean to suggest that you're infertile. I was just saying that you may be planning to have kids after being married for two years, but it might be eight because of whatever, and you probably wouldn't want your money tied up in a 529 for that period.
 
DeacHoops said:
fair enough. but we've talked about adoption, and if we are unable to have kids, we intend to adopt. regardless, there would be college costs to worry about.

i had not considered the financial aid aspect, and wanting to shelter that income from being considered for financial aid. the sources i had looked at said to hit 15% going into retirement savings, and once you've done that, the rest can go into college savings. but after tuffalo's post, i did some googling, and the argument for pouring more into retirement is compelling. definitely something to consider.
Click to expand...
With regards to adoption, a lot of states have programs where the child can attend a state university for free. I know this is at least the case for my adopted brother in Florida.
 
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