California 529 (scholar share)

Anyone doing 529s here? What’s the take? pros/cons? My understanding was 529s didn’t make too much sense in the past as it could only apply to college and put financial aid at risk. But I doubt my kid is going to qualify for financial aid and I think the recent tax law made changes to 529 right? So is this an attractive option now?

Also what is the contribution deadline to qualify for 2017 for 529s?

thanks

Are you sure your kids won’t qualify for financial aid? If you went FIRE and only draw income from rentals, your income will probably be very low, may even be zero for tax purpose because of depreciation.

I believe financial aid also looks at primary property of parents. (or at least it used to). so most of us owners in the bay area are screwed from that aspect.

You can’t put into a trust or similar tax tricks? I actually don’t know and very curious like you are. :smile:

I think 529 might also be considered in financial aid, but you can maybe try doing “grandparent” tricks if it applies.

In california, 529 contributions are not deductible, which makes it more or less like a limited-roth.
I would consider doing real-estate investment and use the cashflow for school expenses. They will also have a use for it after education.

529 investments are really limited compared to roth, you can’t do individual stock bying et.c

Right. I thought about 529 in the past but the limited investment options just didn’t sit right with me. Like @tomato my plan is to use my rentals to pay for kids’ college. If the rent cashflow is enough that’s great. If not maybe I can do re-fi or just sell outright to tap into the appreciation.

But the tax rule changed recently. I am very curious what people’s opinions are, especially among the Bay Area property owners here.

I too plan to use our Roth Ira and rental income. I do not have 529s. If you work for some firms like Netflix/Google you can put a significant chunk of after-tax income into Roth ( and not just the 5500 per year backdoor limit ).

I did it and used it to payoff my student loans. I made too much to deduct the interest on it.

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The clue here is “liquidity”.
Are you using your own money, or you let the manager of your account use it for you and you won’t see it until the end of your life?

Are you paying penalties to loan it?

Do you have to pay penalties if you don’t take required minimum distributions?

There are better ways of using your own money.

Some limitations exist when it comes to Roth IRAs.

http://www.rothira.org/roth-ira-pros-and-cons.html

We aren’t talking about Roth IRA, so thanks for being irrelevant.

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Some idiot is not paying attention. Right Marcus? :sweat_smile::sweat_smile::sweat_smile::sweat_smile:

I thought that this was no longer the case. However, the higher income level will be a problem.

We were supposed to do a 529, but ended up with a different college fund due to Scottrade not having a 529. Glad I did, because kid’s Amazn went from 950 to 1500 :slight_smile:

Anyways, one advantage of a 529–but not here–is that some states exempt that income from state income tax. And now 529 can be used for private schools K-12, so if a relative from another state is paying for either private or college, the 529 may be a good tax-deductible way to take that help.

I might be wrong about anything or everything in the above paragraph, so do let me know.

You guys don’t get it.

You as a parent are the medium through what your kids will excel in life economically.

Get a term insurance if you don’t like IULs.

You can open a policy for $1M or $500K for yourselves, $50-$60 a month, then, open an IUL for your kid for $250K or $500K. Most insurance companies won’t allow to open a kid’s policy if the parents don’t have one, and for half of the parent’s policy.

So, open an IUL policy for $250 a month for 5 years, increase it to $400 next 5 years and then to $500-$600 for the next five years. You stop contributing right there. The result is that your kid will be paying his college no problem. When he is an adult, you just give him the policy as owner and you can become the beneficiary. He will retire with a good chunk of money.

Oh, if something happens to either parent, the death benefit will suffice to pay for their college, or for surviving spouse to pay for a down payment on that house of their dreams.

It’s called 1 million dollar baby.

Don’t listen to negative people, they are like blindfolded people at your birthday piñata, they just don’t hit one!:wink:

Will a 529 plan affect my child’s ability to qualify for financial aid?

Guidance from the U.S. Department of Education says that a 529 plan is counted as an asset of the parent or other account owner in determining eligibility for federal financial aid. Only 5.6% of the value of the account is considered the parent’s assets for financial aid calculations. There is no impact if the account is owned by another relative, such as a grandparent, aunt, or uncle. When assets are held in the child’s name, such as with a custodial account, only 20% of the assets will be considered. Schwab recommends that you consult your tax advisor concerning your particular situation.

https://www.schwab.com/public/schwab/investing/accounts_products/accounts/college_savings/529_plan

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The new federal tax law expands the qualified use of 529 savings accounts by allowing withdrawals for K-12 tuition expenses, with a limit of $10,000 per year, per beneficiary. However, individual states may or may not adopt this expanded definition of qualified withdrawals. Clients should consult a qualified tax advisor to discuss their individual situation

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You’re seriously lecturing people who are:

  1. Far more educated than you
  2. Earn much more than you
  3. Have much higher net worth than you

Don’t take financial advice from the most broke person in the room.

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Personal attack?

:laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing::laughing:

Uhm. I think I’m the most broke person in the room :frowning:

I wouldn’t take advice from me either.

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I am not selling this, be advised, this is by searching online. Whole life is very…well…expensive.

But you have a good heart, and you are humble, atributes some kid here lacks. :wink: