If there is a thread for this please re-direct but I could not find one!
Have 2 grandkids, one just starting 1st grade, the other 2 years behind (and there will be no more grandkids). So, about 12 & 14 years until college age. Set up 529 plans (Fidelity Massachusetts plans) when they were born (and parents have small 529 plans for both kids too). Massachusetts currently allows up to $2,000 deduction MFJ for annual contributions (at 5% state tax rate, a small $100 reduction in taxes). We are over 59 1/2, retired and highly unlikely this grandkids would ever be eligible for financial aid (but who can predict the future?)
Current funds:
MA2036 Index - net exp .14%, lifetime return 9.29%, 68.6/31.4 stock/bond ratio ~ Bal $18k
MA2039 Index - net exp .14%, lifetime return 8.87%, 81.9/18.1 stock/bond ratio ~ Bal $13k
We are in a position to pay for both grandkids' educations in full in the future and plan to do this (or gift them the equivalent for a home or something along those lines if they don't attend college). Have not told parents this yet for many reasons, and unused funds in their kids' 529's could be rolled over into Roth IRA's up to $35k each - highly unlikely that their accounts will exceed this and we will share our plan to pay for the grandkids' education in the next few years. There are no other relatives that the account beneficiaries could be changed to in the future. Son and grandkids are already the beneficiaries on the Roth IRA's.
So, rather than continuing to put our money into 529 accounts with the possibility of one or both children not going to college (or not being able to use the 529 funds for other eligible expenses), and incurring the 10% penalty and taxes on withdrawing the proceeds - why not just leave the money we would otherwise contribute to the 529's in our Roth IRA's? Could buy similar target date funds inside our Roths like Schwab's SWYFX 2035/SWYGX with net exp ratios of .08% (currently both almost 100% stock) Vanguard's same target date funds have same exp ratios but slightly lower returns due to higher % of bonds.
No worries about us touching the money and it not being there later - we won't need it for our use. Would welcome any thoughts, suggestions or even alternatives to this. Thanks in advance for your collective Bogleheads wisdom.
Have 2 grandkids, one just starting 1st grade, the other 2 years behind (and there will be no more grandkids). So, about 12 & 14 years until college age. Set up 529 plans (Fidelity Massachusetts plans) when they were born (and parents have small 529 plans for both kids too). Massachusetts currently allows up to $2,000 deduction MFJ for annual contributions (at 5% state tax rate, a small $100 reduction in taxes). We are over 59 1/2, retired and highly unlikely this grandkids would ever be eligible for financial aid (but who can predict the future?)
Current funds:
MA2036 Index - net exp .14%, lifetime return 9.29%, 68.6/31.4 stock/bond ratio ~ Bal $18k
MA2039 Index - net exp .14%, lifetime return 8.87%, 81.9/18.1 stock/bond ratio ~ Bal $13k
We are in a position to pay for both grandkids' educations in full in the future and plan to do this (or gift them the equivalent for a home or something along those lines if they don't attend college). Have not told parents this yet for many reasons, and unused funds in their kids' 529's could be rolled over into Roth IRA's up to $35k each - highly unlikely that their accounts will exceed this and we will share our plan to pay for the grandkids' education in the next few years. There are no other relatives that the account beneficiaries could be changed to in the future. Son and grandkids are already the beneficiaries on the Roth IRA's.
So, rather than continuing to put our money into 529 accounts with the possibility of one or both children not going to college (or not being able to use the 529 funds for other eligible expenses), and incurring the 10% penalty and taxes on withdrawing the proceeds - why not just leave the money we would otherwise contribute to the 529's in our Roth IRA's? Could buy similar target date funds inside our Roths like Schwab's SWYFX 2035/SWYGX with net exp ratios of .08% (currently both almost 100% stock) Vanguard's same target date funds have same exp ratios but slightly lower returns due to higher % of bonds.
No worries about us touching the money and it not being there later - we won't need it for our use. Would welcome any thoughts, suggestions or even alternatives to this. Thanks in advance for your collective Bogleheads wisdom.
Statistics: Posted by 557880yvi — Tue Aug 27, 2024 12:36 pm — Replies 2 — Views 141