<p>again, they’re not choosing between – they’re said they’re funding both and wondering if there’s a better place to put the college funds than the 529</p>
<p>Math, this was from OP post</p>
<p>Would it make sense in terms of FAFSA to stop our deposits into S’s 529 and put them into our IRAs instead? Or would this not make a difference at all? </p>
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<p>It would make sense, imho, to fund IRA first, then 529.</p>
<p>This was from a later post by the OP:</p>
<p>“Thanks mathmomvt, you have it right in your response to beolein–I’m talking about money that’s allocated towards college costs already. We also have funds allocated towards our IRAs.”</p>
<p>There’s nothing in the OP’s posts that indicate they don’t have things under control. They are currently doing both 529 and IRA. They are just wondering if all to IRAs is a good choice for fafsa. Not sure why anyone is reading more into it.</p>
<p>Thanks everyone for the input, I’ve been reading replies and having to google lots of terms!</p>
<p>I never knew about UGMAs and do wonder whether they’re for us and how far down the financial aid route we’re going. Can anyone explain the second paragraph from a page on UGMAs? I’ve been trying to understand how they work.
*Those eligible for financial aid may actually not benefit from a establishing a UGMA. Colleges and financial scholarships generally assume that 35% of assets in a child’s name be used to pay tuition before calculating any award of financial need. This figure is approximately 6% of assets for parents’ assets. Hence, any tax savings could be significantly offset by the loss of financial aid given by the school.</p>
<p>To combat this financial aid conflict, many parents sent up UGMA accounts and then plan on using the assets for the benefit of the child prior to completing financial aid forms; hence, they receive the tax benefit and avoid losing financial aid.*
[What</a> are the pros and cons of a UGMA account?](<a href=“http://www.the-adviser.com/Money/ugmaacc.htm]What”>What are the pros and cons of a UGMA account?)</p>
<p>As for funding our retirement before the kids’ college funds, we’re currently putting much bigger contributions into retirement accounts, at least 3x as much as into the kids’ funds. H does have a defined benefit plan (another term I had to google) after many years of misery as a public sector employee. I’m also public sector but haven’t been in as long so it’s mostly my contributions (with some employer contributions, I need to find out how much they’re contributing and look at my allocations) We’re both having money withheld into 403B accounts (public sector equivalent of 401K) and we’re actually making the maximum contributions to our IRAs so any additional money would get put into 403Bs. </p>
<p>So that really changes my question to one about tax and FAFSA impact of 403B vs 529, not IRA vs 529. And the more I read the more I think that 403Bs are even more complicated to me than IRAs.</p>
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The parents may be paying for laptops, cars, applications and tests, etc from the account … or a private HS. </p>
<p>PS - Some schools that use the profile ask about retirement accounts (IRAs, 401Ks, and 403Bs) and if they consider the retirement accounts over-funded they may still consider that extra money as an available asset … so depending on how much you have already saved in retirement accounts than stashing extra money may not have the financial aid benefit for which you are looking at some schools.</p>
<p>This statement is out of date:</p>
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</p>
<p>The actual amount is 20% for student assets.</p>
<p>If you’re saving money to pay for your child’s college, then a 529 is the way to go because it’s assessed at the parent rate of 5.6%, rather than the student rate of 20%, by FAFSA.</p>
<p>I am not sure how much OP wants to put into education, but the limits for IRA are $5000 plus catch up so it will be $6000 per person. So you could put in $12000 a year total for both of you. On the other hand you can contribute $26,000 (total for both of you ) into a 529 before gift tax comes into play.</p>
<p>So it also depends upon the amount.</p>
<p>I realize now that there are two children. A IRA max is $6000 per person period. For 529 you and your spouse could contribute $26,000 for each child or $52,000 a year. Again your OP says a few hundred dollars a month, so not sure what numbers you are talking about.</p>
<p>There are no Federal annual limits to how much can be contributed per beneficiary to a 529. Individual states might impose a limit although I haven’t heard of any offhand. Each state has its own lifetime limit, typically over $200K.</p>
<p>If you’re concerned about Gift and Generation-Skipping Transfer Tax (GSTT) issues then you should be aware that the GSTT regulations include one unique provision, applicable only to Section 529 plans. You may contribute up to five years worth of annual exclusion gifts in one year. So a married couple could contribute up to $130,000 per child up front without using any of their lifetime gift tax credit.</p>
<p>[529</a> Plans: Questions and Answers](<a href=“http://www.irs.gov/newsroom/article/0,,id=213043,00.html]529”>http://www.irs.gov/newsroom/article/0,,id=213043,00.html)</p>