Great video! Thanks so much for the info. By the way, when the time comes can I use the funds from a 529 to pay for tuition in a college outside of USA? i.e. European University
What I don’t like about the custodian plan is if my son turns out to be a thug, the money will still go to him once he reaches a certain age right? I like the way the 529 plan sounds but only if it means that only the account has to be open for 15 years before having the option to roll it to a Roth rather than the account AND beneficiary needing to be the sand for 15 years. If it’s the latter, then I don’t really like 529 plans either.
You have the choice to rollover the 529 funds. OR you could keep it all for yourself. You just have to pay a small penalty and taxes if you don't use it for education expenses. An alternative to both of these would be to start a taxable brokerage in your name (and then decide if you child is worthy of it later :) If not, the money is all yours.
@ I think you misunderstood that by “custodian account” I meant NOT the 529 account. I should’ve said UTMA I guess. But yeah, so far I’m doing that brokerage account plan. 15% tax is acceptable to me to maintain the option of what to do with the money later.
Awesome video!! I subscribed. I do have a question. I have a 529 and notice none of the investments pay dividends. Do you know why they don’t pay dividends in a 529 plan?
I’m not sure exactly why they don’t, but my assumption would be to not allow payouts on the dividends to maximize your final portfolio balance. There may be dividends, but they are baked in. I hope that helps!
Depending on the details of your state plan, you can use the funds for any accredited college, university, apprenticeship, community college or postgraduate program in the United States-and even some schools abroad. For my state plan (Michigan) ... that is the case.
When you move you also don't need to move to a different state. It might be worth moving just if there are tax benefits for you OR there are better investment options. Other than that, you can live in Texas and contribute to a NY 529.
It could! Their income later in life could help them achieve FIRE earlier too and a college degree could help them have a higher income. So, if it were me, I'd focus on the 529 but to each their own.
@@MarriageKidsandMoney I would probably do a mix of both. I went the college route but I would have been way further ahead had I known how the job market actually worked.
This all depends on how you're investing your money. I would recommend starting with your purpose for investing. If your purpose for investing is future education expenses, a 529 is a smart choice.
What fee’s are you referring to? My UTMA for my kids don’t charge fees over at Fidelity. Unless you mean expense ratio’s from different ETF’s they invest in? I use VOO for them at 0.03% which is amongst the lowest and negligible at best.
@@MarriageKidsandMoneyI’m interested in a UTMA in MIchigan for both my boys age 11/9. Going to use Vanguard since I have accts. Both have 5k in their savings. Can I just move that 5k into each utma? Do I have to worry about proving income like other custodial accts? Once they are old enough, can they transfer that money to a Roth or an individual brokerage?
@ There is no proof of income requirement for a UTMA. It will become their own taxable brokerage account when they reach the age of majority. In Michigan, that is age 18. At that age, they can freely use that money for whatever they want.
@ thank you! Will there be any issues transferring 5k from each of their savings to the utma? I won’t have to pay taxes on that right? Just make sure I file that next year?
@ I'd recommend meeting with a financial professional who knows your situation best. From the limited information I have about your situation, there should be no issues moving money from their savings account to a UTMA. You'll receive the appropriate tax documents from Vanguard at tax time.
My son was left a 529 plan from his grandfather when he died 15 years ago. My son is now 24. Since then he only went to vocational school so most of the money is left in the 529 account. How would we be able to use that money for a down payment on his first home while avoiding taxes if possible?
Great question and what a beautiful gift his grandfather left him. I'd suggest meeting with an advice only financial advisor - pay an hourly rate for their time and make some smart decisions with this money. You could even pay for it for your son as a gift (like $100-$150). My quick thoughts from "guy on the internet who doesn't know all of the details about your financial situation" ... - (MID-TERM and SAVE ON TAXES PLAN) consider the new rules from the SECURE 2.0 Act that allow a portion of the 529 to be rolled into a Roth IRA (I believe the account needs to have existed for 15 years - not sure on your timing). Eventually, that money can be used for a portion of a home downpayment. - (LONG TERM GENERATIONAL WEALTH PLAN and BEST FOR TAXES) consider keeping it in the 529 for future education (or for his kids education) - (IMMEDIATE and EXPENSIVE PLAN) pay any taxes and penalties and buy the home sooner
@@lisaz9820But it has to have been the same beneficiary for 15 years first right? Not just the same account but the same beneficiary? That’s the answer I’m finding everywhere but no citations given.
