College 529 fund question

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IRQVET
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Re: College 529 fund question

Post by IRQVET »

A bit off topic (but related) but my buddy in Tennessee was telling me about some program where you can start paying tuition at todays rates, for college expenses at that university in the future. He didn't specify which university was doing this.

Never heard of such a thing. Anyone have some insight?
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bloobs
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Re: College 529 fund question

Post by bloobs »

IRQVET wrote: Wed Mar 17, 2021 1:33 pm A bit off topic (but related) but my buddy in Tennessee was telling me about some program where you can start paying tuition at todays rates, for college expenses at that university in the future. He didn't specify which university was doing this.

Never heard of such a thing. Anyone have some insight?
Yes that's pretty common. Here's Virginia's version: https://www.virginia529.com/blog/whats- ... d-tuition/.

I picked Virginia's because it has many top-tier state universities to pick from (UVa, Va Tech, William and Mary)--as compared to Tennessee for example.

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IRQVET
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Re: College 529 fund question

Post by IRQVET »

Now that I'm thinking about it again, I think he might have said Vanderbilt in Nashville case that's were he lives?

I'll have to see what colleges around me offer such a thing. My only concern, is what if they choose a major like I did that wasn't offerred at that particular college. I know when I was in grad school, my major was only offerred at a handful of universities. For me it was between UoA and a few medical related colleges (like John Hopkins) at 4 times the tuition cost. So I went to Alabama because they had my major and it was inexpensive.
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Roy_Batty
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Re: College 529 fund question

Post by Roy_Batty »

How are you establishing a Roth IRA for your kids if they have no or low earned income? Or have I misunderstood and the suggestion is to use your Roth nest egg for the kids college?

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bloobs
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Re: College 529 fund question

Post by bloobs »

Roy_Batty wrote: Wed Jan 05, 2022 8:26 pm How are you establishing a Roth IRA for your kids if they have no or low earned income? Or have I misunderstood and the suggestion is to use your Roth nest egg for the kids college?
Typically the parent opens his own roth IRA that can be used to fund their child's college expenses. Unlike 529s Roth withdrawals to pay tuition to be income tax free must be only on your contributions. So if you withdraw earnings from your Roth, you you will pay income taxes on that amount.

But Roths often have much better investment options to the typical 529 plan.

Bubba
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Re: College 529 fund question

Post by Bubba »

Roy_Batty wrote: Wed Jan 05, 2022 8:26 pm How are you establishing a Roth IRA for your kids if they have no or low earned income? Or have I misunderstood and the suggestion is to use your Roth nest egg for the kids college?
You can open a Roth for a child as young as a baby. I wouldn't suggest putting in the full max, however, if you can show on paper that you've been paying your child (e.g. for cleaning up their room, folding the laundry or other house related chores) then you can do something like that. This is a bit of a grey area, so I would suggest you research it and decide for yourself if you want to do this.

I'm using a Coverdell for both my kids. While the 529 allows me to put more money away, the Coverdell allows me to chose whatever funds I want. TD Ameritrade offers Coverdells and the ETF/stock selection is perfect.

Best,

Bubba

anomadtoo
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Re: College 529 fund question

Post by anomadtoo »

Roy_Batty wrote: Wed Jan 05, 2022 8:26 pm How are you establishing a Roth IRA for your kids if they have no or low earned income? Or have I misunderstood and the suggestion is to use your Roth nest egg for the kids college?
Myself (and many friends) opened the roth ira under our names but its for the kids college (or wedding, or first house downpayment, etc). Better investment opportunities and growth; and when its college time its better its in your name and not theirs for financial aid, I've read several times.

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mjedlin66
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Re: College 529 fund question

Post by mjedlin66 »

Roy_Batty wrote: Wed Jan 05, 2022 8:26 pm How are you establishing a Roth IRA for your kids if they have no or low earned income? Or have I misunderstood and the suggestion is to use your Roth nest egg for the kids college?
You absolutely can open a Roth IRA in your child's name. You have to have a "custodial IRA" account, which is offered by a few different brokerages. And the child has to have "earned income". Allowance paid in exchange for chores would count.

https://www.nerdwallet.com/article/inve ... a-roth-ira

As long as they are a dependent on your tax return AND their earned income is less than $12,550, then they don't have to file their own tax return:

https://turbotax.intuit.com/tax-tips/fa ... /L60Hf4Rsg

So their tax rate is 0%. Which means a Roth IRA for kids is an AWESOME investment vehicle.
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Roy_Batty
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Re: College 529 fund question

