Either his dad will pay for college or I’ll contribute out of my general pot of savings once he’s 18 and headed to school. 529 plans aren’t that great of a deal, anyhow.

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35186090)

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35186154)

Don’t understand how somebody who is so financially illiterate writes articles for “finance blogs”

If either you or your husband plans to pay for any part of college (or private school k-12 under new tax plan), it is a no brainer to use a 529 plan.

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35186777)

Now, as to your original question, it is you that is being financially illiterate if you don’t understand the alternatives to 529 plans. Their benefits are not utterly unique - in fact, unless you’re a top 1% earner, all of the same benefits can be had from a Roth IRA. If you are a top 1% earner, then fine, a 529 makes sense, but if you over- contribute and end up not needing all of the monies for qualified educational expenses, you’ll need to pay cap gains and income tax on it, anyhow. In your case, it sounds like you’ve over contributed if you already have $100k at age two. The kid will not need millions for his education, most states limit you to about 300k, and you’ll end up paying cap gains and taxes on the excess money, either way. It only makes sense for you to continue contributing if he’ll be attending private K-12 and you use up the money along the way, because compounding over time for college will create the same difficulty. Or, you’d better hope he has a sibling or other family member to whom you can roll-over/ gift the excess funds.

In short, 529 plans are really only of value to top earners who intend on contributing more than the Roth IRA limits per year, and wouldn’t benefit from education-related tax deductions, anyhow. For everyone else, just dip into your Roth for college tuition. If you’re saving enough that you can max out a 401k plus a Roth every year for retirement savings, then you’re likely in the top 1% earner category and would do well with a 529.

This is clearly an over-simplification of a complex topic and their are nuances which would alter my advice, such as minor tax rate implications, deductions, need-based financial aid, quality of 529 plans offered by your state, etc.

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35195764)

The point of the 529 is to incentivize people to tighten their belts and save for both.

These middle class people you are referring to aren’t going to save too much in a 529 - they are much more likely to not save enough and have to take out predatory loans. Even if they did, they can move move the 529 to their grandchildren if they need to. Worst case they pay a penalty but benefit from tax deferral.

The hypothetical middle class family that saves too much, and has no grandchildren reflects a very small sample size.

Oh and Nutellas kids are almost certainly going to spend millions on their education. Most people on here would benefit. So saying “it’s not a great deal” and then clarifying that you only meant poor people isn’t really helpful. My guess is you also make enough where you should be contributing.

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35195847)

Most people on this site are not top 1% income earners. Almost everyone below that level should be fairly indifferent between a Roth or funding a 529 first. Since most people can’t do both, the better choice is the Roth, since the monies can be used for either purpose. You can not withdraw from a 529 for retirement purposes without penalties.

Most states cap 529s at about $300k. If youre high income and expect to need more than that, you should draw down contributions to your Roth second in order to achieve similar tax benefits.

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35197256)

You made some claim about how 529s are risky which I was debunking.

Now you say you should fund a roth before a 529. That’s a complicated question. Let’s say we take your example where you don’t have enough to do both. Let’s also say you actually need to use the entire balance to pay for college expenses. You will pay more tax using a Roth IRA to do this if you are withdrawing the amounts before 59 1/2, because you will pay tax on the earnings. For a 529, as long as it’s used for an approved expense, you don’t pay tax on the earnings. In addition, many states offer a deduction for the 529, which you don’t get if you use the roth as your college savings account.

Also, someone might want to contribute to a traditional IRA and get the tax deduction. That would prevent them from using a Roth, and a traditional Ira is not a good college savings account. So for those people, it might make sense to do a 529 as well.

That doesn’t mean you should always pick one over the other, but to say the benefits aren’t that great is silly, especially if you are talking about “middle income Earners” where every dollar matters.

Also you seem to be assuming that people on here aren’t in 1% so they can’t afford to fund both. That’s a bunch of bullshit. A lot of people (especially on here) can afford to fund a Roth IRA and put some amount ($50? $1000?) into a 529. That’s what the person who started this thread was asking.

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35197678)

CFP + takes ~20 or so portfolios designed by CFAs and sells them as "financial advisory". CFP = sales person.

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35201597)

i'd note that julia's own reasoning doesn't support her own decision not to contribute to a 529 - from what i understand she and her husband are high earners. the diatribe she posted defending her claim that 529s aren't a good deal is premised on someone being a relatively low earner who can't contribute to both a roth and 529 (which she and her husband certainly can).

