Author Topic: 529 plan?  (Read 2455 times)

MrsCoolCat

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529 plan?
« on: July 04, 2016, 05:26:33 PM »
Hi. So DH & I read some information online & on the IRS website. Does the leftover money the beneficiary doesn't use go to them (i.e. Kid gets a scholarship), or what happens to the funds? Has anyone contributed to one & what are ur thoughts; pros & cons? Thanks in advance.

seattlecyclone

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Re: 529 plan?
« Reply #1 on: July 04, 2016, 05:49:07 PM »
My understanding is that the money remains your property. You can change the beneficiary to another relative or withdraw the funds and pay a penalty. Whether you then give the excess cash to the original beneficiary is up to you.

Choices

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Re: 529 plan?
« Reply #2 on: July 04, 2016, 08:20:54 PM »
You can withdraw up to the amount of a scholarship from your 529 without paying a penalty.

Lkxe

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Re: 529 plan?
« Reply #3 on: July 04, 2016, 08:27:28 PM »
You can withdraw up to the amount of a scholarship from your 529 without paying a penalty.
Though you will pay taxes on the gains and you can not take only contributions and leave the earnings (and avoid taxes) in the account



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MrsCoolCat

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Re: 529 plan?
« Reply #4 on: July 05, 2016, 06:42:18 AM »
Hmm ok, so do you guys/gals here have a 529? Is it a good or bad idea? Obviously, that's a subjective question. Thanks again.

abhe8

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Re: 529 plan?
« Reply #5 on: July 05, 2016, 07:29:08 AM »
It can be good, especially if your state gives a tax deduction for contributions. You can roll the balance from one child to another or even grandchildren.

little_brown_dog

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Re: 529 plan?
« Reply #6 on: July 05, 2016, 09:20:38 AM »
We are using the NY529 plan. We felt the 529 was a good strategy for us due to the tax advantage and the fact that we are pretty confident that at least one or two of our kids will end up going to college. There are strict qualifying expense and penalty rules, but if you are in a family where college is the norm/expected, and you have multiple kiddos who are going to be good candidates for school, then I think they are worth it. Absolute worst case scenario, no one uses it and we have to take the tax and penalty hit. That would stink, but we would still get a hefty chunk of unexpected cash that we could then use for other things.
« Last Edit: July 05, 2016, 09:22:45 AM by little_brown_dog »

Secretly Saving

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Re: 529 plan?
« Reply #7 on: July 05, 2016, 10:00:29 AM »
We have two 529 plans.   One for each of our children.  Our state offers a tax benefit, so we contribute up to that max each year.  They have a fair amount of money in them, but I expect them to be completely used for bachelor and master degrees.

catccc

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Re: 529 plan?
« Reply #8 on: July 05, 2016, 02:21:57 PM »
I am a fan of the 529 plan.  I don't feel it is too restrictive.  We get a state benefit.  We use the vanguard NY plan.

If all goes as expected, we will cash out w/o penalty when my kids get scholarship!  (I'm half joking, I don't want to put a ton of pressure on my kids...)  If it goes a little less than planned, we'll use the funds to pay for college.  If we go further down the spectrum of not needing it, we'll hold them for other family members that may find them of use, or future family members (grandkids, my nephews, whatevs).

I am trying not to overfund them, but I don't know exactly when to stop.  (Kids are 5 & 7, 529 balances are 30K and 27K) 

I remember reading something about having grandparents open the account instead of the parents, to keep it from getting counted in FAFSA stuffs, but I thought, "hey, if we have the money, we have it, no need to hide it..."


catccc

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Re: 529 plan?
« Reply #9 on: July 05, 2016, 02:26:05 PM »
seattlecyclone shared an interesting bit about an alternative use for 529 funds if your kid doesn't need them:

http://forum.mrmoneymustache.com/ask-a-mustachian/529-college-savings-plan-vs-custodial-acocunt/