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Sounds completely reasonable. I'm a physician who entered practice with $150k in student loans from medical school, so I will not allow my son to get into that much debt if he pursues a professional degree (MD, JD, MBA etc). How much you save is an entirely personal decision as to how much you are willing to support them.
Our current thinking is to plan for about $100k/year in college expenses for four years for each child. If there are funds left over after undergrad, they can use that for grad school.
Your Contribution will get hit for Virginia State Income Tax Re-Capture, Since you can claim 4K per kid per year, if you don't use it for education Expense, and withdraw your contributions, VA, will get its Income tax, you did not pay.
Just a FYI, If your over-fund for more then all 3 (now) kids need, you can just let it "Ride" and change the beneficiary at any time in the future and use the $'s for your GrandKids. Yea, I know your kids are 1, 4 & 5 now, but some day there will be grandkids....
Ah, yes thanks for that clarification. We don't have a tax deduction for 529 plans in MN, so I forgot about this nuance in other states.
Thanks everyone for the thoughtful responses. The 63k is in total unfortunately. I contribute 1600 in total among all accounts a month and was hoping to stop contributingat some point. Perhaps end of 2016? Or maybe end of 2017? Or....
Just a thought, For tax planning on the 1600/month Divided by 3 = 533/month per kid, x 12 months = 6,400 a year, 2,400$ over VA tax deduction threshold per kid. You might be better putting just $333/kid per month in now, saving the other $200/month in a separate account to do that in the "OutYears" to get the Virginia tax benefit from it.
Don't feel bad...I'm sure you're ahead of many, and just being in the habit of making regular contributions is a great thing. That way, if/when your income changes, you'll already have the habit established and you can just bump up the amount.
I can do the math, and based on a 5% avg return, it'll be about 130k by the time they start college
First, I commend you for putting forth effort to improve the lives of your children.
OK, we are about to send our oldest to college in 2 years. For a public college in the state of Texas, we are looking at $7,500 in tuition, books, and fees plus $12,000 in other living expenses per year.
So about $20k per year.....right now.
I would estimate that your 5% yearly appreciaton will be eaten up by increases in both tuition AND living expenses.
So if the goal is to completely fund all aspects of the education, I think you are only about halfway there.
Is 63k in 529 accounts enough, assuming your kids have 14, 13, and 17 years left before college?
assuming of course in state tuition and staying home with us in VA, which is currently around 10k.
I can do the math, and based on a 5% avg return, it'll be about 130k by the time they start college (give or take). My goal is to have enough in there to cover the tuitions, but not too much left over.
folks with personal experience, any insight is appreciated. the money is currently with the InVest account in VA, split over aggressive, moderate, and real estate accounts that they offer.
Be careful about over-funding 529 plans. Your kids may get full ride scholarships, decide to not go, or some combination. Save some of the money elsewhere like taxable or Roth instead, to preserve flexibility for use of funds.
Be careful about over-funding 529 plans. Your kids may get full ride scholarships, decide to not go, or some combination. Save some of the money elsewhere like taxable or Roth instead, to preserve flexibility for use of funds.
You can pull out the money received in scholarships. So if you get a $20k/yr scholarship you can pull out that $20k from the 529 penalty and tax free. But I agree with you. I'd rather have it underfunded and then fund it as they are in school than end up paying a penalty on it when it turns out to be to much.
You can pull out the money received in scholarships. So if you get a $20k/yr scholarship you can pull out that $20k from the 529 penalty and tax free. But I agree with you. I'd rather have it underfunded and then fund it as they are in school than end up paying a penalty on it when it turns out to be to much.
Its not TaxFree, Its penalty free, You do not have to pay the 10% penalty on the qualified withdrawals, you do need to pay income tax on any gains,
(Also you need to check on what Virginia's rules are, they may do a income tax recapture, since you did not pay taxes on some/all of the contribution)
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Look at all the options for funding college, and the fact that the kids can get CHEAP money while in school, you can keep your money earning and pay off their loans. Paying 100% their own way kept my kids focused on staying in their majors, finishing FAST, and insisting a good quality EDU.
We started our kids in ROTHs at age 12, FAFSA did not touch it (or consider the ROTHs as EDU 'contribution').
WA State Free FT college instead of HS helped save my kids some edu expenses.
Lots of things can change in 10 yrs. Keep your current 529 and manage it well. Some / all of your kids may not continue in edu. There may be much better options by then (I hope so!, just finished another Master's program at age post 50, quality of U was not impressive. (Profs and students)). In current climate would be sending my kids overseas FT for college.
YMMV
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