My kids go to a private school which we have been paying out of pocket.

I had to look up my taxes for last year and I was scrolling through and I noticed that under the dependents information was a table regarding education expenses, 5-6 columns dealt with higher education, but the final column asked about elementary education.

Looking it up apparently a 529 can be used for private education in certain states (TX included.) We don't have a 529 for any of our kids.

It may be too late to start a 529 and take out this semester's tuition, maybe next semester. But does anyone else do this? How does it work?

Do I maintain the tax benefits of a 529 if withdraw the money for use?

There are some states with a state income tax where a 529 contributions are tax deductible, but Texas isn't one of them.

If it's preschool, it may qualify for Dependent Care FSA (deductible), but Kindergarten and up is not.
https://www.fsafeds.gov/explore/dcfsa/expenses?take=100

real world data here...two kids, 2.5 years apart. same amount invested in each, same fund program. Both started when they were born.

There's definitely some advantages to a 529 but I've always been of the view that if you don't do that one both pretty big and pretty early (rather than either/or), then it starts to not become worthwhile to do vs. a standard brokerage account. Fees tend to be a little higher on 529's and investment avenues in them are narrow not to mention the improper withdrawal penalties.

you do lose some flexibility compared to a Roth account, but the expense ratio for my 529 is .12%. Not too worried about that.

Diggity said:

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you do lose some flexibility compared to a Roth account, but the expense ratio for my 529 is .12%. Not too worried about that.

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Which 529 did you go into? Because mine has practically zero flexibility in it. Just 3 different risk tolerances.

I'm not saying they are bad necessarily but I also value liquidity quite a bit and personally think most people overdo giving up liquidity for tax advantages.

To OP - do your own math but I did a bunch of different contribution and withdrawal scenarios when I started both for my kids early on and came to the conclusion that using them anywhere before college is a bit of a waste of their value.

it's run by Vanguard.

They have the typical "target date" funds, but you also have some other options (which you can blend).

It works for my needs

Individual portfolios | NY 529 Direct Plan (nysaves.org)

529 can be used for Elementary Ed but if you are contributing then turning around and disbursing there is no advantage (as said above). Tax-free GROWTH is the advantage of the 529. Let me explain...


We started 529 when each of our kids were born and put $100 or so in monthly (average). Grandparents also contributed some chunks at times, so I am not going to say it was all us, but we aren't talking about huge contributions either.

Kid 1 started college at a local CC and is now going to A&M Commerce (Junior). He should graduate with more than 100K in 529. He will be able to either use it for law school or pass it on to his kids (depending on the path he will take)..

Kid 2 started at A&M this week. Like someone said above, you are looking at 15K a semester. He has some dual credit hour so he will likely graduate a year early with $75-100k left. Right now his plan is to use that for dental school.

Kid 3 is 14. We've stopped contributing to his, and he will still likely end up with a greater balance than the other 2. He wants to play football somewhere, so its possible his college is paid for. If so, we will sit on his for grad school or pass to his kids.

LOTS of advantages from just a little bit of discipline when the kids were young...

What you have set up for your kids (and possibly grandkids!) is incredible - kudos to you and your spouse for being proactive at an early age!

I wonder though; would it be better to have this money in a brokerage so that you could use those excess funds for something like a downpayment on a first house for them? Maybe that would provide more of a leg-up as they begin their careers with housing becoming less affordable for first time buyers. Or maybe a trust that they are able to receive distribution from at a certain point?

Again - not at all taking anything away from what you have done for your family. This is just what I've been pondering for my own children as I ended up foregoing a 529 and opened a separate brokerage account instead, but have thought about moving it into a 529... the tax advantage is appealing, but I would like some flexibility in how it's used.

how much of that funding came from you guys vs grandparents?

I'm trying to wrap my mind around how overfunded your kids appear to be, with $100 a month going into the account.

I should be studying 11 said:

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What you have set up for your kids (and possibly grandkids!) is incredible - kudos to you and your spouse for being proactive at an early age!

I wonder though; would it be better to have this money in a brokerage so that you could use those excess funds for something like a downpayment on a first house for them? Maybe that would provide more of a leg-up as they begin their careers with housing becoming less affordable for first time buyers. Or maybe a trust that they are able to receive distribution from at a certain point?

Again - not at all taking anything away from what you have done for your family. This is just what I've been pondering for my own children as I ended up foregoing a 529 and opened a separate brokerage account instead, but have thought about moving it into a 529... the tax advantage is appealing, but I would like some flexibility in how it's used.

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They have an utma account as well. I agree with your reasoning.

Diggity said:

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how much of that funding came from you guys vs grandparents?

I'm trying to wrap my mind around how overfunded your kids appear to be, with $100 a month going into the account.

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I don't know and don't want to look though 20 years of records to find, but I think grandparents pitched in 2000 each kid maybe 4-5 times. A rich uncle gave a big chunk one time (like maybe 5k - 10 at most?).

we had some other contributions as well. I would guess a quarter to a third came from them.

We had it in Growth Fund of America for the majority of the time. There were some crazy growth years during that time period.

got it. We've averaged about $150 a month per kid.

ours has performed pretty well over the years, but I'm not feeling super confident that it will float the total amount of college tuition. Will certainly help though.