Are you wondering whether to superfund a 529 plan? My wife and I did for both our children. I’ll share with you are reasonings in this post.

A 529 plan is a good way to save and invest for your child’s education. The after-tax money you put into your child’s 529 plan gets to compound tax-free, just like a Roth IRA retirement account. Further, when you use the money to pay for qualified college education expenses like tuition and books, the money is not taxed.

Thanks to the 2017 Tax Cut And Jobs Act, $10,000 a year from the 529 plan can also be used to pay for grade school tuition as well. The added flexibility is nice for parents who are considering sending their kids to private school. Tuition can range from between $10,000 to $60,000 a year.

Normally, the maximum each parent is recommended contribute to a 529 plan is based on the maximum gift tax exclusion amount. This amount is $15,000 per parent per year in 2021 versus $10,000 in 1997. The maximum gift tax exclusion amount generally goes up by around $500 every 2-3 years.

Note, the gift tax exclusion amount increases to $16,000 in 2022. As a result, you can now superfund a 529 plan with $80,000 starting in 2022.

The $16,000 per year is not limited by parent. It is limited by person. In other words, if you get two sets of grandparents to also contribute $16,000 each, along with two parents, that’s six people who can contribute a total of $96,000 a year! If this happens, your child will become a 529 plan millionaire in no time.

Just note, if you give more than $16,000 in cash or assets (for example, stocks, land, a new car) in a year to any one person, you’re supposed to file a gift tax return. You don’t actually have to pay a gift tax since you’re still living. You’re also not going to be sent to prison, like the parents who were caught bribing university officials to help their children gain admission. So don’t worry.

One of the main questions that has come out of my 529 savings guide by age post is whether to contribute to a Roth IRA or a 529 plan. This is a great question I did not think about because contributing to a Roth IRA is not something I have ever done.

Fortunately or unfortunately, by the time I worked a full year in finance, I was no longer eligible to contribute to a Roth IRA due to the income limit requirement. Instead, I just focused on maxing out my 401(k) every year for the next 13 years until I left full-time work for good.

Partly due to my inability to contribute to a Roth IRA, I developed a negative bias towards the investment vehicle. It made no sense to me why the government would set arbitrary income limits for retirement savings when I believed everybody deserved to save efficiently for their future. Further, the article is a nice counterpoint to the 99% positive Roth IRA articles out there.

Now that I’m older, wiser, and have two children to consider, let’s take a look at the pros and cons of contributing to a 529 plan or a Roth IRA for college. I’ll also share some thoughts on which route is best for you.

From a financial perspective, one of the best things to come out of the coronavirus-induced market meltdown is being able to contribute to your children’s 529 plans at lower index prices. Let us dig deep into the recommended 529 plan amounts by age.

The appropriate 529 plan amounts by age will help ensure that you accumulate enough to pay for your child’s college education comfortably. At the same time, the right 529 plan amount by age will also ensure that you don’t over-invest if you don’t want to.

Given parents are investing for an expense that might not occur for another 10-18 years, it’s easier to invest in a 529 plan during times of turmoil. You want to have the right about in a 529 plan by age so you don’t overfund or underfund the college savings account.

Investing In My Daughter’s 529 Plan

Originally, I had only planned to invest $15,000 into my daughter’s 529 plan in 2020 because I was nervous about the stock market after a 10-year bull run. However, once the stock market started selling off in February and March 2020, I decided to contribute more to her plan. See my 529 contributions below.

The stock market kept on tanking until I ran out of the maximum bullets allowed. By the end of March 2020, I had ended up superfunding $75,000 into my daughter’s 529 plan. After making a stock market bottom prediction in March 2020, I put my money where my mouth was and bought.

If I had contributed more, I would have violated the superfunding rule, which allows families to front-load five years worth of contributions ($75,000 per donor/$150,000 per couple) without having to file gift taxes, while protecting their lifetime gift and estate tax exemption.

Given the world felt like it was coming to an end in March 2020, my wife and I decided to have her dollar-cost-average into our daughter’s 529 plan by $15,000 a year for the next five years just in case the recovery takes years.

When the stock market began rebounding in April, so did both of our children’s 529 plans. Today, our son’s 529 plan account is only about twice as large, despite being 3X older.

This is when I began to wonder what is the appropriate 529 plan amounts by age. I was beginning to feel like we had over-contributed to our daughter’s 529 plan. However, thanks to the likely incessant rise in college tuition, continuing to contribute to a 529 savings plan makes sense.

There is a never-ending debate between going to public or private school.

Personally, I went to international private school while my parents were stationed abroad until I was 13. Then I went to public school for high school, college, and graduate school from my MBA. I found each type of school to have its pluses and minuses.

In this post, let’s objectively analyze the decision to attend public or private school using real tuition dollars. We’ll also talk about the opportunity cost of paying so much to go to private grade school and private college.

The first day of preschool was tough. Not so much for our boy, but for my wife and me.

My immediate thought was, so this is where creativity comes to die. My wife and I spent three hours a day with him for the first week to help with the transitioning process.

During this time, I observed how other kids of varying developmental levels behaved. I saw kids having to wait their turn, listening to instruction, and trying to communicate with other 2.5-year-olds who weren’t good communicators.

As I thought about my negative reactions while soaking in the hot tub, I came to realize what I disliked about preschool was exactly what I disliked about work.

If you have a baby or toddler or are planning to have a baby, this post is for you. I’ve been running an interesting, real-life, real-time experiment on how hard it is to get ahead if you have below-average money and little status.

In 2017, we ended up applying to three preschools that accepted toddlers as early as two for the 2019/2020 school year. We then applied to five more preschools between SF and Honolulu that accepted toddlers after three for 2020/2021. We didn’t know what we were doing so we decided to play it safe.

Private schools are always stressing diversity and inclusion. Unfortunately, diversity and inclusion are theoretical goals made difficult to achieve because they are stymied by deep-rooted admission practices such as legacy admissions, bribery, and quid-pro-quo legal donations.