Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
AA for college funding
Old 09-19-2019, 08:04 PM   #1
Recycles dryer sheets
SnowballCamper's Avatar
 
Join Date: Aug 2019
Posts: 102
AA for college funding

WA state's 529 plan is basically prepaid tuition, but only tuition up to the highest cost state school, and we're all paid up for five years of school.

For other expenses I have a coverdell education savings account with about 21k of VOO (Vanguard S&P 500 ETF) which has done nicely so far.

College starts in about six years, and the coverdell contribution limit is 2k per year.

Looking for suggestions on the way forward in terms of AA and specific funds, but mostly the thinking behind the recommendation.

On the one extreme I could stick with VOO and try to get out before the dip is too deep. I think we're due for a correction, but have no idea if its next year or in ten years.

I could buy into a bond fund with new contributions, but which one?

Also, any 'tricks' to know about in terms of the coverdell rules?

Thanks.
__________________

__________________
--At what age does spending less now in order to have more later stop making sense?
SnowballCamper is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-19-2019, 08:24 PM   #2
Full time employment: Posting here.
USGrant1962's Avatar
 
Join Date: Dec 2016
Location: DC area
Posts: 966
100% equities is extremely aggressive for an expense due in 6 years. Vanguard has age-based glidepaths available on their 529s, with the following AAs for someone 11-12 years old:

Conservative: 10/90 stock/bond
Moderate: 40/60
Aggressive: 60/40

If your 529 really is prepaid tuition then you probably don't need to be the most conservative AA - but 40-60% stock seems reasonable. But if you follow this model you should be adjusting your AA to be more conservative every two years or so.

Vanguard's take is here: https://investor.vanguard.com/529-pl...-based-options
__________________

__________________
FI and Semi-ER March 24, 2017
Consulting to stay engaged

"All models are wrong, some are useful." - George Box
USGrant1962 is online now   Reply With Quote
Old 09-19-2019, 08:29 PM   #3
Recycles dryer sheets
 
Join Date: May 2007
Posts: 426
Oregon College Savings Plan uses vanguard target funds for AA and timing withdrawals.
homestead is offline   Reply With Quote
Old 09-19-2019, 09:30 PM   #4
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 3,663
First thought: Is the student guaranteed (or required by you) to go to a WA school? Or can it be used out of state?

I have three kids in or near college. What I do is put any expenses projected to be incurred in the next three years into bonds and the rest in stocks. That's aggressive but I'm OK with the risk/reward trade-off as I have backups if needed.

I use VBTLX in ESAs or my state 529 bond fund for bond investments (which are also Vanguard funds underneath the hood).

One trick that I wrote about in another thread here is that you can withdraw from ESA and turn around and contribute that money to the 529. If you do that, the ESA withdrawal is not taxed, and the 529 contribution may be deductible on your state taxes (it is in my state). Net result is that the college funds stay the same but you get a state tax deduction on the transferred amount.

Reading Pub 970 on irs.gov is possibly a worthwhile exercise.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is online now   Reply With Quote
Old 09-20-2019, 06:51 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 9,757
We used 529 plans and also the American Opportunity Tax Credit. You may not be able to use the AOTC if your income is too high or if you have overfunded your college savings which seems to be likely since you already have 5 years of tuition in the can.

In your shoes, I'd stop saving/investing specifically for college and just put the money in a joint taxable account invested tax efficiently and perhaps a little bit in an age-based 529 plan. If you wanted to change the AA of the Coverdell, then going with a Target Retirement, Life Strategy or Balanced fund with at least 60% equities would be what I suggest.

It really seems that coverdells are way out of favor nowadays since 529 plans are used instead. 529 plans don't really have limits like a Coverdell or at least the limits are easy to get around. OTOH, the limits are so high that a family would not be doing the right thing to exceed the limits.
LOL! is offline   Reply With Quote
Old 09-20-2019, 07:46 AM   #6
Recycles dryer sheets
SnowballCamper's Avatar
 
Join Date: Aug 2019
Posts: 102
No requirement to stay in state. WA's 529 is a bit different. For those interested read this.

https://www.get.wa.gov/howgetworks

It got silly the past couple years with the state legislature reducing tuition... We'll see what the future holds.

Yeah, the coverdell limits prevent it from being a single source of funding, but it might be just enough to cover most of the room and board.

I hadn't seen the vanguard page on their suggested AA plan. I'm thinking I'll use the moderate risk plan with VOO and BND

Thanks All.
__________________

__________________
--At what age does spending less now in order to have more later stop making sense?
SnowballCamper is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Funding grandchild’s college fund Dash man FIRE and Money 19 10-04-2017 12:51 PM
Ethics/boundaries-related question about college funding SecondCor521 FIRE and Money 46 04-25-2016 05:20 AM
Need help with college funding forms Texas Proud Other topics 31 09-14-2015 12:20 PM
College Funding - what did you budget for your kids? Aiming_4_55 Other topics 64 04-26-2013 01:04 PM
Funding college for kids... ouch! Aiming_4_55 Other topics 62 02-01-2012 03:19 AM

» Quick Links

 
All times are GMT -6. The time now is 07:34 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2019, vBulletin Solutions, Inc.
×