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35196476)

1) My husband has tons of money saved. By the time my kid is college-aged, we will have easy access to as much as he’ll need. Sure, putting some in a 529 will shield it from cap gains, but again, it won’t make a difference to us in 16 years. Cap gains on a 300k account will be chump change. Now, buying educational credits might be a better deal for us. But again, we can do that at anytime, and anyhow, we are not price sensitive.

2) I do not earn enough to contribute to a 529 meaningfully.

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35197177)

Why would you not fund both?

Even in your rich husband’s situation, you’re going to forgo a vehicle that shields some of the tax liability. How is that better than just funding a 529?

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35197241)

A 529 is limited to about 300k. Cap gains on the contributions might be $20-30k at most. You’ll pay that much in penalties and taxes if it goes unused for any reason. If you have a high net worth, there’s not a huge benefit there.

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35197326)

There is a reason why obama wanted to gut the 529 program to prevent rich people from using it (after he and his wife had already prefunded the 529s for their daughters). And there is a reason why there was tremendous pushback that prevented him from doing so.

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35204130)

There is no limit to the growth in 529 plans. There is only a limit on contributions. So this $300k “limit” you keep talking about doesn’t factor in market appreciation. In CA the limit is $475k in contributions but the growth can be millions of dollars if you keep letting it appreciate. And that $475k is per beneficiary, so you can start as many as you like and get millions in tax free growth. It’s cap gains on millions of dollars not $300k. High net worth people don’t just use it as a vehicle for tax free growth for their children’s expenses but grandchildren and nieces and nephews etc. you can also keep changing beneficiaries until you use it up.

I also don’t know where you’re estimating cap gains on $300k as only $20-$30k. The top rate is 23.8%. But you know, even if it’s “only” $20-30k, LOL at a “personal finance expert” writing off such cap gains taxes as a drop in the bucket.

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35204741)

I won’t even get to the rest of your post, because it appears you don’t even understand the basic rules of 529 plans, so it’s not worth debating an uninformed person.

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35205148)

Of course your husband is already past that age and you will be by the time your kid goes to college so i see how your rationale works for you though i don't think it applies to most people.

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35196975)

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35207188)

My point was and still is the idiocy of your husband who has the money to contribute using non-529 money for college because the cap gains paid would be “chump change.”I know many people far wealthier than your husband and none of them would ever say saving 23.8% on $300k is “not that good of a deal.” Because if there’s one thing the rich cares about, it’s tax avoidance.

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35202400)

pack it up boys we're done here!

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35204002)

2. Appropriate Moniker.

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35186212)

Will look to up it probably when they start 1st grade and then high school, something like that

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35186392)

https://www.google.com/amp/amp.kiplinger.com/article/college/T002-C001-S001-the-529-plan-scholarship-exception.html

Note I haven’t researched the state deduction recapture rules around using a non qualified withdrawal for a scholarship.

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35195891)

You will almost surely be penalized somehow for having that money. Probably half of it will be confiscated to fund diversity coordinators.

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35187120)

b) it is EXTREMELY hard to get approved for independent status for financial aid. they will see through some UMC scam bullshit in a heartbeat

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35197945)

not sure if she even knew this aspect against 529

but, considering this, it bolsters her argument significantly, particularly for the non rich

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35204216)

The private schools set high tuition rate and scholarships so the parents can do this.

If you treat the 529 like this, the tax treatment ends up being the same as a Traditional IRA, but you can put away $14,000/yr/child, and you can collect any state tax credits ($500/yr in my state).

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35196533)

-529 can't be used at CONSERVAHERO schools like Hillsdale, Grove City, Patrick Henry

-529 basically worthless at Naval Academy or West Point

-529 assumes your kid is paying sticker rather than getting significant scholarship/AP credits/community college credits coming in.

-529 limited investment opportunities and higher fees, UGMA I cop dat Vanguard tip.

Yes I also know, maybe you want to pay sticker at your NESCAC like the fucking striver prole you are. But I much prefer the flexibility of the UGMA with the tradeoff of the potentially higher tax liability.

Hate away, XO. :)

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35196474)

If your kid gets a full ride at a service academy (I think all students do) I think you can withdraw their sticker tuition price tax free and spend it on whatever you want.

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35196549)

529 is still your money.

I have a UGMA/UTMA but only to get the $2200/year of 0% taxes on dividends.

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35691057)

(http://www.autoadmit.com/thread.php?thread_id=3864057&forum_id=2#35197008)