Which 529 Plan Is Best For California Residents

Which 529 Plan Is Best For California Residents – Wondering how much to contribute to a 529 plan? This article provides a proper framework for 529 plan contributions for seniors. The idea is to contribute enough to the 529 plan to cover most, if not all, of your child’s college expenses when the time comes.

From a background I am a father of two young children. So all the plans were heavily funded in the year they were born. That way, I got their college savings out of the way so I could focus on other things.

Which 529 Plan Is Best For California Residents

Which 529 Plan Is Best For California Residents

529 plans received job improvements in 2020 due to the passage of the SECURE Act and the SECURE 2.0 Act.

How To Open A 529 Account

With the Safeguard Act 2.0, there is a reflection grant that starts in 2024 and comes with many restrictions. First, the rollover amount cannot exceed the Roth contribution limit, which is $6,500 this year. You cannot get back more than $35,000 during the beneficiary’s lifetime. You cannot transfer contributions or income from the last five years.

. Experts are not sure if a new 15-year wait is necessary to change the beneficiary. Whether dollar-backed earnings from a 529 plan transferred to a Roth account by the IRS are subject to the rule requiring them to remain in the Roth account for at least five years will not be known until the IRS issues rules.

However, public contributions are not subject to the Roth IRA income limits of $153,000 for single filers and $228,000 for joint filers this year.

Because of these benefits, it makes more sense to contribute to a 529 plan if you have children. Make the most of your money by taking advantage of any benefits the government sends you. The bad guys know we have taxed hard working citizens enough!

California 529 Plan And College Savings Options

After a busy year in the stock market, I decided to look into my son’s 529 plan. While the S&P 500 has not done well, it has gotten to the point where I wonder if it can make much of a difference. That’s right, when it comes to how much to contribute to a 529 plan, too much may not be good.

After contributing $70,000 to my son’s plan at the end of 2017, my wife contributed $45,000 between 2017 and 2019. My mother also donated $30,000 for a total contribution of $146,500 between 2018-2019.

At the end of 2019, the 529 plan ended the year at $189,911.45. Therefore, $43,411.45 in tuition fees is tax free. It’s a pity that 2018 was a year of decline. But not bad for less than two years of subscription.

Which 529 Plan Is Best For California Residents

The last chart shows a YTD return of 22.71%, compared to a return of 31.49% for the S&P 500 and 8.72% for the US Aggregate Bond Index.

Save And Pay For College With 529 Plans

My son’s 529 plan is 100% invested in a mutual fund, so he has stocks and shares. The split is about 75%/25% and tapers off at age 18.

A collection of expiration dates is appropriate at that time. I didn’t want to spend any effort managing his money while trying to save him as a former SAHD. Also, making my own budget was even more confusing.

In retrospect, we chose a very uncertain investment. But maybe it’s just greedy talk. As of early 2021, my son’s 529 plan is now worth $255,000 thanks to the 16% increase in the S&P 500 in 2020.

Our first goal is to create a 529 plan worth $500,000 after 18 years. Because college tuition is compounded at a rate of ~5% per year over the years, a year of tuition of $50,000 today will grow to $120,000 in 18 years. Then there is room, board, transportation and other expenses to pay.

College Gifting Program

The X factor is whether our son can go to a public elementary school and avoid the extra $25,000 – $50,000 in annual tuition for 13 years when he starts kindergarten. Our public schools would probably reject him if they knew how lucky we are. So, we might be better off trying to shoot to accumulate $1,000,000 in a 529 plan.

Another X factor is his ability to get scholarships and the knowledge to choose an affordable university. Knowing that my husband and I are naturally intelligent, we thought that we would not even get special scholarships.

But accumulating $1,000,000 in a 529 plan to pay for school seems pretty silly. Personally, I’d rather go to public school my whole life, than end up with a big check after college to save, buy a house, or start a business.

Which 529 Plan Is Best For California Residents

At a compound rate of return of 5%, the $189,900 529 plan will grow to $415,000 over sixteen years. If the average annual contribution is $24,000 per year at a 5% compound rate of return, the plan will grow to $1,010,000 during that period.

What Is A 529 College Savings Account And How Do You Open One?

Now we have a daughter, maybe $1,000,000 to shoot for. ah If it’s more, we’ll roll the rest into a Roth IRA.

If you are contributing too much to a 529 plan, you are not allocating your limited resources well. Every dollar you contribute to a 529 plan is one less dollar you can contribute to your own retirement savings, your home down payment, and a trip around the world with friends.

I think you are already planning to open a 529 plan because you are interested in additional tax-free growth and want to give your children more options in the future. Another idea is that you are happy to pay for part of your child’s education.

Deciding how much to contribute to a 529 plan is not easy. Here are some things to consider before contributing to your 529 plan.

Why Military Families Should Use 529 College Savings Plan

Let’s say you want your daughter to attend two very prestigious state universities, William & Mary or UC Berkeley, at an expensive price. You should visit each school’s website and familiarize yourself with the current cost and attendance history.

After calculating the historical growth rate, use that growth rate to estimate how much college will cost over time for your daughter to be eligible to attend. Then figure out how far you want to get there and how to get there.

Most financial samurai parents recommend saving enough to pay for your in-state tuition. I like this approach because it covers the basics and provides a financial topic of conversation when the time comes for your child to decide where to go.

Which 529 Plan Is Best For California Residents

One of the main reasons I didn’t retire early was that I didn’t justify having a second child when I was 42 and my wife was 39. After years we thought one was over.

Tax Deduction Rules For 529 Plans: What Families Need To Know

After the age of 40, a woman’s chance of conceiving naturally drops to 5% for each attempt. So, since we don’t want to go the IVF route, there is a 95% chance of saving money for two children in the future.

But don’t worry. Even if you overcome adversity and are blessed with many children as an adult, you still have plenty of time to save and invest for your child’s future. It’s not like your expenses are going to run into thousands of dollars after the birth.

It is almost impossible to accurately monitor your child’s behavior. Yes, you may think your child is the prettiest, smartest, best looking and kindest child. But try to be honest by comparing your child’s progress on different grades and tests.

As for your children, you do not want to suffer from Dunning-Kruger. If you do, you will give your children a false sense of security that will shatter in the real world. Praise the effort, not the results.

Plan Investment Options: A Quick Guide For Parents

Not everyone wants or deserves to go to college, let alone private or private colleges. If your child is not interested in learning about useless calculations and wants to collect cars for a living, it is better to go to trade school. Trade school does not take as much time or expense as college. So, you don’t have to save much in your 529 plan.

Even though the SECURE Act passed, none of us were sure how our 529 money was going to pay for things until we actually did. I really hope to try to withdraw the $100,000 one day, but I can’t because I lost my password and forgot to create an emergency rule.

There is also a growing possibility that many more Americans will be able to attend prestigious colleges for free in the next 20 years. If the bull market continues, the economic gap will continue to widen. As a result, a socialist can be elected president, and many others can be elected as well

Which 529 Plan Is Best For California Residents

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