31

This is primarily opinion based but will answer some factual parts of your question. Aren't there always risks with debt/spending money? Of course. People plan all types of contingencies but there is always the "black swan" that they did not see coming. It is/was foolish for home buyers to fall for the mantra of "buy as much house as you can based on ...


20

With that close an age gap it would probably make sense to use separate 529s. Technically you can transfer funds and even change the beneficiary from one sibling to another, but if both are in college at the same time you would probably want to let both of them use 529 money at the same time. Also, with multiple accounts you have more flexibility over the ...


14

This is a great question! Just a couple of days ago I put together a spreadsheet to analyze two mortgage scenarios in response to this question about 15 year mortgages. I ended up not answering that question because there weren't enough solid numbers to provide advice one way or the other. However, your question makes this spreadsheet really interesting. ...


10

In my opinion, this is probably a personal choice. With no extra paperwork, you and your spouse can each gift $15000 per child. Unless you are planning to gift more than $30K combined, one acct, to keep it simple, is enough. If, on the other hand, your total gifting will exceed this, the simplest approach is to use the 2 accounts, and not need to use the ...


6

People always say it's worth it to spend $/take out a loan for an education because it's invaluable or will pay off in the end. You are right to be skeptical of this advice. But isn't this kind of thinking what's causing people to go into upwards of 140k in student loan debt? Yes. 100% yes. No matter the degree, it is generally the folks who ...


6

Separate accounts may be better if you live in a state where 529 contributions are deductible from your state income taxes. OP did not list a state, but you may need separate accounts to claim the deduction for both children. In Maryland the deduction is "per account"[1] or "per beneficiary", and each account can typically only have one beneficiary at a ...


5

I am going to respond to a very thin sliver of what's going on. Skip ahead 4 years. When buying that house, is it better to have $48K in the bank but a $48K student loan, or to have neither? That $48K may very well be what it would take to put you over the 20% down payment threshhold thus avoiding PMI. Banks let you have a certain amount of non-mortgage ...


5

A 529 plan is set up in a specific beneficiary's name but the money can be rolled over or transferred into another 529 plan in the same beneficiary's name, or the beneficiary can be changed by the owner of the account. I mistakenly believed that the new beneficiary could be anyone else, but as mhoran_psprep has pointed out in the comment below, the new ...


5

Yes, it's considered the students asset, regardless of the custodian aspect. I don't know how you'd propose to put it in a retirement account, even with the earned income to facilitate this, the limit is $5500/yr. The larger issue is parental income. That and parental assets. Tough to game that part of the system to get aid. In the end, one should look ...


5

I would go here and play with the FASFA financial aid calculator to see if you qualify for grants, which is probably your ultimate objective. It would seem to me that qualified retirement contributions do not count towards eligibility provided you are younger than 59.5, and even then it would be questionable.


5

Michigan's 529 plan offers a wide variety of investment options, ranging from a very conservative guaranteed investment option (currently earning 1.75% interest) to a variety of index-based funds, most of which are considered aggressive. You said that you are unhappy with the 5% you have earned the past year, and that you thought you should be able to get ...


4

The biggest issue is determining how committed you are to this "niece". When setting up an account (529/prepaid tuition/Universal Gift to Minors/Coverdell/Roth) you are making a commitment that locks you into some provisions. They all have different amounts of control, and can impact taxes and financial aid. The states involved can even be important. Some ...


4

Yes, in fact, if your MAGI is $220K or over as a couple, you are not able to open the account. Having a relative with lower income is a good way to set one up. As MrChrister commented, the Coverdell is more limited, only $2000/yr, dropping to $500 if congress doesn't act. (limit was $2000 in 2012, to clarify) Funds must be disbursed by age 30 to the ...


4

There are several variables to consider. Taxes, fees, returns. Taxes come in two stages. While adding money to the account you can save on state taxes, if the account is linked to your state. If you use an out of state 529 plan there is no tax savings. Keep in mind that other people (such as grandparents) can set aside money in the 529 plan. $1500 a year ...


4

I'm not a 'rule of thumb' guy, but here, I'd suggest that if you can set aside 10% of your income each year for college, that would be great. That turns out to be $900/mo. In 15 years, if you saw an 8% CAGR, you'd have $311K which happens to be in your range of expenses. And you'd still have time to go as the baby won't graduate for 22(?) years. (Yup, 10% ...


