.

Ok, I'll bite.

I will do this as soon as I have a kid.

Let's say i max it out and little Timmy is smart as a whip and gets a full ride. He doesn't need mommy and daddy's money. To withdraw the 100K or so, I assume if it wasn't going towards education expense it incurs capital gains?
 
I just opened one for both my wife and I - total of $6,376. I've got a bit more I could contribute - should I wait for next tax year or dump it all in there right now?

MTown I am in Illinois but I have a couple of Iowa clients, and maybe one of the Iowa CPAs can tell you. But I think Iowa changed their law that as long as the contribution was in before the due date of the return, it could be a deduction on the 2015 tax return.

So if you have extra haven't filed your 2015 taxes, you might see if you can make a 2015 contribution now, and get the deduction for 2015, since you have already maxed your 2016 contribution.

For those that contribute to IRAs this rule will be familiar but that is on a federal level.

Here is the website. I am by no means and expert on Iowa tax so please check to see if you are eligible before doing this. About half way through the "Additional Advantages for Iowa Taxpayers"

https://www.collegesavingsiowa.com/content/taxbenefits.html
 
you can, just would need to pay tax on any gains.

same also applies if you child joins the military

I just double checked on that now and you are correct. If you just wanted to withdraw the money you would have to pay the income tax. Otherwise, you could hold the account for future education expenses or use it for a qualifying family members expenses tax-free.
 
Ok, I'll bite.

I will do this as soon as I have a kid.

Let's say i max it out and little Timmy is smart as a whip and gets a full ride. He doesn't need mommy and daddy's money. To withdraw the 100K or so, I assume if it wasn't going towards education expense it incurs capital gains?

yes it does.

The doomsday scenario would actually be if your kid was dumber than a rock and couldn't get in to college because then you'd also have a 10% penalty lopped on top of it (unless you had other children to transfer it to)
 
You can choose from their investment portfolio of funds based on risk assessment (agressive growht through bonds & money market) and/or have it reconfigure automatically over time on their age-based savings track.

Here is Iowa's website:
https://www.collegesavingsiowa.com/content/home.html


That reminds me why I didn't have one, that and the non fed deuction. I haven't been the biggest vanguard fan.

I have kept everything outside in open cash
 
I'm reading conflicting ideas here.

Should I contribute more than the tax deduction amount each year or only to that limit?

Let's say I have $10,000 and the tax-break limit is $6,376. Should I contribute the remaining $3,624 or hold off until next year. 2015 taxes are already files and done - I don't want to amend it.
 
yes it does.

The doomsday scenario would actually be if your kid was dumber than a rock and couldn't get in to college because then you'd also have a 10% penalty lopped on top of it (unless you had other children to transfer it to)

Follow-up last question.

I couldn't roll this into my 401k penalty free, or any sort of IRA penalty free?
 
Ok, I'll bite.

I will do this as soon as I have a kid.

Let's say i max it out and little Timmy is smart as a whip and gets a full ride. He doesn't need mommy and daddy's money. To withdraw the 100K or so, I assume if it wasn't going towards education expense it incurs capital gains?

Yes, it looks like at that point you would have to pay taxes on the gains or you can use the money for education expenses for any qualifying family member.
 
I'm reading conflicting ideas here.

Should I contribute more than the tax deduction amount each year or only to that limit?

Let's say I have $10,000 and the tax-break limit is $6,376. Should I contribute the remaining $3,624 or hold off until next year. 2015 taxes are already files and done - I don't want to amend it.

if you're going to contribute the max every year, I'd just leave it at that. At 6k per year you'd have over 100k invested before even considering gains and unless you're sending your kids to Harvard, probably won't be needing that much.
 
if you're going to contribute the max every year, I'd just leave it at that. At 6k per year you'd have over 100k invested before even considering gains and unless you're sending your kids to Harvard, probably won't be needing that much.

in fact, once your kids start working I'd stop contributing to the education plan and start contributing to a Roth ira for them (which is limited by how much earned income your children have) assuming you wouldn't have the extra money to do both.
 
in fact, once your kids start working I'd stop contributing to the education plan and start contributing to a Roth ira for them (which is limited by how much earned income your children have) assuming you wouldn't have the extra money to do both.


I dont think I will ever need our roths, we just plan to let them roll to our kids when we die. As long as they leave them in roths, it is like we contributed to theirs. At least that's what we were told
 
So these can only be used for college? Definitely not doing that then. Not everybody wants to/needs to /should go to college. My husband is way more successful owning his own business with no degree than I am with my stupid degree requiring biotech job.
 
So these can only be used for college? Definitely not doing that then. Not everybody wants to/needs to /should go to college. My husband is way more successful owning his own business with no degree than I am with my stupid degree requiring biotech job.

Well yeah, college savings plans are used for college.
 
Any suggestions for other good ways to invest for one's children?

You said your husband owns his own business? - this is perfect. Get them on the payroll as early as you can, pay them a normal wage (not favorable), and use that income to invest in a Roth IRA.

Buying funds outside the Roth might be a good idea too, if they want to use that for a house down payment, starting a business, etc...but I would definitely let compound interest work for their retirement as early as possible.
 
I live in Texas and still chose to open a 529 plan in Iowa for my daughter when she turned 1. The Texas plans I looked at had absurd restrictions on them, and my family can contribute easily to the Iowa 529 (although they've admitted that they don't trust sending money online... so I guess it's not THAT easy. sigh).
 
if you're going to contribute the max every year, I'd just leave it at that. At 6k per year you'd have over 100k invested before even considering gains and unless you're sending your kids to Harvard, probably won't be needing that much.

Isu instate tuition is 17k/year in 2016. 4 x 17 = 68k plus inflation. Ill defenitly need it.
 
You don't have to wait for a child to start saving:
IRS Publication 970, Tax Benefits on Education, the beneficiary's family includes the beneficiary's spouse and the following other relatives of the beneficiary:

  1. Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them.
  2. Brother, sister, stepbrother, or stepsister.
  3. Father or mother or ancestor of either.
  4. Stepfather or stepmother.
  5. Son or daughter of a brother or sister.
  6. Brother or sister of father or mother.
  7. Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.
  8. The spouse of any individual listed above.
  9. First cousin.
 

Help Support Us

Become a patron