College funds- noob thread

[dingleberryswitzer 2724]

Need advice on the best way to save and grow my cash.  The end result being to fully pay for one of my 3 kids to go to college.  I’ll choose the one with the most promise, the others will be on their own.  
mall kidding aside, is 8 so I have 9 more years to get my shit together.  I’m looking for the best combination of growth and low tax liability.  
 

Currently I have my spare cash in various mutual funds and ETFs.  Am I wrong thinking that when I cash those out I won’t be taxed (or taxed at lower  rate) if I am spending it education?  

Should I open accounts in my kids names individually so when they cash out they won’t pay as much tax being poor-ass college kids with little to no income?  
 

should I just yolo it all in gme and dogecoin?

[CooterBrown 18002]

Yes, you will pay taxes unless that money is in a state 529 plan.  Colorado and Utah 529s are generally considered the best with the low fees.  The state does not matter. It can be used for any education expenses in any state and in any country.  If there's money left in an account, you can assign it to a different kid to use for education purposes tax free or cash it out for yourself and pay taxes on the remaining balance.

 

 

Edited April 6, 2021 by CooterBrown

[dingleberryswitzer 2724]

Ok.  So the last couple years I’ve been able to deduct my wife’s grad school tuition but my quick research shows that expired this year and was capped at $6k.  
I’ll look into that 529.  

[SimonBolivar 10957]

Just spend it on something fun and tell your brats to load up on loans and hope for forgiveness.

[dingleberryswitzer 2724]

Well I’ll make a decision by freshman year if they are even college material. If not I might be getting a boat.  

[Texas St. Armadillos 1381]

I will add that you should not sacrifice your retirement savings to pay for college or save for your kid's college.  The time horizon to pay back a student loan is much longer than your the time until your retirement.  Good on you for giving this attention now.  My best advice is constant and consistent amounts to the 529 accounts.  Even if it's only $100 per kid per paycheck, set up an auto draft.  And keep contributing to your retirement.

[dingleberryswitzer 2724]

Yea I have a pension and 403b but I’m gonna read that Roth IRA thread too.  
I’ve kind of already made the decision that I’ll pay for my kids tuition only at a state school level.  I’ll chip in the 6-8k a year (or whatever it is by that time) and they can live at home.  but if they want to go to live in a dorm or move to NY and go to Columbia then they can get a job.  

[KYHorn 17006]

53 minutes ago, dingleberryswitzer said:

Need advice on the best way to save and grow my cash.  The end result being to fully pay for one of my 3 kids to go to college.  I’ll choose the one with the most promise, the others will be on their own.  
mall kidding aside, is 8 so I have 9 more years to get my shit together.  I’m looking for the best combination of growth and low tax liability.  
 

Currently I have my spare cash in various mutual funds and ETFs.  Am I wrong thinking that when I cash those out I won’t be taxed (or taxed at lower  rate) if I am spending it education?  

Should I open accounts in my kids names individually so when they cash out they won’t pay as much tax being poor-ass college kids with little to no income?  
 

should I just yolo it all in gme and dogecoin?

 

19 minutes ago, CooterBrown said:

Yes, you will pay taxes unless that money is in a state 529 plan.  Colorado and Utah 529s are generally considered the best with the low fees.  The state does not matter. It can be used for any education expenses in any state and in any country.  If there's money left in an account, you can assign it to a different kid to use for education purposes tax free or cash it out for yourself and pay taxes on the remaining balance.

 

 

This is the right response. I live in KY and use Utah's 529. 

The only exception is if your state provides certain benefits for having your 529 in that state. For example, some states offer you incentives for using their plan and your child enrolling in a state college, or offer state tax deductions on your contributions if you use your state's program (for some states, you can deduct even if it's another state's program). KY and TX don't offer this. 

[dingleberryswitzer 2724]

Now I see that you can withdrawal from a Roth IRA penalty free to pay for education.  What’s the downside to this?  I could have one and my wife could have one to double up the max deposit.  
 

[dingleberryswitzer 2724]

8 minutes ago, KYHorn said:

 

This is the right response. I live in KY and use Utah's 529. 

The only exception is if your state provides certain benefits for having your 529 in that state. For example, some states offer you incentives for using their plan and your child enrolling in a state college, or offer state tax deductions on your contributions if you use your state's program (for some states, you can deduct even if it's another state's program). KY and TX don't offer this. 

So what’s the best plan for a dude in TX with kids that will most likely go to a Texas school? 

[KYHorn 17006]

8 minutes ago, dingleberryswitzer said:

Now I see that you can withdrawal from a Roth IRA penalty free to pay for education.  What’s the downside to this?  I could have one and my wife could have one to double up the max deposit.  
 