4

My worry is that the online degree is less recognized and it is harder to find good jobs. You get what you pay for. "On-line degree" is not really the issue. The issue is the recognition and the reputation of the degree (and the institution). It may hurt you more to have a degree from some bogus on-line site not accredited by anyone on your resume than no ...


4

If you're paying for (out of savings or via a loan) a graduate degree in math or a related subject, rather than getting paid to do it, you're being conned. The norm for these kinds of programs (always apply as PhD-track even if you might not go beyond masters) is that you get funding through the institution in the form of teaching assistantships, research ...


4

Rule of thumb: in the USA, a student who's qualified doesn't pay (other than time and effort) to receive a graduate level degree. (This does not consider "professional" degrees such as JD, MD, OD, DDS, etc) The mechanic by which the degree is actually paid for is pretty different between Masters and PhD. Masters degrees are paid for (perhaps not at 100%, ...


3

OK, maximum reasonable amount (sort of an oxymoron the costs are not reasonable) is going to be end game more around $180K (2016 dollars) with the parameters you listed. My son is going to college next year so we did a little looking around the last couple of years. Consider higher growth rates the first 10 years, then you would pull back on the aggressive ...


3

Just follow Dave Ramsey's steps. Save your baby emergency fund of $1000, pay off the HELOC, save 3 - 6 months emergency fund. After going in that order, invest 15% for retirement, save for college and put all the extra towards the mortgage.


3

In my opinion, whichever plan or commodity system you use is just supplemental to a very simple thing: go to your bank's online account, set up a regular transfer (monthly in my case, maybe weekly for you depending on when you get your salary in your country/state) to a savings' account in your kid's name with a decent rate, and just watch it grow. Then ...


3

Tax-wise, a 529 is similar to the Roth IRA. Deposits are not pre-tax for federal purpose, and if withdrawn according to the rules, the growth can be tax-free. For most people, the IRA is likely needed to function as intended, for retirement, but if, as in your case, there's little downside to using the extra IRA space to save for college. One benefit is ...


3

Just to make the deal sweeter, see if you can negotiate a cash discount for paying for grad school with cash. If not, at least look into paying with a rewards credit card so you can get a rebate through your own means. Pay the school loan. People can default on mortgages, school loans are forever. Nothing wrong with sacrificing your dreams for a house ...


3

Edited based on the comments. Here's the SEC article on 529 plans, it answers some of your questions. My nephew lives in Ohio. I live in Kentucky. Does this in any way affect benefits for the fund or eligibility for in-state tuition? Generally it shouldn't. The plan pays for the tuition and may affect FAFSA eligibility, but has no bearing on residency ...


3

MrChrister makes some good points, but I saw his invitation to offer a counter opinion. First, there is a normal annual deposit limit of $13,000 per parent or donee. This is the gift limit, due to rise to $14,000 in 2013. If your goal is strictly to fund college, and this limit isn't an issue for you, the one account may be fine unless both kids are in ...


3

If you're ready to start a 529 account, it makes a big difference which state you choose (some states have excessive fees). It doesn't have to be your own state, but some states give you tax incentives to stay in-state. What you need to do is check out Clark Howard's 529 Guide and check to see if your state is in the "good" list. If not, then pick out a ...


3

I'm not aware of banks offering savings account for specific reasons, other than certain accounts for college funds, as the number of reasons someone might want to open a savings account is almost infinite. What I did was open 3 savings accounts with the same bank (I could have opened more, but I didn't need more). Each account is labeled with a nickname ...


3

The way deductions work normally does not take into account what account the transaction was made using. I.e. you report your gross income, your deductions and they subtract the deductions from the income. What's left is your taxable income. The tricky part comes with pre-tax contributions to tax advantaged accounts (like 401(k)). Those plans require ...


3

I think it's hard to argue with a guaranteed ~5% savings on the portion that could be deducted, but to save 70k per child you'll be contributing far more than $2,500 per year. So in that case I think I'd use Maryland's system for $7,500 per year to maximize the tax benefit, then go with New York's plan for the rest of your contributions each year for the ...


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