We invest enough to the point to where if we can’t use it for education, the 10% penalty should hopefully not hurt particularly much.
I should do the math on that — could the tax-free growth eventually allow you to reach a break-even point on the 10% penalty?
I’d have to make some baseline assumptions and I’m guessing it would take many years, but avoiding a ~ 0.5% tax drag to later pay a 10% penalty could actually be a smart play over decades.
I've done this math and it almost never works because you are also converting capital gains to ordinary income. maybe if you drop to an extremely low tax bracket, but I doubt most physicians ever will, by choice anyway.
For the OP, we have about $350k saved for our kids seven and ten and don't plan to add more. We front loaded heavily and had some good investment returns. We will cash flow any shortfall. any excess will be used for nieces, nephews, grandkids, or classes during our own retirement.
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