I'm wondering if there is any benefit to opening a 529 plan for my child who is a 9th grader. I also have a 5th grader and wonder whether it would benefit that child to open a 529.
The details of my situation are as follows:
-- I am finally maxing out my retirement plan at work and my HSA. I also have investments in a taxable account which I just opened this year. My entire retirement savings is small (I've only really started maxing out my contributions over the past 2 years although I did have some automatic employer contributions over the past 8 years) and I am trying to be more aggressive with a plan to save about 40-50% of my take home pay from here on out so that I am not working until I am 75.
--Our only debt is a relatively small mortgage that we have 20 years left on.
-- I live in a state without state taxes so there won't be a state tax deduction benefit.
-- My husband and I are in agreement that will assist our children up to the tuition cost of the our state schools (currently around $12,000) but we expect them to be partially financially responsible for their schooling so we will not be covering more than that cost. This means we could easily cover the cost per year by putting less in our taxable accounts while our kids are in college without touching any of the money already invested in the taxable account.
My concerns are whether the short time line makes it too risky or just plain pointless to invest in a stock index fund and expect that money to have grown in 4 years. Does it make more sense for me to open one just for my younger child?
Should I open it for my older child and then just transfer it my younger child if the investments don't do well over the next 4 years to see if another 4 years of investing will help grow the money?
Would the benefit of the tax free withdrawals on the earnings be worth it if my investments do grow? Or will the earnings be so small as to not really matter much?
How much money does it make sense to put away over the next four years if I do open a 529? Just enough to cover the $12,000 per year I plan on giving to my child?
The details of my situation are as follows:
-- I am finally maxing out my retirement plan at work and my HSA. I also have investments in a taxable account which I just opened this year. My entire retirement savings is small (I've only really started maxing out my contributions over the past 2 years although I did have some automatic employer contributions over the past 8 years) and I am trying to be more aggressive with a plan to save about 40-50% of my take home pay from here on out so that I am not working until I am 75.
--Our only debt is a relatively small mortgage that we have 20 years left on.
-- I live in a state without state taxes so there won't be a state tax deduction benefit.
-- My husband and I are in agreement that will assist our children up to the tuition cost of the our state schools (currently around $12,000) but we expect them to be partially financially responsible for their schooling so we will not be covering more than that cost. This means we could easily cover the cost per year by putting less in our taxable accounts while our kids are in college without touching any of the money already invested in the taxable account.
My concerns are whether the short time line makes it too risky or just plain pointless to invest in a stock index fund and expect that money to have grown in 4 years. Does it make more sense for me to open one just for my younger child?
Should I open it for my older child and then just transfer it my younger child if the investments don't do well over the next 4 years to see if another 4 years of investing will help grow the money?
Would the benefit of the tax free withdrawals on the earnings be worth it if my investments do grow? Or will the earnings be so small as to not really matter much?
How much money does it make sense to put away over the next four years if I do open a 529? Just enough to cover the $12,000 per year I plan on giving to my child?
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