Questions From The Flight Deck:

Introducing: Andy Christopher – F18 Navy Fighter Pilot and Investment Advisor

• Background
  • How’d you get interested in flying?
  • Why the Navy?
  • Navy flight experience.
    • Ejection story – first flight!?!

 

Meat of the Mission – 529s

Common Questions:

• What if my kid gets a scholarship?
• Do I need to invest in my state’s 529? No!
• What if I overfund the 529?
• Can I give my 529 to my child?
• How does the 529 affect financial aid?
• Can I use the 529 for United, Delta, SWA feeder schools – aka career development programs.
  • United Aviate
  • Delta Propel Program 
  • SWA Destination 225
• Should I just use the Roth IRA? Roth 401k?
• The major difference between Roth IRA withdrawals and Roth 401k withdrawals:
  • There is one catch, though. Early withdrawals have to be prorated between (nontaxable) contributions and (taxable) earnings. To calculate the portion of the withdrawal attributable to earnings, simply multiply the withdrawal amount by the ratio of total account earnings to account balance. U.S. Department of Labor. “401(k) Plans for Small Businesses Supplement.”
• Why save for college?
  • College Tuition Inflation Statistics | BestColleges 
  • Tuition increases over time have traditionally outpaced inflation
  • Avoid student loan debt (for parents and children)
  • One of the most expensive “investments” in one’s life
• 529 basics 
  • Similar to Roth IRA: After-tax money in, tax-free money out when used for qualifying tuition expenses
  • FAFSA: Does a 529 plan affect financial aid? - Savingforcollege.com 
    • Any parental assets beyond that amount ($10,000) will reduce a student’s aid package by up to a maximum of 5.64% of the asset’s value.
    • So, if a parent’s 529 account exceeds the Asset Protection Allowance by $10,000, his child’s financial aid award could be reduced by as much as $564.
• Which plan to pick?
  • What Is a 529 Plan? - Savingforcollege.com
  • Don’t have to use your state’s plan, but may be reasons to use in-house plan
  • Unique plan rules for transfer of ownership, total account value limits for contributions
  • State tax benefits (OH)
    • E.g., Virginia residents – tax deduction PER ACCOUNT, age 70 rule and tax deductions carry forward...
  • Low-cost plans (Utah my529, W VA, etc.) 
• How much to save? 
  • Vanguard Savings Calculator
  • Rule of thumb:
    • Public vs. Private
    • Scholarship
    • Other sources of funding: grandparents, GI Bill, etc.
  • "Superfunding”: 10 Rules for Superfunding a 529 Plan - Savingforcollege.com
• How to invest the contributions?
  • Low-cost/index approach
  • Target-enrollment date (works like a 401(k) target-date fund)
• What if you don’t use the funds?
  • Estate Planning Considerations: Dynasty 529 Plan For Multigenerational College Expenses (kitces.com)
  • Secure Act 2.0 Changes: The SECURE Act 2.0: The Most Impactful Provisions #10 — Moving 529 Assets to a Roth IRA - Fred Reish
  • Withdrawal Options: Penalty-free (not tax free) for service academies, scholarship, death/disability
  • Changing beneficiaries
• Veteran Benefits
  • GI Bill Transfer
  • State Specific Benefits (CalVets, etc.)
    • Hazlewood Act - Through the state’s Hazlewood Act, originally approved in 1943, Texas promises its veterans or their survivors 150 free credit hours at any of the state’s public universities or community colleges, once their federal benefits have been exhausted. And vets may transfer hours they don't use to their children.
      • Hazlewood benefits are available to veterans who currently reside in Texas and who lived in Texas or had Texas as their home of record at the time of enlistment, or who simply enlisted in Texas.

 

1. Vanguard college funding calculators 

• https://vanguard.wealthmsi.com/csp.php

2. Leading Edge 529 video

• https://youtu.be/Br4ws8waxDQ

3. Morningstar College report, comparison.

• https://www.morningstar.com/personal-finance/best-529-plans-2023