I think the withdraws count as income for that year on the FAFSA, so it could impact your financial aid. Other than that and the contribution limits to the Roth, I'm not sure of other reasons not to do it rather than using the 529.

Edit: Oh, you should look into what counts as education expenses on both. I imagine the 529 is more broad, but that's just a guess.

Edited April 6, 2021 by KYHorn

[KYHorn 17006]

11 minutes ago, dingleberryswitzer said:

So what’s the best plan for a dude in TX with kids that will most likely go to a Texas school? 

It's been awhile since I researched it, but it depends on the different investment options. Each 529 has different plan options and each option has different fees. When I researched it all a few years ago, Utah's was considered one of the best-managed with low fees, so I went with it.  

[dingleberryswitzer 2724]

11 minutes ago, KYHorn said:

I think the withdraws count as income for that year on the FAFSA, so it could impact your financial aid.

The article I read mentioned that a 529 can impact financial aid as well and why the Roth was suggested.  We are also firmly middle class so my kids will most likely not get too much need based aid anyways.  

[B00M 6413]

So when I set up these 529 accounts, I could have chosen any state, not just Texas? My options through fidelity were quite limited with the lowest ER around 0.14% 

[B00M 6413]

8 minutes ago, dingleberryswitzer said:

The article I read mentioned that a 529 can impact financial aid as well 

True but it reduces FAFSA aid by only 5% of the 529's value. No surly poster is getting FAFSA aid anyway 

[Reagan1k 3024]

It's hard to go wrong with a 529.  Don't overthink it too much.  The trick to it isn't really a trick.  It's consistent deposits to principal as early, often, and as large as you can make them.  While its possible to overfund a 529, its not likely.  If you do however, you're likely to be in a situation where a) you won't miss the money and b) you'll be able to designate a future beneficiary such as a grandchild if your kid doesn't use it all up (but they will).

 

[The Royal We 3067]

1 hour ago, Texas St. Armadillos said:

My best advice is constant and consistent amounts to the 529 accounts.  Even if it's only $100 per kid per paycheck, set up an auto draft.  And keep contributing to your retirement.

This is what I've been doing for all 3 of mine since each one of them was born - $100 per kid, per month.  They can either go to a state school or go to a state school, their choice.

[Texas St. Armadillos 1381]

12 minutes ago, The Royal We said:

This is what I've been doing for all 3 of mine since each one of them was born - $100 per kid, per month.  They can either go to a state school or go to a state school, their choice.

Add $10 to it every year on their birthday.  1st 12 months $100/month, 2nd 12 months $110/month, 3rd 12 months $120/month.

If you are able of course.  Can add up quickly with no real effort or change in lifestyle for you.

[dingleberryswitzer 2724]

Is this shit run through the individual states or through 3rd party vendors?  I ask because when I use google ibget a bunch of ads and I get suspicious.  I’d rather not go through some third party broker or servicing company if I can go straight to the source. 

[Mach 1 1677]

As posted above, go with the lowest fee state.  We also use Utah.

https://my529.org

Mormons are indeed sneaky and suspicious, so you may want to consult a financial consultant.

[B00M 6413]

7 hours ago, B00M said:

So when I set up these 529 accounts, I could have chosen any state, not just Texas? My options through fidelity were quite limited with the lowest ER around 0.14% 

Upon review, fidelity's default 529 for a Texan is a New Hampshire/national plan. Fidelity has Arizona, Connecticut, Deleware, Mass and NH.

[dingleberryswitzer 2724]

Yea I’m tempted to do that one since I already have a fidelity account.  One source said Ohio was the best combination of low fees and performance.  

[dingleberryswitzer 2724]

From what I saw the Utah plan no longer has the lowest fees.  
 

Utah .165% for age based management.  
New hampshire: 0.14

Am I reading this correct.   Fuck they make this so damn difficult 

[Horns99 155]

Upon review, fidelity's default 529 for a Texan is a New Hampshire/national plan. Fidelity has Arizona, Connecticut, Deleware, Mass and NH.

Upon review, fidelity's default 529 for a Texan is a New Hampshire/national plan. Fidelity has Arizona, Connecticut, Deleware, Mass and NH.

Don’t worry about state sponsor if you are in Texas. If you go with Fidelity just choose one of their age based portfolios - only Fidelity Funds, a mix of active & indexed, or just Fidelity Index funds. The Index only funds have the lowest internal cost of the 3.


Sent from my iPhone using Tapatalk

[dingleberryswitzer 2724]

25 minutes ago, Horns99 said:

 

Don’t worry about state sponsor if you are in Texas. If you go with Fidelity just choose one of their age based portfolios - only Fidelity Funds, a mix of active & indexed, or just Fidelity Index funds. The Index only funds have the lowest internal cost of the 3.