I found this out today: Starting in 2024, 529 account holders will be able to transfer up to a lifetime limit of $35,000 to a Roth IRA for a beneficiary
Question…we have custody of 5yo grandson. We started a 529 plan. The custodial ira mentioned earned income. How would that work for a 5yo child. Thank you
For a 5 year old child, it makes more sense to invest with a 529 (future college needs) and / or a UTMA (future house down payment, etc). Custodial Roth IRA can be difficult with the earned income requirement at 5 years old. More details: ruclips.net/video/ZL8JwuGjYHI/видео.html
YES! This is a recent win from the SECURE 2.0 Act in 2022 ... You will be able to convert 529 funds to a Roth IRA. There are some stipulations: The conversion is capped at $35,000. Your account has to be open for 15 years or more. The beneficiary of the 529 becomes the account holder of the Roth IRA.
@@MarriageKidsandMoney what do they mean it's cap to $35k? so what happens like if you had $100k in it? what would happen to the $65k? also since it's roth our kid wont get the money until 59.5 yrs right?
@@BobDole-x1x Yes, $35k is the cap. The other remaining amount could be used for educational purposes for another child or even yourself if you want to go back to school. If you use it for non-education expenses, you'll have to pay both federal income taxes and a 10% penalty on the earnings. I'd suggest aiming to cover only 50% of your kid's college expenses and have them support with the rest (scholarships, working in school, etc.) More details on how to save for college and graduate debt free :). ruclips.net/video/fPKPW0u0MKM/видео.htmlsi=5clXQJY6KFph6RwH
Great explanation! Thank you for this I really needed it!
So glad to hear that!!
Great info. Awesome video
Glad you enjoyed it!
Thanks a lot for this video. Doing both
You're so welcome! I'm so glad you enjoyed it!
Likewise.
Great video! Thanks so much for the info. By the way, when the time comes can I use the funds from a 529 to pay for tuition in a college outside of USA? i.e. European University
Typically, yes. As long as the schools are eligible and the money is used for qualified educational expenses.
So all children saving accounts interfere with fafsa? Like prevent from getting the most financial aid ?
529 only!
What I don’t like about the custodian plan is if my son turns out to be a thug, the money will still go to him once he reaches a certain age right?
I like the way the 529 plan sounds but only if it means that only the account has to be open for 15 years before having the option to roll it to a Roth rather than the account AND beneficiary needing to be the sand for 15 years. If it’s the latter, then I don’t really like 529 plans either.
You have the choice to rollover the 529 funds. OR you could keep it all for yourself.
You just have to pay a small penalty and taxes if you don't use it for education expenses.
An alternative to both of these would be to start a taxable brokerage in your name (and then decide if you child is worthy of it later :)
If not, the money is all yours.
@ I think you misunderstood that by “custodian account” I meant NOT the 529 account. I should’ve said UTMA I guess. But yeah, so far I’m doing that brokerage account plan. 15% tax is acceptable to me to maintain the option of what to do with the money later.
Awesome video!! I subscribed. I do have a question. I have a 529 and notice none of the investments pay dividends. Do you know why they don’t pay dividends in a 529 plan?
I’m not sure exactly why they don’t, but my assumption would be to not allow payouts on the dividends to maximize your final portfolio balance.
There may be dividends, but they are baked in.
I hope that helps!
what if I move to a different state. For the 529 plan, can I transfer it over to a different state plan?
Depending on the details of your state plan, you can use the funds for any accredited college, university, apprenticeship, community college or postgraduate program in the United States-and even some schools abroad.
For my state plan (Michigan) ... that is the case.
When you move you also don't need to move to a different state. It might be worth moving just if there are tax benefits for you OR there are better investment options. Other than that, you can live in Texas and contribute to a NY 529.
So the UTMA could help the kid reach FIRE sooner should they go that route.
It could! Their income later in life could help them achieve FIRE earlier too and a college degree could help them have a higher income.
So, if it were me, I'd focus on the 529 but to each their own.
@@MarriageKidsandMoney I would probably do a mix of both. I went the college route but I would have been way further ahead had I known how the job market actually worked.
@@dnah02 Either way, you're planning ahead! Which is a win for sure.
Yes!
Which one gives you more money?
This all depends on how you're investing your money.
I would recommend starting with your purpose for investing.
If your purpose for investing is future education expenses, a 529 is a smart choice.
What fee’s are you referring to? My UTMA for my kids don’t charge fees over at Fidelity. Unless you mean expense ratio’s from different ETF’s they invest in? I use VOO for them at 0.03% which is amongst the lowest and negligible at best.
