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What savings scheme do you use for a kid?


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  • 4 months later...

I have a newborn so this topic is now relevant to my interests. I would like to open a 529 account for her, which I've browsed different options and I'm leaning towards the Vanguard 529 Plan for Nevada. It's appealing because it has low fees and because I already have accounts with Vanguard, so there's a simplicity factor.

A couple questions I have:

1. They have options for an Individual 529 Portfolio (where I can pick investmest like a Vanguard Total Stock Market Index Fund) or the Targeted Enrollment Portfolio (where I determine their year of enrollment and Vanguard adjusts the diversification for me over time). For my personal Roth IRA, my strategy is more in line with the first option. For a college fund that's needed in ~18 years, I'm more inclined to pick the TEP so I can set it and forget it and trust Vanguard to make good decisions. Is that reasonable here?

2. The effective annual contribution "limit" is $17,000 for 2023 to stay within the gift tax exclusion limit. Is there any reason I shouldn't front load it with that amount this year, then my future yearly contributions could be lower and still be on pace for the final goal? Assuming my other tax-advantaged retirement accounts are maxed out yearly and that $17,000 would otherwise end up in a brokerage account or savings.

Thanks for any input.

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1 hour ago, wild_turkey said:

I have a newborn so this topic is now relevant to my interests. I would like to open a 529 account for her, which I've browsed different options and I'm leaning towards the Vanguard 529 Plan for Nevada. It's appealing because it has low fees and because I already have accounts with Vanguard, so there's a simplicity factor.

A couple questions I have:

1. They have options for an Individual 529 Portfolio (where I can pick investmest like a Vanguard Total Stock Market Index Fund) or the Targeted Enrollment Portfolio (where I determine their year of enrollment and Vanguard adjusts the diversification for me over time). For my personal Roth IRA, my strategy is more in line with the first option. For a college fund that's needed in ~18 years, I'm more inclined to pick the TEP so I can set it and forget it and trust Vanguard to make good decisions. Is that reasonable here?

2. The effective annual contribution "limit" is $17,000 for 2023 to stay within the gift tax exclusion limit. Is there any reason I shouldn't front load it with that amount this year, then my future yearly contributions could be lower and still be on pace for the final goal? Assuming my other tax-advantaged retirement accounts are maxed out yearly and that $17,000 would otherwise end up in a brokerage account or savings.

Thanks for any input.

If you can cash roll it, you can do a 1 time contribution of up to 5 years limits in one year, but you can’t contribute again until year 6.   I’d go with the index fund and reevaluate at year 12 and year 15.  

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7 hours ago, wild_turkey said:

I have a newborn so this topic is now relevant to my interests. I would like to open a 529 account for her, which I've browsed different options and I'm leaning towards the Vanguard 529 Plan for Nevada. It's appealing because it has low fees and because I already have accounts with Vanguard, so there's a simplicity factor.

A couple questions I have:

1. They have options for an Individual 529 Portfolio (where I can pick investmest like a Vanguard Total Stock Market Index Fund) or the Targeted Enrollment Portfolio (where I determine their year of enrollment and Vanguard adjusts the diversification for me over time). For my personal Roth IRA, my strategy is more in line with the first option. For a college fund that's needed in ~18 years, I'm more inclined to pick the TEP so I can set it and forget it and trust Vanguard to make good decisions. Is that reasonable here?

2. The effective annual contribution "limit" is $17,000 for 2023 to stay within the gift tax exclusion limit. Is there any reason I shouldn't front load it with that amount this year, then my future yearly contributions could be lower and still be on pace for the final goal? Assuming my other tax-advantaged retirement accounts are maxed out yearly and that $17,000 would otherwise end up in a brokerage account or savings.

Thanks for any input.

$17k is per person, if there is a spouse or others they can gift also.  I am not familiar with the Nevada plan as far as its annual max contribution, if any.

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  • 2 weeks later...

None of my existing brokers allow opening a second margin or even cash account under my name (and earmarked for kid)

One of them offer a joint-account ‘with rights of survivorship’….but turns out the other joint owner must be 17+

Ended up opening a ‘Custodian account’ instead where i manage the money now, and kid automatically inherits full control at the age designated by me between 18-24. All post-tax so theres no real advantages. Bought kid some SPY with open limit order for TSLA should it hit

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