Debating setting up a 529 for my 1 year old son...but was discussing with wife and she has concerns re: that vs other alternatives in which our son wouldn't have to use the money for education purposes after hitting a certain age.

Are there any ripe alternatives you guys think I should explore outside of a traditional or custodial brokerage account?

I say stick with 529. It's pretty flexible if your plans change

We did a 529 and regular savings. Frontloaded the 529 fund at the beginning to take advantage of the tax free gains. You can always transfer the 529 to a sibling or to yourself for future classes.

Not an expert, but I think a 529 just needs to be tied to a SSN and can be used whenever someone with that SSN has eligible expenses.

I think now is a real good time to set up a 529 just so you have more time for that investment to grow.

However, if you want a tad bit more flexibility, fully fund your Roth IRA as money could be withdrawn for educational purposes and your retirement has fewer opportunities for scholarships and work study than your son's education has (if you are debating whether to put money into your retirement account or his 529). Someone can correct this if it has changed.

And the follow up is our 529s are in NY's program, but plenty use Utah's 529 as they both use Vanguard funds with a lower expense fee. Time is your friend so earlier you could get something set-up is better than overthinking it/procrastinating and waiting until he's 9 to open a 529.

529. Never second guess it!!!


Second child is starting college end of month- Started their 529 when they were both under1 yr old!

Set it up. Fund monthly. Never look back

I had an advisor tell me years ago that you can simply use your IRA to pay for kids' college and it is treated the same as the 529. I don't know if that has changed or if the person was incorrect, but if still true, then perhaps look into funding your own IRA and pay for their school from that. Seems like an easier path to keeping any monies not used for school in your own name.

529, just need to review how much you are putting into it based on performance over the years.

You don't have to plan to fully fund from the 529, but there are lots of additional expense that can be covered even for kids who get bigger scholarships.

And remember, you can withdraw money from the 529 up to the scholarship value with no penalty, just have to pay the taxes on earnings at that point.

529. We set them up 20 years ago on automated investing. Using them now.. Turned out to be a wise move.

My son is 5th year senior and my daughter starts the fall living in the corps dorms. Her 14 hours tuition/fees, dorm room, meal plan, parking is $13,300 before a couple scholarships. Then there are books, but online services have made that less expensive over time.

Can't express enough how nice it is to be an empty nester and have saved for these expenses

Good luck and congrats to your kids for having great parents.

barnyard1996 said:

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529. We set them up 20 years ago on automated investing. Using them now.. Turned out to be a wise move.

My son is 5th year senior and my daughter starts the fall living in the corps dorms. Her 14 hours tuition/fees, dorm room, meal plan, parking is $13,300 before a couple scholarships. Then there are books, but online services have made that less expensive over time.

Can't express enough how nice it is to be an empty nester and have saved for these expenses

Good luck and congrats to your kids for having great parents.

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How much money are your kids paying toward their education?

Red Red Wine said:

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I had an advisor tell me years ago that you can simply use your IRA to pay for kids' college and it is treated the same as the 529. I don't know if that has changed or if the person was incorrect, but if still true, then perhaps look into funding your own IRA and pay for their school from that. Seems like an easier path to keeping any monies not used for school in your own name.

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Since you didn't clarify, I am assuming you are referring to a Traditional IRA.…Yes, you can use IRA dollars to pay for qualified educational expenses, and if you are below 59 1/2 you can even avoid the 10% early withdrawal period…BUT you will have to pay taxes on the growth of your IRA upon withdrawal, which you don't have to pay on the 529.

Now, if you are talking ROTH IRA then that is different on the taxes, but you are also limiting your personal retirement and not utilizing all of the tax advantaged vehicles available to you.

If you are concerned about having "too much" in your 529 then you can fund it up to a certain point and backfill with other vehicles. Easy with multiple kids to fund heavy on the first kid and taper off for the 3rd.

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barnyard1996 said:

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529. We set them up 20 years ago on automated investing. Using them now.. Turned out to be a wise move.

My son is 5th year senior and my daughter starts the fall living in the corps dorms. Her 14 hours tuition/fees, dorm room, meal plan, parking is $13,300 before a couple scholarships. Then there are books, but online services have made that less expensive over time.

Can't express enough how nice it is to be an empty nester and have saved for these expenses

Good luck and congrats to your kids for having great parents.

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12thMan9 said:

How much money are your kids paying toward their education?

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Why?

We did a 529 and very happy we did. It was super flexible in that one kid went to a private college and the other to an in-state college. We were able to move money from one account to the other very easily without any penalties. The in-state kid has money left over and can use it later for grad school or even pass it down to his kids.

I started a 529 for a ll three kids when the received a SS#. I am now starting to draw from the first account for my baby girl is leaving for college next week.

My #1 recommendation is to fully understand what happens if you decide to take the acct down to 0. In my case, if I were to withdraw any money that is designated as non-college expense, the entire account would dissolve and therefore assess a penalty for closing the acct.

Therefore, I recommend you put together a plan that will invest weekly until the child is 18-22 years old. I would shoot for a goal that is about 80% of the projected cost of college. In my case, my daughter is only needing to attend for 3 years and has a goodly amount of transfer credits. She will be attending Southern Miss and I project her 3 years to be ~$63,000. Had it been 4 years, we would be at ~$84k. There is much more than that in her account so I will be transferring the remaining to her brother. The brother will most likely receive good scholarship money and not need all his money and then transfer the remaining to the last child. He will not need all of his money, so it will transfer to a grandchild.

