Fedup
Thinks s/he gets paid by the post
I think put some money in 529 is not a bad idea. If they don't use it, you can keep it.
Lol... Yes. I calculate that I would hardly touch the nest egg ($1.5M). We have 4 pensions kicking in after retirement (2 military retirements ($7,000 per month combined) plus 2 social security ($6,500 per month combined). Plus the bull market...
I think put some money in 529 is not a bad idea. If they don't use it, you can keep it.
+1The challenge is not just how you raise them - it is how much they get influenced by peers, which at 18 is going to be a tremendous challenge. Once others find out about it can be tough to fend them off. As an example, look at the young athletes who get big, even moderate money in their late teens or early 20s, and the financial failure rate that occurs.
I do not much about them, but if you really want to leave them a windfall maybe a trust that starts at a particular age and pays out money periodically would be a better bet than providing access to a lump sum.
Agreed... Thank you for your comment. Yes. I am really hoping that I don't let them down and raise kids that would not appreciate such a gift. My work is cut out for me.
Honestly, the two other options are donate to charity or for us to spend like crazy in our golden years. I would prefer to give it to the kids. When I learned that I was going to be a father, my wish was to give them more than I had growing up. My mother was a single parent, raised 3 kids, and we had almost nothing. There was hard times when I was a kid. That taught me to be frugal. Frugal to a point where I just got a cell phone. Even now, when we have almost $2M in assets, I still clip coupons and use groupon.
So, just trying to do the correct estate planning.
Revisiting this for a moment: My parents had nothing when I was born. They worked hard, scrimped and saved and made certain that (with us also working and saving) us kids could get a good education. We appreciated it because it cost US as well as mom and dad. When time came for our kids to go to college, we did help, but made sure it was "hard" on the kids as well. They had to do their part. Buying into the process made them stronger and they also appreciated what they had when they were finished. What we have done to see that "they have more than we did" is to help with things like student loans and house down payments - once we have seen how hard they are willing to work for what they want. They have never asked for help, so we feel really good about offering it because we know what the effect is on their lives.
If I'm making a point, it is that I understand being "without" and how that affects us in relation to the next generation. BUT making it too easy on kids is no gift IMO. Let them struggle, help a little as you see them needing a little help. Then later, you can step in when they are old enough to appreciate it and also use it wisely.
If all this means that you pay a little more taxes in the mean time, so be it (heh, heh, Uncle Sam needs the money!) Sure, fund the 529s up to a point, but don't get carried away. Keep your "powder" dry for when they need it and go from there.
I rarely give this much specific advice. I never think I have enough experience or knowledge to do so. But in this case, I think I know "where you live" so to speak.
Still, this is a decision that only you can make and nothing anyone says is Gospel. You'll still be responsible (along with your kids) for the outcome(s). So eventually, you'll just have to go with your gut because YMMV.
You can keep it but subject to income tax on growth and a 10% penalty if not used for eligible expenses.