Best savings plan/account for grandkids?

[Darcy03231]

Until reading about it on the Dis, I never knew that this was a thing grandparents did. My grandparents didn’t and neither did my parents for my daughters. I don’t have grandchildren but it is not something I think i’d do either.

Just how much money is expected to be contributed? How much in the end will it actually be?

Our daughter and SIL opened 529 account for their kids. I buy one thing for birthdays/Christmas and then put the remainder of any budgeted money into their 529. I usually budget $150 for birthdays and Christmas. Grandson just had a birthday and we bought him a $25 gift to open and put $125 into his 529.

 

[TCRAIG]

Not if the owner is a grandparent. Funds given can count as income, however, not as assets.

Good to know - thanks

 

[Simba's Mom]

Are there fees associated with a 529?

I don't know-I don't think so-although I should know since we started 4 of them for our grandchildren. We don't make regular contributions to the 529s as some people do. However, we're getting to an age where our parents have died, so we always contribute a portion of our inheritance to our grandchildren. And I had to laugh at the person who said that rather than setting up 529s, they just contribute to the ones their children already set up for the grandchildren. In our case, DS recently wanted to contribute part of his tax return, so he just wrote DH a check and asked him to put it in the account we'd set up.

 

[lovesmurfs]

I don't know-I don't think so-although I should know since we started 4 of them for our grandchildren. We don't make regular contributions to the 529s as some people do. However, we're getting to an age where our parents have died, so we always contribute a portion of our inheritance to our grandchildren. And I had to laugh at the person who said that rather than setting up 529s, they just contribute to the ones their children already set up for the grandchildren. In our case, DS recently wanted to contribute part of his tax return, so he just wrote DH a check and asked him to put it in the account we'd set up.

And my DDIL didn't trust us to use DGD's Social Security number to set up a 529 program (she doesn't trust the "market."). DS called and asked all sorts of questions, etc. and it just didn't seem worth the effort or justifying it.

So I set up a mutual fund in my own name, told DH about it, and it goes to DH when I die, but he's earmarking it for college for DGD. Contingent is DS if we both die.

We started it with $2,000 and put $150/month in it until last month. It's at over $8,000 now (DGD turns three on Halloween). I'm thinking that may be enough and just sit and let it grow, but we'll see.

My grandmother put $5,000 in mutual fund accounts (UTMAs) for both kids. We never added to either one (due to being broke while the kids were growing up). Even though they're both over 21, they've asked me to stay as custodian of the accounts for now. DD26 used hers for a Europe trip with her college choir and for a car -- She's only got $12k left. DS31 hasn't touched his, and it's at $34k. I remind him from time to time, so he's aware it's there.

 

[Dan Murphy]

Are there fees associated with a 529?

As with all mutual funds, there are fees associated with their management.

I use the State of illinois plan, Bright Start, one of the highest rated 529 plans in the country. I use its Enrollment Date Portfolios, similar to target date, or age/retirement date based portfolios in a 401(k) plan. The total annual fee is 0.10% (1/10%).

Beside the federal and state income tax deferral and tax free education purpose withdrawals, I get a Illinois State Income Tax deduction on the deposits, 4.95%.

 

[Frwinkley]

Our oldest grandchild is 2 1/2. We opened a 529 for her when she was born with $250. We contribute $250 each month, with an additional $200 for her birthday and Christmas. Her account has close to $10K in it at this point.

We will do exactly the same for her baby brother who was just born in May.

In PA, we are able to fully deduct our contributions from our state income taxes (not Federal).

 

[tvguy]

And many folks do not qualify for any need based scholarships anyway.

Yes. Some parents and students are shocked to find out they do not qualify. My kids High School had excellent College Planning Advisors who met with parents all four years of high school. They warned that in the College Financial Aid world, things like Retirement savings are considered luxury spending that should instead be spend on your child's education. And the FAFSA Expected Parent Contribution is pretty steep. They said to expect that number to come up to about 28% of your GROSS income........yes gross income, not take home pay. I was lucky, mine came in at 27%. And your Allstar athlete, first chair musician etc. will be competing with a pool of allstars and first chair musicians for scholarships.

 

[Dan Murphy]

Retirement savings are considered luxury spending that should instead be spend on your child's education.

Qualified retirement accounts, such as 401(k), IRA, SEP are not considered assets for FAFSA.

 

[tvguy]

Qualified retirement accounts, such as 401(k), IRA, SEP are not considered assets for FAFSA.

Been 20 years since I filled a FAFSA out, so my memory may be failing or it changed since 2005.

 

[Dan Murphy]

Been 20 years since I filled a FAFSA out, so my memory may be failing or it changed since 2005.

It has not changed. Also not reportable are home value, life insurance cash values, annuity cash values, 529 accounts (not owned by student or parents), HSA account values.

 

[tvguy]

It has not changed. Also not reportable are home value, life insurance cash values, annuity cash values, 529 accounts (not owned by student or parents), HSA account values.

Take a look at Page 8, worksheet B. You DID have to report IRA deductions in 2005. https://fsapartners.ed.gov/sites/default/files/attachments/fafsa/0506FAFSA101204.pdf

 

[Dan Murphy]

Take a look at Page 8, worksheet B. You DID have to report IRA deductions in 2005. https://fsapartners.ed.gov/sites/default/files/attachments/fafsa/0506FAFSA101204.pdf

Yes, deductions, because that would have been income before deposited and subsequently deducted for that year. But not the accumulated assets in the IRA.

 

[tvguy]

Yes, deductions, because that would have been income before deposited and subsequently deducted for that year. But not the accumulated assets in the IRA.

Yes, that is what I remember.