Sent from my iPhone using Tapatalk

 

That’s what I did.  Fidelity was easy since I already had an account.  Went with age based pure index.  I wasn’t going to sweat a .01% different here or there going through a shit load of different plans.  
now I play the waiting game.  

question:  Let’s say my kids don’t go to college, is there such thing as a “boats and hoes” school I can attend later in life?  

Edited April 7, 2021 by dingleberryswitzer

[B00M 6413]

2 hours ago, Horns99 said:

 

Don’t worry about state sponsor if you are in Texas. If you go with Fidelity just choose one of their age based portfolios - only Fidelity Funds, a mix of active & indexed, or just Fidelity Index funds. The Index only funds have the lowest internal cost of the 3.


Sent from my iPhone using Tapatalk

 

Yup, 0.14%

 

 

[SquishMitten 10403]

We’re putting a decent amount into one 529 plan each month. Three kids, but as I understand it they can all use the same account.

But my real plan was marrying a woman with very wealthy parents.

[millhouse 2603]

Well you can use one for all your kids but you'll have to be constantly changing the beneficiary on it. So if your kids are each 4 years apart or plan on paying out of pocket for atleast one of the kids when two are in school, yeah that works.  

[Neonmoon 38129]

How much money do you need in 9 years to pay for kids college? 

UT is 10,824 per year for tuition. That’s 43,296 total. In 9 years, that money will be 73,147 in 9 years. 
 

 

Edited April 11, 2021 by Neonmoon

[Grumpy Camel 2]

Echo the 529 recommendations.  I have both my kids set up on a Virginia 529.  I think I read somewhere that Virginia has the most 529 account users when compared to other states.  Who the hell knows, but I am happy with it and the performance.  The site is also pretty easy to use and dummy proof for newbies like me.  

[Lobwedgephil 1139]

17 hours ago, Neonmoon said:

How much money do you need in 9 years to pay for kids college? 

UT is 10,824 per year for tuition. That’s 43,296 total. In 9 years, that money will be 73,147 in 9 years. 
 

 

UT estimate is currently needing about 30k a year. In 9 years it will either be ridiculously expensive, or free. 

 

 

 

Edited April 11, 2021 by Lobwedgephil

[KeysPhoneWallet 807]

So I got this fidelity credit card that puts 2% into a 529. ipso facto, I’m done.

Question is can only one kid get $ from this or all three kids?

I think I can pay for one kid then change the beneficiary to pay for others

[Poolflood 845]

You can also add in an UGMA (Uniform Gifts to Minors Act). We have both for our kids.  And don't be the shy about nudging grandparents to contribute for birthdays and Christmas.  Both of our kids should graduate with 30k+ depending on scholarships. 

[StassneyHorn 6573]

Utah 529s were the always the best. I’d say skip university and tell them learn Salesforce for free online or go to CC. As college grads from UT, we should all know by now it’s a scam.

[KYHorn 17006]

On 4/7/2021 at 10:48 AM, dingleberryswitzer said:

From what I saw the Utah plan no longer has the lowest fees.  
 

Utah .165% for age based management.  
New hampshire: 0.14

Am I reading this correct.   Fuck they make this so damn difficult 

Also need to look at the fund's performance. That is likely to have a greater difference than .025%, which amounts to a $25 difference on a $100,000 investment.

[South Austin 52434]

Question from college fund noob:  Do the tax advantages of a 529 outweigh another investment vehicle that might produce a better rate of return? 

In my particular situation, I'm a little late to the game in having a dedicated college fund for Kid No. 1 (a freshman in high school), but not so much for Kid No. 2 (a fourth grader).  I have some decent savings and am looking to move a sizeable chunk of that into a fund that will grow more than it has just by sitting in savings.  Is a 529 still the way to go?

I'll hang up and listen.

[dingleberryswitzer 2724]

14 hours ago, KeysPhoneWallet said:

So I got this fidelity credit card that puts 2% into a 529. ipso facto, I’m done.

Question is can only one kid get $ from this or all three kids?

I think I can pay for one kid then change the beneficiary to pay for others

I made separate accounts for each kid.  Fidelity made it pretty easy to do, so why not?  I’m not sure about how you’d spread you CC rebate across 3 accounts though.   You could keep one and change beneficiary but there might be problems if they are both in school at the same time.  Also the plan I chosen throttles the aggressiveness as they get closer to graduation.  
 

[KYHorn 17006]

2 hours ago, South Austin said:

Question from college fund noob:  Do the tax advantages of a 529 outweigh another investment vehicle that might produce a better rate of return? 

