My parents (who live out of state) wanted to contribute but they wouldn't get any tax benefit as out of state residents so they sent me the money and I made the contribution. At least I said I did.
Cocaine ain't gonna buy itself.
Financial Thread
- Thread starter NATEizKING
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My parents (who live out of state) wanted to contribute but they wouldn't get any tax benefit as out of state residents so they sent me the money and I made the contribution. At least I said I did.
Cocaine ain't gonna buy itself.
go to this link and set up an account. it's super simple.
https://www.collegesavingsiowa.com/home/open-529-account.html
+1 on the Iowa 529. Super simple, IA tax deduction big enough to have real value.
START EARLY is the best advice I can give. Child #2 is now a junior, and I started when she was appx 5. Did the math last year, and about half the balance was contribs, and half was earnings. So sort of cut the cost in half by starting early.
START EARLY is the best advice I can give. Child #2 is now a junior, and I started when she was appx 5. Did the math last year, and about half the balance was contribs, and half was earnings. So sort of cut the cost in half by starting early.
Have been setting aside cash in Iowa's 529 plan for each one of my kids ever since they were born. Over time it has really added up. My goal has been to give myself a raise when the kids go to college! Agree, start early and save as much as you can.
Since 529's seem to be the current topic...
Most everything I've read suggests a 529 plan is better than a Roth IRA when saving for a child's college (for a number of reasons). However, an investment guy (fiduciary) told me a few years ago to avoid a 529, and go with a Roth IRA instead. I can't seem to recall his logic behind that suggestion, and it's been bugging me due to it being counter to what seems to be the mainstream school of thought. Anyone have any insight?
Most everything I've read suggests a 529 plan is better than a Roth IRA when saving for a child's college (for a number of reasons). However, an investment guy (fiduciary) told me a few years ago to avoid a 529, and go with a Roth IRA instead. I can't seem to recall his logic behind that suggestion, and it's been bugging me due to it being counter to what seems to be the mainstream school of thought. Anyone have any insight?
More flexibility. Almost infinitely more investment choices. You can pretty much do whatever you want, whenever you want with that Roth IRA.
Say your kid is a musical genius and has a chance to take lessons from some world renowned piano player when they're 12 years old, you can dig in to the Roth if you need to to make that happen.
Just keep an eye on the fees and investment expense of the IRA.
I do not know the specifics on a 529, but a Roth you can pull out your contributions (not earnings!) tax free. And they could then be spent as you wish - not necessarily strictly toward tuition.
https://www.nerdwallet.com/blog/investing/roth-iras-trump-529-plans-battle-education-funding/
a quick Google search brings up a variety of articles. This one says that qualifying education expenses can be paid for penalty-free through Roth IRA contributions. That provides some good flexibility when combined with the retirement purpose.
Only issue with this is the kid has to show income in order to establish a Roth. If you own a business and can pay your kid to do light chores around the business at age 10 or 12 it would work, but if you don't own a business your kid is pretty limited in finding an income source to qualify for the Roth.
I would set the Roth up under my name, not the kid's name. If you're so rich you can't have a Roth you should be fine anyways.
If you already have a Roth you are saving for your own retirement in you can't do this, can you?
You can have as many as you want, there's just contribution limits. But at what point does it matter? I think of my money and accounts as a pool. If you're going to be paying for something does it really matter where it comes from (assuming it's coming out of an "equal" account? You're going to get taxed somewhere. Might as well get the best tax deal you can and still retain the flexibility with the Roth. Stuff happens.
I look at the 529 essentially as a "college 401k". From what I've researched, there are a few things here, as I understand them:
- Education expenses are pretty broad. If you kid gets a full ride, they might still need (albeit less) money for books, housing, etc.
- A 529 can be spent on anyone in your family. So, you could keep it for other kids, grand kids, or even spend it on yourself later in life.
- Worst case, you pull the money out, pay income tax and a penalty like you would for a 401k.
The best tax deal would be the Iowa 529 since you can deduct the contributions on your Iowa tax return. Can't do that with the Roth.
What do you think about contributing to an 529 to a maximum point (say $50k), then focusing your contributions more on a Roth? I suppose if you're maxing out Roth's for your own retirement, the 529 would be a nice option to be able to save for your kids' college in a similar type of investment? Am I correct?
financial advice I have seen recommends fully funding your own retirement first. Kids can take loans out for college. You can't take a loan out for retirement. So by that logic you would want to max out the yearly Roth limits first (which can go toward either school or retirement) and then fund a 529.
It's also state dependent. Minnesota does not allow you to deduct this from your taxes, either.
This is great advice. I try to get 15% of my income into a retirement account each year. This is less than the $11k we're allowed to max in a Roth. So, I get 15% in and anything left over goes to kids' college.
