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529 Savings Plan
Old 01-25-2017, 10:07 PM   #1
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529 Savings Plan

My daughter just turned 1 and we want to start planning for her college. My wife is a medical resident. She has 300k in loans, which are in forbearance, but for which we still make the expected payments. Together we currently pull in $130k/annum gross. We own one of our cars and owe 8k on the other. We have a 7 year arm mortgage ( 6 years left) of 157k. We save about $2000 per month into savings. She will be done in 2.5 years with expected pay of 400k. What should we start investing in for our daughter and is a 529 plan right? Currently we live in nc, but hope to live west (originally from ut).
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Old 01-25-2017, 10:45 PM   #2
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We have tried to put $500/mo in each kid's 529... And now, with kids aged 14 and 16, we have about $90k/kid. Our goal is 100k/kid at the time they reach college start.
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Old 01-25-2017, 11:43 PM   #3
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We also save for the kids' college using 529s. We live in a state without state income tax, so don't need to select any particular state 529 and are with the one offered through Vanguard. Once we have "enough" in each kid's 529, we would switch to a regular brokerage account for additional college savings so as to not purpose-lock further money - however the way DD is talking med/vet routes, I don't think we'll hit that "enough" That 300k figure you cite is huge!

As some members may recall, we also have another set of 529s for our kids; they are not at such a good, low-cost outfit as Vanguard...
http://www.early-retirement.org/foru...mom-77274.html
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Old 01-26-2017, 06:04 AM   #4
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My kids are 23 and 19. One just finished his masters (and is employed) and the other is a sophomore in college. We started 529 plans when the boys were 3 and 5 which was about when 529 plans started. At the time we lived in NJ and just invested in the "NJ Plan" which had low fees and re-balanced the investment from equities to bonds as the boys got older. In the end the non taxable gain on our contributions paid for just shy of 2 years of college for each child. That is about half the cost. The gains with our contributions were more than enough and we have extra funds still in the plans. We have always been in the highest tax bracket so an added benefit was that the gain was not taxable. When we moved to PA we even received a state income tax deduction on our annual contributions.

Looking back it was an excellent decision for us.
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Old 01-26-2017, 07:59 AM   #5
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I think you can defer the contribution to the 529 until your wife is done with med school. I would focus on contributing to Roth IRAs, Roth 401k and after tax 401k while you are in a modest tax bracket compared to the $400k earnings tax bracket. When you start making the big bux, contribute to the 529...
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Old 01-26-2017, 08:09 AM   #6
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I think opening a 529 is a good idea even if you are not going to be able to put a ton of cash into it right away - who knows, maybe a grandparent or other relative wants to contribute
Unfortunately, NC just quit allowing state tax deductions for 529s, so do look at plans from other states. NC is not terrible but definitely not the best choice IMHO
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Old 01-26-2017, 09:32 AM   #7
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Quote:
Originally Posted by euro View Post
I think opening a 529 is a good idea even if you are not going to be able to put a ton of cash into it right away - who knows, maybe a grandparent or other relative wants to contribute
Unfortunately, NC just quit allowing state tax deductions for 529s, so do look at plans from other states. NC is not terrible but definitely not the best choice IMHO
The state to check is where you reside. NJ never allowed state income tax deductions for deposits into 529 Plans. PA does allow such deductions even if the 529 Plan is opened in another state's plan. We live in PA and have NJ 529 Plans. We are able to deduct contributions from our state return up to a limit. You need to check the state where you reside.
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Old 01-26-2017, 11:44 AM   #8
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Quote:
Originally Posted by NgineER View Post
I think you can defer the contribution to the 529 until your wife is done with med school. I would focus on contributing to Roth IRAs, Roth 401k and after tax 401k while you are in a modest tax bracket compared to the $400k earnings tax bracket. When you start making the big bux, contribute to the 529...
Agreed, plus I would consider changing the mortgage to a fixed term of 15 or 30 years while mortgage rates are low.
You have a lot riding on the med school thing, I hope it works out or you will be screwed.
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Old 01-26-2017, 05:15 PM   #9
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This is the one you want. It's in Vanguard age-based portfolio. It's in the deans list of 529 plans from Clark Howard.

As to whether investing in a 529 plan is the best place for your money at the moment is not something I'm commenting on, except to say it's not a slam-dunk if you have other options for the money (pay-off debt, max-out tax advantaged accounts).
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