Viewing Question: I have a 14 year old and I want to set up a college fund for him. How much should I put in a 529?

1 Response

  1. When you’re starting with a 14 year old it’s a little trickier so you should definitely talk to a planner before contributing. With a 529 plan, you avoid taxes on the growth and may get a state tax deduction on the contribution. Because you avoid taxes on the growth, the benefit of contributions to a 529 decrease as your child gets closer to college aged.

    529s cannot be converted into retirement assets and are accounted as parental assets for FAFSA. If you know your child won’t get any need based financial aid and you want to superfund your child’s 529 now, then I would suggest putting in up to $200,000 (assuming you only have the one child), and I would suggest doing it this year rather than over several years to maximize the potential market appreciation. Depending on the market performance and where your child attends college, this may cover slightly more or less than the total.

    Depending on the amount of money you’re looking to contribute, your eligibility, you may want to look into contributing to a Roth IRA. After 5 years you can withdraw the principal (but not the appreciation) you invested in a Roth tax free. These assets will not be treated as parental assets for FAFSA, however, the withdrawal will be treated as income for the next year’s FAFSA. Therefore, if you’re going to use the Roth to fund your child’s college, its best to use it only for the last year.

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