In my particular situation, I'm a little late to the game in having a dedicated college fund for Kid No. 1 (a freshman in high school), but not so much for Kid No. 2 (a fourth grader).  I have some decent savings and am looking to move a sizeable chunk of that into a fund that will grow more than it has just by sitting in savings.  Is a 529 still the way to go?

I'll hang up and listen.

Just my thoughts, but in general the funds' returns can be viewed pretty easily and compared to a benchmark. If your alternative vehicle is just an S&P index fund, you can pretty much get exactly that in a 529. If you're planning to be quite a bit more risky, then yeah I suppose you could overcome the tax advantages, but that'd have to be pretty substantial, depending on your tax bracket (I'm assuming 22%+). Because your oldest is in his, you may choose to avoid the age based funds for that one because they'll be heavy in bonds and such

[Neonmoon 38129]

On 4/12/2021 at 8:33 AM, South Austin said:

Question from college fund noob:  Do the tax advantages of a 529 outweigh another investment vehicle that might produce a better rate of return? 

In my particular situation, I'm a little late to the game in having a dedicated college fund for Kid No. 1 (a freshman in high school), but not so much for Kid No. 2 (a fourth grader).  I have some decent savings and am looking to move a sizeable chunk of that into a fund that will grow more than it has just by sitting in savings.  Is a 529 still the way to go?

I'll hang up and listen.

1. Frontload. Put in as much as you can as early as you can to take advantage of the power of compounding. The IRS allows an individual to frontload 5 years’ worth of gifts (5 x $15,000) in one year. If you can afford it, do it. This method is much better than trickling in $250 per month over 18 years.

also, it all depends on the specific 529 plan rate of return and how fast you need the money, meaning if you wanted to save for your teenager you would go full tits in growth stocks and hope for the best. For the younger one, you could diversify funds for continual safer growth. 

if the 529 plan is only getting 3% growth then yes you can do better at T Rowe Price or whatever. 

[Neonmoon 38129]

On 4/11/2021 at 4:15 PM, Lobwedgephil said:

UT estimate is currently needing about 30k a year. In 9 years it will either be ridiculously expensive, or free. 

 

 

 

I thought he just wanted tuition. In that case, 29,400 x4 = 117,600.00, in 9 years, adjusted for 2.5% inflation, that is $146,866 dollars needed in 2030. The S&P 500 averages 9.79% annual return over 10 years. Let's be safe and assume a 8% return. You need to make annual payments of 11,760 into the investment account to reach that goal. 

[Slacks 6819]

On 4/6/2021 at 9:30 PM, Mach 1 said:

As posted above, go with the lowest fee state.  We also use Utah.

https://my529.org

Mormons are indeed sneaky and suspicious, so you may want to consult a financial consultant.

Mormons are not suspicious... 

Source: am suspicious

[Slacks 6819]

On 4/7/2021 at 1:44 PM, dingleberryswitzer said:

question:  Let’s say my kids don’t go to college, is there such thing as a “boats and hoes” school I can attend later in life?  

TrumpU Part 2, Electric Boogaloo?

[Slacks 6819]

On 4/12/2021 at 8:33 AM, South Austin said:

Question from college fund noob:  Do the tax advantages of a 529 outweigh another investment vehicle that might produce a better rate of return? 

In my particular situation, I'm a little late to the game in having a dedicated college fund for Kid No. 1 (a freshman in high school), but not so much for Kid No. 2 (a fourth grader).  I have some decent savings and am looking to move a sizeable chunk of that into a fund that will grow more than it has just by sitting in savings.  Is a 529 still the way to go?

I'll hang up and listen.

Similar question... I have a few dollars in tech and reits.  I can't see how a 529 +tax advantage is going to keep up with GOOGL, NFLX, or IIPR (IIPR has killed it for us.)

[Slacks 6819]

but i did let the youngest invest in weed stocks...  he's going to have to work through college.

[Texas Jeff 1942]

How much money do you need in 9 years to pay for kids college? 
UT is 10,824 per year for tuition. That’s 43,296 total. In 9 years, that money will be 73,147 in 9 years. 
 
 

At Texas it’s not the tuition it’s the housing that can add up. West campus isn’t going to pay for itself. Even if your kid has roommates and is away from campus, Austin still costs a lot more than College Station.

[Guest Lobo]

New Hampshire might be slightly less expensive now.  But that could be a flash in the pan. Utah's been the best for over a decade.  Better investment optionality, better access to managers, and better alpha (not in all risk tolerance sleeves, but more than anyone else).  

[El Tri 412]

i also have the utah plan for my 2 girls and have been pretty happy with it.

[Fudge Nuggets 19184]

Would have been better if this was the "College boobs - fund thread" thread.