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How much is too much in 529?

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  • How much is too much in 529?

    I’m wondering what the consensus is on how much is a sufficient amount in a 529.  We have two kids, ages 2 and 4, and the totals so far are $16,500 and $9200, and my parents have separate 529’s with an additional $6k and $4k respectively.  We are still auto depositing $250 per month per child.  We don’t want our kids to be restricted to a cheaper public school if the dream is a private school or grad school, but we don’t want to get hit with penalties for having too much if they get scholarships or not needing the full amount.

    What is a good number at what age?

  • #2
    We are willing to have too much in. We put 1k per kid per month in since birth. The difference between state school and private school for us could be 50k per year. No one knows how much is enough. Or even if my second kid is college material.

    My neighbor kid just started second year at private university. 68k per year for undergrad.

    Good question.


    • #3
      I found this data here also some more detailed numbers here.



      My thoughts:

      1. Clearly the costs are going up.

      2. Data below doesn't included room and board (and laptops, cars, life, extra study guides, caffeine, etc).

      3. Not all folks will go to college, but some will go well beyond college.

      4. At age 2-4, you probably can't yet know if they'll go, be crazy smart, or just normal students.

      5. You don't need to hit the perfect $#. says it here. Just get something. There are jobs, other savings, loans, changes in life, etc that make the difference. Maybe have 100k per student by the time they finish? You'll likely be beyond that at your current rate. Don't worry about being too restricuted, students can get loans for anything. Might even make them choose wisely, or at least intentionally. I would consider how you raise the children, and do they know you'll be helping with college? I think that message is important. If you always suggest they'll have that as an option/expection, maybe that's healthy.


      • #4
        We plan worst case scenario-- NYU/USC -- and hope for the best.   There's always grad school and cousins and grandkids (gift rollover to avoid penalties).  Consider front loading if possible.


        • #5
          I would be thrilled (tickled pink!) if my second child received a scholarship or went to an inexpensive school and left some money in the account, a truly wonderful problem to have. More likely, as the experience with my first child, a current college freshman, proved (private school, $52k/year after scholarship discount), no matter how much you saved in the 529, there will always be the, er, opportunity to supplement from cash flow or other sources, particularly if Your State U. is not the likely destination.


          • #6
            If you have any significant income and 529s funded at any level, need-based aid seems pretty far fetched.

            Worst case you pay tax and the penalty on the money.


            • #7

              If you have any significant income and 529s funded at any level, need-based aid seems pretty far fetched.

              Worst case you pay tax and the penalty on the money.
              Click to expand...

              When asked, our college counselor said that if your income is more than $140k, don’t bother with the FAFSA.


              • #8
                my neighbor with the kid at Harvard is also suspicious that there is no such thing as need blind admission.   they say that it won't matter, but in the end he suspects it probably helps as a tie breaker.



                • #9
                  We're in a similar boat, with kids 0, 3, and 6.  We contribute $500/month to each child, plus the occasional monetary gifts from other family members.  Our goal is to reach $250k for each child, which should cover tuition, room and board for our state school (University of California system).  The rest of our savings is ploughed into the general taxable account.  If they need more help, not covered by scholarships / work, we'll pull it from the taxable account.  If they don't need it, great, I get to retire earlier.  We don't see the need to maximize our tax advantage by trying to cover 100% of tuition via 529.  Even if they go to private school, and the 529 only covers 50%, the way I see it, we still came out ahead.  If one of our kids chooses not to go college, no problem.  We'll give it to one of the other kids for private school or graduate school.  Worst case scenario, maybe I'll use it myself for a post-career culinary education.  


                  • #10
                    Two kids; 11 and 9, both north of $100k in their respective accounts.  Contribute $500/month each.  Should allow both to get through undergrad at a State/lower expense out of state without financial issues.  Our approach is that the 529 money is your pot of money (as long as you get the grades), but there isn't more once it runs out, so think and choose wisely.  If there is remaining 529 monies, then would all be available towards a 'graduate' program.

                    At this point my 9 yo would 'invest' it all in slime, so hoping a bit of logic takes hold before she graduates high school.


                    • #11
                      Wow! There's three places even cheaper than Utah! I had no idea!
                      Helping those who wear the white coat get a fair shake on Wall Street since 2011


                      • #12
                        I saw this comment in an article from Bigger Pockets from 2015 :

                        "I purchased a duplex when my first child was 1 year old with exactly this plan. It works!
                        She got a full ride scholarship since I never told her that was the plan. However, she went to vet school and I used the proceeds from the sale of that duplex to purchase a house for her to live in while in graduate school. She rented out 2 bedrooms to other students and uses that money for her expenses of food, 1/3 of the utilities, books, etc. Five years later, kid #3 decided to mess up the plan by going to a private school which requires she live in the dorms. No problem, I used the money from the sale of first daughter’s house to buy a rental house in my neighborhood and use the rental income to pay for her housing expenses. (She has a scholarship that pays for almost all of the tuition) I again purchased a fixer upper so the $31,000 house is now worth approximately $75,000. I plan to keep it until my 12 year old son starts college then exchange it for a house near whatever college he attends or use it for income to pay for dorm fees.
                        Basically, you can use the same money over and over again if you buy a house for your kid to live in. You sell it when they finish, so rather than pay $10,000 a year X 4 = $40,000 for dorm fees, you pay nothing! We were even able to buy a foreclosure in a decent neighborhood and fix it up during the summer so we could make money on the deal when we sold it.
                        If you choose this route, I recommend that you insist the roommates send you the rent check even if you just give the money to your kid. Roommates tend to pay late or not at all if you don’t have an outside entity to blame. (Sorry, but my mom will evict you and be mad at me if you don’t pay!)
                        Your kids will benefit from working on the rentals. Mine are able to do the repairs on their houses since they grew up with it. You will benefit financially since you will not be “throwing away” their college money. You get to keep the houses or sell and keep the money. Good luck!"

                        What are your thoughts?


                        • #13
                          Kinda related - Once they're in high school and you've identified a school that they'll likely be going to, do some research on the school's CLEP and DSST acceptance policy.  Many times, a kid can test out of between 6-12 credits of the general studies stuff.  The exams cost about $100 (for 3 credits) versus whatever per credit hour tuition the schools charge.  I've known hundreds of high school students who have started out college with between 3-30 credits already towards their degree.  Can save some significant money.
                          I should have been a pair of ragged claws. Scuttling across the floors of silent seas.


                          • #14
                            Ha, we just brute force it down our kids throat here - 6 APs a year.    I kid you not, the local public school is a monster childhood eating machine that is a 4x4 schedule that if max packed can actually take 8 APs a year.  (CRAZY!)

                            That said, having sophomore standing is a nice things to have going into college to allow more flexibility on broader experience.


                            • #15
                              We are being somewhat aggressive with the 529s and trying to front load the account to about 50k for each kid by age 2. This should ensure undergrad is covered even if we don't contribute another dime. Once front loaded, we plan to do 1k per month per kid until we no longer have earned income.

                              Am I likely to overfund even if they go to a private med school...probably a good chance. However, covering education is a high priority for us, and any funds not used will get to sit and compound for decades until grandkids start college. I actually hope my kids get good scholarships so that a lot of money can compound for decades and ensure no one of my descendants ever has to go into school debt again.