Saving for College
My husband and I have three teenage children, one in college, one in high school, one in middle school. We have a good amount put away for college, in investments separate from our IRAs, but the advisor we worked with when the kids were little did not encourage us to start 529s for them. Is there an advantage to moving our college savings into 529s at this point for our two who are not yet in college, or at least for our middle schooler?
Terry Says
If you live in Illinois, there is a tax deduction on state income taxes for up to $10,000 in contributions.
But the real advantage of a 529 is the tax-free growth of the money for college.
And although there is really no difference in the reporting or impact of 529 accounts vs general parental assets, I think it “looks” better to have the college money segregated in a 529. If you want to appeal an aid offer, the school might feel differently if you point out that the 529 assets are designated for three children for college. (Remember you can withdraw the money for use by any child in the family.)
It’s not too late to get some tax-free growth. BUT make sure you are in the most conservative investment choice — not just the age-based choice. I’d put the money in the 529 in the name of the youngest child — with the longest time to grow the money — although the others can use it, and there is no requirement or date to withdraw it.
You won’t run up against the gifting limits because you cane each make a one-time gift of 5X$16,000 for each child!!