Post by Roy_Batty »

mjedlin66 wrote: Thu Jan 06, 2022 1:46 pm
Roy_Batty wrote: Wed Jan 05, 2022 8:26 pm How are you establishing a Roth IRA for your kids if they have no or low earned income? Or have I misunderstood and the suggestion is to use your Roth nest egg for the kids college?
You absolutely can open a Roth IRA in your child's name. You have to have a "custodial IRA" account, which is offered by a few different brokerages. And the child has to have "earned income". Allowance paid in exchange for chores would count.

https://www.nerdwallet.com/article/inve ... a-roth-ira

As long as they are a dependent on your tax return AND their earned income is less than $12,550, then they don't have to file their own tax return:

https://turbotax.intuit.com/tax-tips/fa ... /L60Hf4Rsg

So their tax rate is 0%. Which means a Roth IRA for kids is an AWESOME investment vehicle.
Interesting, thanks for the replies everyone.

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IRQVET
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Re: College 529 fund question

Post by IRQVET »

If you’re still keeping score on this topic . . .

I was comparing several 529 accounts as the one I had with USAA was under-performing, and I found that the Ohio 529 had the best returns, the lowest fees, and the highest ratings per Forbes and several other sources. So I moved them over to them and so far I’m very happy with them.

For what it’s worth!

https://www.forbes.com/advisor/personal ... 529-plans/
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Scarfinger
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Re: College 529 fund question

Post by Scarfinger »

I opened a Roth custodial IRA for my nephew last year. I put 400 dollars in it and told him that if he didn’t make $400 the IRS would come after him. He is 14years old and sells coffee beans. He made $1200 total.
I am just an average Joe. I have no clue to what the market will do.
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Paul Merriman 2 fund strat: (age - 25) x2.5 = TDF + balance into S fund or variation of

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bloobs
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Re: College 529 fund question

Post by bloobs »

Scarfinger wrote: Fri Jan 07, 2022 2:11 pm I opened a Roth custodial IRA for my nephew last year. I put 400 dollars in it and told him that if he didn’t make $400 the IRS would come after him. He is 14years old and sells coffee beans. He made $1200 total.

$1200 coffee? I sure hope it wasn't Colombian Lindo Coffee

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Love that movie!

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Snapdragon
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Re: College 529 fund question

Post by Snapdragon »

I plan on doing Roth IRA for my kids instead of a 529. When I did research, paying them for chores seem sketchy. So I am wanting them to sell our chicken eggs or do a bake sale to get started with a Roth. My kids are 6, 5 and 3, so I am in no rush but want to get the oldest started before she's 8. Not only will she have money growing tax free from such an early age, it's a chance to teach her a little at a time about stocks and markets.

Bubba
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Re: College 529 fund question

Post by Bubba »

Snapdragon wrote: Sat Jan 08, 2022 6:18 pm I plan on doing Roth IRA for my kids instead of a 529. When I did research, paying them for chores seem sketchy. So I am wanting them to sell our chicken eggs or do a bake sale to get started with a Roth. My kids are 6, 5 and 3, so I am in no rush but want to get the oldest started before she's 8. Not only will she have money growing tax free from such an early age, it's a chance to teach her a little at a time about stocks and markets.
Mine are the same age. I've got a roth for both and a coverdell. I would suggest to go with both. The nice thing with the Coverdell is that you can give it to anyone in your family for their university expenses. That means one child can gift it to another, etc. The Roth is great too. I read about a case where a child as young as 7 was receiving wages from his parents for helping in their store. The judge ruled it "ok" to give him a Roth. I cannot find the case anymore, but I think around that age it should be a great time to give a little something.

529s aren't bad, but I like selecting my own investments, so the Coverdells really work for me. :D

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Scarfinger
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Re: College 529 fund question

Post by Scarfinger »

bloobs wrote: Fri Jan 07, 2022 2:56 pm
$1200 coffee? I sure hope it wasn't Colombian Lindo Coffee

Love that movie!
He isn't working the the CIA or any drug cartels that I know of...
I am just an average Joe. I have no clue to what the market will do.
TimboSlice wrote: "People really need to stop overthinking this."
Paul Merriman 2 fund strat: (age - 25) x2.5 = TDF + balance into S fund or variation of

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