529 or Not?

[sengsational]

It doesn't make a lot of sense, either.

But I just thought of a way the law would make sense: if it was limited to the total AQEE actually incurred. In other words, say that only 50% of the total AQEE was utilized during the actual school years. It would be logical to allow the other 50% to be utilized against student loans.

 

[gatored]

Please make sure my thinking is correct...

We have 2 kids, 4 and 6 years old. I am 31 and DH is 41. Our current plan is to leave full time work in 5 years to travel with the kiddos in a tiny house. Our investments should be at about 1.2 million at that time with about 300,000-400,000 in low volatility non tax advantaged funds and 800,000-900,000 in a mix of traditional and roth 401ks/IRAs.

Only work part-time starting in 2023 at 36 years old and DH at 46 with a 9 and 11 year old? $1.2MM, plus part time income is supposed to cover your living expenses (utilities, clothes, food, property taxes, home insurance for tiny house, cars, car insurance, medical insurance for 4, etc.) for the next 40-50 years, as well as pay for both kids college and the cost for 4 to travel, presumably extensive travel given the appearance of being main driver in work cut-back? By cutting back I'm assuming that will have an impact in your future SS benefits (many of the 35 years will either be 0 or smaller amount). Are there any pensions or inheritances expected that would help fortify the $1.2MM?

 

[GrayHare]

Let's say after 10 or 20 years one makes a non-qualified 529 withdrawal, I realize there is a 10% penalty, but how are the investment gains taxed? Are they all cap gains, or are the multiple years of dividends separated out and taxed as dividends during the tax year of withdrawal, or something else entirely?

 

[Fired Up]

Let's say after 10 or 20 years one makes a non-qualified 529 withdrawal, I realize there is a 10% penalty, but how are the investment gains taxed? Are they all cap gains, or are the multiple years of dividends separated out and taxed as dividends during the tax year of withdrawal, or something else entirely?

The gains are taxed as ordinary income.