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  • more stupid 529 questions

    if we are okay with letting plan have extra for grandchildren, is there still a benefit to winding down the stock ratio as kids approach college (assuming you can cash stream any gaps from market setbacks)?  or is that more akin to timing the market since suddenly the time invested might be thirty years instead of five years.  or just go ahead and reduce risk and spend it but replenish after they get out of college and return to aggressive stock allocation?

    is there a maximum value the 529 plans can have in them?  i couldn't find an answer to this.

     

  • #2
    These are not stupid questions; you insult yourself.

    The average length of a bear market is just under 12 months, although some have lasted a little over 3 years and others as long as 3 months. For those who can afford to cash-flow school/university when the market is down (most of our clients), we recommend a balanced equity portfolio throughout the education years. This is particularly true if you have more than one child. This is not market-timing - it is, instead, a part of a plan.

    afaik, there is a maximum you can contribute to a 529 ($75k currently if you can front-load 5 years) but no ceiling on growth.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3




      is there a maximum value the 529 plans can have in them? i couldn’t find an answer to this.
      Click to expand...


      Apparently, there is a maximum aggregate account balance for a single beneficiary (I believe aggregate balance means contributions + returns) that is determined state by state. For the Utah 529 (where we have accounts for our kids) the maximum balance in 2017 was 430,000. Once the account balance hits that level, further contributions are not accepted. I assume that growth can still raise the balance higher, just no more contributions allowed. Link with details below.

      Utah Maximum Aggregate Account Balance Limits

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      • #4
        Here is a link with all the state maximums. So, yes, there is a maximum value where plans no longer allow you to contribute.  Make sure you are looking at the correct row as this site also includes information for ABLE accounts.

         

         

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        • #5
          Well, there you go - thanks, guys!
          Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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          • #6
            Although I have mostly moved to passive indexing, I am guilty of tactical asset allocation with the kids' 529s.  When the market was recovering in 2010-2012, we cash flowed the older 2 kids' college expenses and left the 529's aggressively in stocks. Our daughter is done, and our son is in his M2 year which we are helping with as the 529s have grown.   This year, I am moving enough to bonds to cover 2 years of expenses for our youngest who is a junior in high school.  My plan combined with luck has us projected to be overfunded at the present moment.  Since we can cash flow if needed, I see no reason to go too conservative as our youngest may want med school too and left over money can roll to grandkids.  We haven't contributed to any 529s in the last 5 years.

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            • #7
              For most accumulators with young kids, the unborn grandkids are only in play if there is leftover money. Paying for our own kids remains the primary goal and endpoint. I would say that if an investor reduces risk in a 529 as college approaches, and there is leftover money after college is done, then that money should be reallocated ton100% stocks or close to it.

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              • #8
                Not that I would ever advise this. The plan limitations are just that. There is no aggregate limitation on multiple plans.

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                • #9
                  That is not even the best reason to have multiple plans. The best reason is that you may have different gains and thus different tax liabilities in the event of non qualified withdrawals.

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                  • #10
                    If you're engaging in trans-generational planning, we recently floated the idea for funding a 529 in one's own name over time, and simply waiting for grandchildren to be born to open a new account for them and transfer in funds up to one-time five-year maximum.  Are there any restrictions to pumping my own 529 which could be massive in 30 years, and could I simply transfer $140,000 out of it for a grandchild once they're born, and Bob's your uncle, college paid with $337,000 at age 18 at 5%.  Of course, no telling how a) inflation or b) rise in educational prices would change the actual value of that...

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                    • #11
                      No restrictions.

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                      • #12




                        Not that I would ever advise this. The plan limitations are just that. There is no aggregate limitation on multiple plans.
                        Click to expand...


                        Exactly. Go to another state. You want to pay for the educations of all of your descendants 4 generations from now? You can probably do it.
                        Helping those who wear the white coat get a fair shake on Wall Street since 2011

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                        • #13
                          Now that would be interesting:  $75,000 per adult into each generational plan:

                          Cali:  Gen 2 Grandkids fund

                          Utah Gen 3 - Greatgrandkid fund

                          Delaware - Gen 4 --GGGK fund --

                          Talking about legacy funding.  That would be interesting to see if anyone's done that.

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                          • #14
                            Wow you guys can take an idea and run with it!

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                            • #15
                              Hello, I'm FIREshrink and I have 8 529 plans.

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