It's true that you should prioritize retirement first, and that you can use Roth funds to pay for education. It's also true that many, many parents get to the college years without any dedicated college funding and are shocked and dismayed by how that constrains their child's options. I personally find benefit in having some separation in what our savings is earmarked for, including college. But there's not a single right answer here.
Does it make sense to invest into the Virginia529 when there's still room in our Roth IRAs? We could always just pull from our Roth IRAs and pay for education that way, yeah?
It's hard to estimate how much to put in the 529. I have no idea how much college will cost in the future (e.g., scholarships), much less whether my daughter will even attend. Hell maybe she'll instead join the military, choose trade school or start a business. I don't want to save for something that we end up not needing to pay for. Isn't there a penalty to withdraw from a 529 for non-qualified expenses?
There are different ways to estimate what you might need in the 529. A common target is to aim for some percentage (say 50% - 100%) of your state flagship university, or perhaps a non-flagship state school. It's okay to not have "enough" - if you have a decent chunk, it becomes much more feasible to cover the difference between your current income, child's income, and modest loans. If you need less for traditional college, remember 529 funds can be used for trade school, and if your child earns big scholarships you can withdraw that amount without penalty. And you can eventually roll up to $35k into a Roth IRA.
Statistics: Posted by smwisc — Mon Mar 11, 2024 7:15 am — Replies 6 — Views 574