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529 plan for K-12

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  • 529 plan for K-12

    Now that the 529 plan was extended to K-12 (up to $10k/year), what is the best way to use it? It seems like it’s biggest advantage is not having to pay capital gains on its growth, but it doesn’t have much time to grow before kindergarten. Also, does this change which states offer the best plan?

  • #2
    Piggybacking on those questions, if you have not started a 529 yet. do you need to open one and contribute before the end of the year or do you have till April next year to contribute for 2017?

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    • #3
      i'm planning on using it only for college and grad schools for my kids.  any extra i will use for myself later in life if appropriate but more likely to pass on to grandchildren.

      do not anticipate using for k-12.  i guess theoretically i might cash flow kids college and leave really big 529 for grandchildren but doubtful i would do this.

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      • #4
        This is going to be great for physicians especially if you had been using a Coverdell ESA until now. People tend to focus on kindergarten, but many clients w/b using a 529 for private middle and high school. You can get a lot of horsepower from 12 years of long-term growth by front-loading, appropriate investing/rebalancing, and following a tactical plan. 529 plan $$ is invested in our standard equity balanced portfolio. Should market be down when child enters middle school, will delay until high/college and transfer balance to next child. Projecting college costs based upon client’s choice of school, inflating, and then dividing contributions 75% 529, 25% taxable account.

        For clients making annual contributions and not frontloading (about 85% - 90%) we start with 100% 529 contributions for max growth and then change to taxable when the 529s are projected to be 75% funded.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          My plan is still that 529's are for college. The advantage is tax-free growth, so the longer you can afford to let it compound the better. The new strategy that is now available is that if you are doing annual contributions and you manage to approach your 529 plan limit ($300k in my state) you can run your private school tuition through the 529 to keep getting an annual state tax deduction. Otherwise, you would have to stop contributing once the account hits the limit. Not many people in that situation, though.

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          • #6




            This is going to be great for physicians especially if you had been using a Coverdell ESA until now. People tend to focus on kindergarten, but many clients w/b using a 529 for private middle and high school. You can get a lot of horsepower from 12 years of long-term growth by front-loading, appropriate investing/rebalancing, and following a tactical plan. 529 plan $$ is invested in our standard equity balanced portfolio. Should market be down when child enters middle school, will delay until high/college and transfer balance to next child. Projecting college costs based upon client’s choice of school, inflating, and then dividing contributions 75% 529, 25% taxable account.

            For clients making annual contributions and not frontloading (about 85% – 90%) we start with 100% 529 contributions for max growth and then change to taxable when the 529s are projected to be 75% funded.
            Click to expand...


            Absolutely -  This replaces the limited Coverdell.  Even for us in the twilight of HS years, still can access some for tuition support.  Something better than nothing!

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            • #7
              I have access to a $20,000 state deduction. A few questions:

              Can 529 funds be used for early childhood education programs within a private elementary school? I know the media is saying K-12, but what about tuition for a program for a 2-3 year old? The wording of the law doesn't seem clear on this.

              Can previous year contributions be used in this new fashion in 2018? I only put in $10,000/year, but would put in an additional $10,000 before Dec 31st 2017 in order to get the max deduction and use that $10,000 towards tuition in Fall 2018.

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              • #8




                I have access to a $20,000 state deduction. A few questions:

                Can 529 funds be used for early childhood education programs within a private elementary school? I know the media is saying K-12, but what about tuition for a program for a 2-3 year old? The wording of the law doesn’t seem clear on this.

                Can previous year contributions be used in this new fashion in 2018? I only put in $10,000/year, but would put in an additional $10,000 before Dec 31st 2017 in order to get the max deduction and use that $10,000 towards tuition in Fall 2018.
                Click to expand...


                There are many questions that we will not know the answer to until a lot more shakes out. I will continue to be silent on any interpretations until I have educated myself a lot more. No need to speculate at the moment unless time is of the absolute essence - which brings up your 2nd question. I see no reason to believe that 529 contributions (and all related growth) will be divided into “before” and “after”. This hasn’t “shaken out” yet, but you don’t have much to lose by contributing the extra $10k this year as I see it.
                Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                • #9
                  Any new thoughts on this? I have 2 kids in the K-12 age group and I’ve been contributing an extra $1667 ($20k/12) per month. When it’s time to pay for the school year then I transfer over $10k/kid. It makes sense to me to consistently contribute over the long term. Is there any way you don’t win with this strategy?

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                  • #10
                    The only loss of benefits is if you're planning on paying for your kids' college too and also have a taxable account. By paying out of a 529, you lose out on the biggest benefits of 529, which is tax free growth on that money over the 10-20 years.

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                    • #11
                      I’m using the 529 for college and have been contributing monthly since they were born. Since the law changed to allow K-12, I’ve been contributing the $1667/month on top of what I had planned for college.

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                      • #12




                        I’m using the 529 for college and have been contributing monthly since they were born. Since the law changed to allow K-12, I’ve been contributing the $1667/month on top of what I had planned for college.
                        Click to expand...


                        This makes sense. You are getting full benefit of the $20K state tax deduction.

                        You are not getting a deduction for the college contributions, but that is true for people in 20 states with no deduction and in many of the states with a state tax deduction, the limit is very minimal.

                        You still get tax-free growth for qualified educational expenses in college.

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                        • #13




                          I’m using the 529 for college and have been contributing monthly since they were born. Since the law changed to allow K-12, I’ve been contributing the $1667/month on top of what I had planned for college.
                          Click to expand...


                          What's your state tax deduction? Up to $10k only? So you're contributing $10k/year for college and then adding another $10k that then gets taken out for K-12 within the year?

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                          • #14
                            I live in a state that does not get a tax deduction for 529 and I use a different state’s plan.  I’m contributing about the same monthly contribution to the 529 for college (about $1400k/month) as I have been since their birth.  The past couple of years, I’ve been putting in $20k/yr extra in monthly installments so that I can use $10k/yr/kid for K-12.  When it’s spring and time to pay for the next year of tuition, I transfer money over to help pay for the next school year in one lump sum.  I’m basically prepaying a year in advance by funding the 529 extra and letting the interest work for me until I need it.  Obviously the longer its in there the better but over time, I should make money with this approach and it won’t negatively affect the money I was already putting in for college.

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