My wife and I have been blessed to have a very strong savings-first approach to life and are blessed to not be concerned with college expense. However, as you can see, we went a little too much. So, my recommendation is to shoot for a goal that is under or a hair over the expected expenditure. I did not really think about it much and just maxed it out each year. Now, there is an excess.

Anyhow, I hope that helps.

We have one set up for our one year old but our goal is more like 25-50% of projected cost. We want something there to have a foundation, but also would hope that at that point in our lives, paying out of pocket shouldn't be a huge stretch. Then you always have the option of student loans. Every kid and family are different, but I don't mind the idea of making him get student loans, seeing what debt like that means when he's out of school, then helping him pay them off.

I have a 10 month old that we're looking to open an account for. Do y'all use the Texas TCSP, LS529, or some other brokerage? We have Roth IRAs through Schwab, should we look there? We're pretty new to this obviously.

Thanks in advance.

Interesting thread with people sharing what college is costing per semester/year/etc.


I am with so many people that claim college is a min of 50k per year in 2022 dollars and i have a real hard time navigating the hyperbole.

Ask 10 people with kids at A&M and you get 10 different answers

evestor1 said:

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Interesting thread with people sharing what college is costing per semester/year/etc.


I am with so many people that claim college is a min of 50k per year in 2022 dollars and i have a real hard time navigating the hyperbole.

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College is 50k a year, factoring tuition/fees, living, books, food, without issues if you put your kid is some of these luxury accommodations.

I have a couple financial advisors with kids and I asked them years ago if I should do 529s for my kids. They said yes. Then I asked them if they personally have 529s for their kids. They said no. Why? Too many rules and constraints and what ifs to mess with, they just focused on building an after tax brokerage account, so that's what I've been doing. That and telling my kids I'll buy a ranch instead of college with the money if their grades aren't good enough…and I mean it. I can't buy a ranch with a 529, at least I assume I can't.

Our cost at Southern Miss will be about $24k per year, without scholarship. Does not include travel or extra spending money but does include tuition, food, books, room, etc.

evestor1 said:

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Interesting thread with people sharing what college is costing per semester/year/etc.


I am with so many people that claim college is a min of 50k per year in 2022 dollars and i have a real hard time navigating the hyperbole.

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Most (maybe all?) schools should have an estimated full cost of attendance somewhere on there website as that is the number used to calculate the maximum aid amount a student is eligible for. Here is is for A&M for instance:
https://financialaid.tamu.edu/Undergraduate/Cost-of-Attendance

You can use the "wayback machine" to compare many years back if you want to see what the trend is.

i like seeing it broke out like that. For me, I think of college as tuition/fees/housing only.

Reason i think this way is b/c i'll be supporting their other expenses such as food, travel, etc at age 17 and 18 ... so it is a constant until i kick them off.

Spoke to an advisor today about opening up a 529 for my 7 month old and she recommended a UGMA account. She said she did it for all 3 of her kids, thoughts on an UGMA account?

htxag09 said:

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Every kid and family are different, but I don't mind the idea of making him get student loans, seeing what debt like that means when he's out of school, then helping him pay them off.

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This is basically what my parents did for me. While they didn't have a lot of money they covered just about everything outside of tuition and did so on a credit card with my name.

So when I got out I had a decent chunk of student loan but also a very good credit score for that age. It was a hurdle to clear but I learned so much paying off that debt.

Read a bunch of personal finance books, which taught me more than just "pay the student loan bill and move on".

If my research is correct, earnings on growth are taxable. Also, the asset become the child's once they turn 18.

IMO and experience, I would chose the 529 unless I am missing something.

seems like the only advantage is the flexibility to spend the money on whatever you like.

The downsides are pretty much everything else.

I guess my hesitation with the 529 comes with the fact that obviously I want him to go to college but what if he goes another route and I don't have another kid to pass the money to. Forgive me I am not knowledgeable on the subject.

That's a (likely small) risk but the other route your advisor suggested doesn't seem to have any tax advantage from what I can see.

It also appears to be treated worse from a qualifying for financial aid standpoint.

I don't really see the benefit to be honest.

Do you plan on having more kids? You can transfer between them

Can also cover trade school, etc. Or continuing education for yourself

Once your child reaches adulthood, the UGMA funds belong to them regardless if they go to College.

This is not the case with a 529.

Yea the two cons I have found are that it negatively impacts qualifying for financial aid and that the first $1050 in earnings per year is not taxed, the next $1050 is taxed at 10% and anything beyond that is taxed at the parents rate. We were going to start the account with $500 and deposit $100 a month, but I'm not really sure what the return would be. It's also scary to think I could save for 18 years and my kid blows it as soon as he gets it since I would have no control. We are planning on another kid so maybe a 529 is the way.

Its hard to believe, but I started here about 18 years ago. I used the calculator and it was pretty darn close.

https://www.capitalgroup.com/individual/planning/college-savings.html

An ESA is another option. Similar to a 529

AggieStan said:

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529. Never second guess it!!!


Second child is starting college end of month- Started their 529 when they were both under1 yr old!

Set it up. Fund monthly. Never look back

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Listen to this!
We did the same, had 529s setup the week we got their social security cards in the mail. It's a great feeling looking at my kiddos account and seeing how much it has grown. Knowing that my 7 year old has enough saved for his first 2 years of college is a great feeling as a parent.

If you don't mind me asking, how much did you open it with and how much do you put in monthly?