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529, Roth, GI Bill

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ryn996
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529, Roth, GI Bill  Reply with quote  

My wife is active duty military and she will be passing on the Post 9/11 GI Bill to our daughter, who is 16 months old (the Army has already approved the transfer). We have a Utah 529 plan in our daughter's name right now with $5,000+ in the account. The GI Bill should take care of all of her college expenses when the time comes. We will probably try to have a second child in the next year.

1. Should we keep the 529 plan active and transfer it to our second child, if we do have a second child?

2. Should we transfer the money in the 529 to one of our Roth IRAs and if we have a second child withdraw what is needed for college at that time from the Roth?

3. Other options?
Post Tue Nov 26, 2013 4:25 pm
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coaster
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The future value of this $5000 is of more significance to a second child's college expenses than it is to your retirement funds, since: if you transfer it, you'll have to start over, you'll have less time for it to grow, and it's a larger percent of the total needed.

~Tim~
Post Tue Nov 26, 2013 4:52 pm
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ryn996
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quote:
Originally posted by coaster
The future value of this $5000 is of more significance to a second child's college expenses than it is to your retirement funds, since: if you transfer it, you'll have to start over, you'll have less time for it to grow, and it's a larger percent of the total needed.


It wouldn't be starting over because it would be growing in the Roth IRA. My thinking is put it in the Roth IRA and then pull money out of the Roth for college expenses, if needed (the possible second child could get a scholarship), since that is allowed with no penalties. Also, money in an IRA isn't counted towards financial aid requirements, while 529 money is, correct? So a big 529 account balance could hurt the kid when it comes time to apply for financial aid, but a Roth balance wouldn't even be looked at.
Post Tue Nov 26, 2013 4:59 pm
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oldguy
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What's the plan if one (or both) kids decide not to go to college? A 529 can be cashed out but all taxes are due plus a 10% penalty. Or you can use the money for other educational stuff but that is mostly dumb stuff that yu don't want to be pushed into.
Post Tue Nov 26, 2013 6:02 pm
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ryn996
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quote:
Originally posted by oldguy
What's the plan if one (or both) kids decide not to go to college? A 529 can be cashed out but all taxes are due plus a 10% penalty. Or you can use the money for other educational stuff but that is mostly dumb stuff that yu don't want to be pushed into.


In that scenario it seems that it would be better that the money is in the Roth, right?
Post Tue Nov 26, 2013 6:28 pm
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Radix3d
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Why not transfer the GI Bill to both children?
Post Tue Nov 26, 2013 6:44 pm
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ryn996
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quote:
Originally posted by Radix3d
Why not transfer the GI Bill to both children?

We may do that, split it 50/50.
Post Tue Nov 26, 2013 6:47 pm
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littleroc02us
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Yes, you cannot transfer the 529 to a Roth without taxes. I have the Utah Educational savings account for the 2 year old son and we plan to put as much as we can in there. You can put it in your second child's name when they are born and if they decide not to go to college you can always transfer it to their children someday.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Tue Nov 26, 2013 9:18 pm
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oldguy
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quote:
In that scenario it seems that it would be better that the money is in the Roth, right?


Personally, I would put it in a Taxable Account. It grows tax-deferred, you pay only capital gains tax on profit if you sell some, and it is never taxed if you let it go to your heirs. But mainly, I like to have a bunch of non-gov't controlled money that I can spend, rule-free, at any age. We use that account for our childrens' colleges, their cars, rental houses, bridge fund for early retirement, etc. And if we don't need it in our lifetime, the kids and grandkids get it tax-free.
Post Wed Nov 27, 2013 12:45 am
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ryn996
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quote:
Originally posted by oldguy
Personally, I would put it in a Taxable Account. It grows tax-deferred, you pay only capital gains tax on profit if you sell some, and it is never taxed if you let it go to your heirs. But mainly, I like to have a bunch of non-gov't controlled money that I can spend, rule-free, at any age. We use that account for our childrens' colleges, their cars, rental houses, bridge fund for early retirement, etc. And if we don't need it in our lifetime, the kids and grandkids get it tax-free.


A taxable account does give me more options. For example, my wife was given a chunk of money when she went off to college so that she could focus on school and not need to get a job to live. We would like to do the same for our kid(s). A taxable account would allow that.
Post Wed Nov 27, 2013 12:53 am
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littleroc02us
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quote:
Originally posted by ryn996
quote:
Originally posted by oldguy
Personally, I would put it in a Taxable Account. It grows tax-deferred, you pay only capital gains tax on profit if you sell some, and it is never taxed if you let it go to your heirs. But mainly, I like to have a bunch of non-gov't controlled money that I can spend, rule-free, at any age. We use that account for our childrens' colleges, their cars, rental houses, bridge fund for early retirement, etc. And if we don't need it in our lifetime, the kids and grandkids get it tax-free.


A taxable account does give me more options. For example, my wife was given a chunk of money when she went off to college so that she could focus on school and not need to get a job to live. We would like to do the same for our kid(s). A taxable account would allow that.


Guess, I'm not sure why you'd rather pay taxes on money used to send your children to college?

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Wed Nov 27, 2013 5:03 pm
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coaster
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quote:
Originally posted by oldguy
I like to have a bunch of non-gov't controlled money

Money in a taxable account is "non-gov't controlled" ?!?!? Hah --- fat chance. Let's see you burn you 1099's and not pay any taxes on your income or gains!!!

"Tax consequences" *IS* a government control. Evil or Very Mad

~Tim~
Post Wed Nov 27, 2013 7:10 pm
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