That's great! Yes, Fidelity, Vanguard, Schwab are some excellent low cost options for parents when it comes to UTMAs
@@MarriageKidsandMoneyI’m interested in a UTMA in MIchigan for both my boys age 11/9. Going to use Vanguard since I have accts. Both have 5k in their savings. Can I just move that 5k into each utma? Do I have to worry about proving income like other custodial accts? Once they are old enough, can they transfer that money to a Roth or an individual brokerage?
@ There is no proof of income requirement for a UTMA.
It will become their own taxable brokerage account when they reach the age of majority.
In Michigan, that is age 18. At that age, they can freely use that money for whatever they want.
@ thank you! Will there be any issues transferring 5k from each of their savings to the utma? I won’t have to pay taxes on that right? Just make sure I file that next year?
@ I'd recommend meeting with a financial professional who knows your situation best.
From the limited information I have about your situation, there should be no issues moving money from their savings account to a UTMA. You'll receive the appropriate tax documents from Vanguard at tax time.
My son was left a 529 plan from his grandfather when he died 15 years ago. My son is now 24. Since then he only went to vocational school so most of the money is left in the 529 account. How would we be able to use that money for a down payment on his first home while avoiding taxes if possible?
Great question and what a beautiful gift his grandfather left him.
I'd suggest meeting with an advice only financial advisor - pay an hourly rate for their time and make some smart decisions with this money. You could even pay for it for your son as a gift (like $100-$150).
My quick thoughts from "guy on the internet who doesn't know all of the details about your financial situation" ...
- (MID-TERM and SAVE ON TAXES PLAN) consider the new rules from the SECURE 2.0 Act that allow a portion of the 529 to be rolled into a Roth IRA (I believe the account needs to have existed for 15 years - not sure on your timing). Eventually, that money can be used for a portion of a home downpayment.
- (LONG TERM GENERATIONAL WEALTH PLAN and BEST FOR TAXES) consider keeping it in the 529 for future education (or for his kids education)
- (IMMEDIATE and EXPENSIVE PLAN) pay any taxes and penalties and buy the home sooner
you can roll it over now to a roth ira
@@lisaz9820But it has to have been the same beneficiary for 15 years first right? Not just the same account but the same beneficiary? That’s the answer I’m finding everywhere but no citations given.
Good info. Can both UTMA and a 529 be rolled into a Roth IRA if they are not used for education purposes?
I found this out today: Starting in 2024, 529 account holders will be able to transfer up to a lifetime limit of $35,000 to a Roth IRA for a beneficiary
Yes!
Question…we have custody of 5yo grandson. We started a 529 plan. The custodial ira mentioned earned income. How would that work for a 5yo child. Thank you
For a 5 year old child, it makes more sense to invest with a 529 (future college needs) and / or a UTMA (future house down payment, etc).
Custodial Roth IRA can be difficult with the earned income requirement at 5 years old.
More details: ruclips.net/video/ZL8JwuGjYHI/видео.html
i heard that if your kid doesnt go to college you can transfer the 529 to a roth ira?
YES! This is a recent win from the SECURE 2.0 Act in 2022 ...
You will be able to convert 529 funds to a Roth IRA.
There are some stipulations:
The conversion is capped at $35,000.
Your account has to be open for 15 years or more.
The beneficiary of the 529 becomes the account holder of the Roth IRA.
@@MarriageKidsandMoney what do they mean it's cap to $35k? so what happens like if you had $100k in it? what would happen to the $65k? also since it's roth our kid wont get the money until 59.5 yrs right?
@@BobDole-x1x Yes, $35k is the cap. The other remaining amount could be used for educational purposes for another child or even yourself if you want to go back to school.
If you use it for non-education expenses, you'll have to pay both federal income taxes and a 10% penalty on the earnings.
I'd suggest aiming to cover only 50% of your kid's college expenses and have them support with the rest (scholarships, working in school, etc.)
More details on how to save for college and graduate debt free :). ruclips.net/video/fPKPW0u0MKM/видео.htmlsi=5clXQJY6KFph6RwH
Yes
Ya mi 529 is pretty god that what I have set up for my daughter
It works well for us!
What's your configuration and yoy growth ? Want to start mine soon hence curious
Pop noise is annoying
I appreciate that feedback. We've gotten rid of that noise going forward.
I hope the video information was helpful nonetheless.
Bro, why are you acting all happy and corny? Just be yourself.
Based on your reaction, you might not enjoy my channel. I am happy. I am being myself.