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Obama's Tax Increase on the Middle Class. YES, Increase

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Jhhnn

No Lifer
Nov 11, 1999
61,106
13,039
136
You missed the article about 6.25 million of the 11.8 million 529's being held by households less than $150k income?

Same point still stands. I started a 529 at time... not long after Obama and crew were out promoting them for their tax free status. Only 3 years in buddy... It isn't like my daughter had 10-12 years of contributions and gains to benefit from before they changed things again. Shit, it was only 2009 when the tax free aspect became "permanent".
Heh. I didn't miss the part where 97% of families don't have 529 plans.
 

Jhhnn

No Lifer
Nov 11, 1999
61,106
13,039
136
Then you have been fortunate. I'm 44. I've often wished I had been born twenty or more years earlier and had the benefit at the time of a cheaper education, perhaps a job with a pension instead of these bullshit 401k's, etc. We live in a modest home that we bought way under market value in 2004 because it was a wreck - in a modest part of town... drive a ford and an old chevy. Keep our bills to the mortgage and save pretty much everything else. I just want to ensure my daughter has a slightly better start that I didn't have in life. I'm also just trying to save enough for retirement that we can retire at a reasonable age and still be able to do the things we enjoy and not be a burden to anyone. I grew up poor the first ten years of my life when my father fell down an elevator shaft and was pretty fucked up for several years before he was back to work. Our family survived off the good will of the community, and social programs at the time.

So I don't worship the wealthy, or try to emulate them. I'm never going to be rich. I'm fortunate enough to be living comfortably by my standards. I'm not driven by greed at all... I actually make plenty and could make less. I'd be ok with that as I built our lives around needing far less. Having been laid off once in 2010 for eight months and surviving that only reinforced I had the right principles.

My concern in this 529 shit is for my daughter which I admit drives some of my disgust at some of the responses to this post. Every now and then one of these debates rolls around and there is no middle ground. "Eat the rich" clouds your argument in this as much as my desire for my daughter to not be up to her eyeballs in college debt drives mine.
Earlier, I pointed out that taxes on 529 plans at maturity are not onerous, certainly not in the way you paint them to be. I pointed out the larger deductions & tax credits proposed, along with free tuition at state community colleges. I pointed out that taxes change, so there's really no saying where they'll be 15 years from now. I pointed out the greed in those able to invest thinking that they should be able to do so tax free. I figure it should never be that way, for anybody. Free rides are for those who can't get a better ride, and they're not very good rides at all.

If you think taxes are the problem, you're blind & inexperienced. Wall St will undoubtedly ding you a lot harder over the next 15 years than taxes on your 529 ever will.
 

DCal430

Diamond Member
Feb 12, 2011
6,021
9
81
Earlier, I pointed out that taxes on 529 plans at maturity are not onerous, certainly not in the way you paint them to be. I pointed out the larger deductions & tax credits proposed, along with free tuition at state community colleges. I pointed out that taxes change, so there's really no saying where they'll be 15 years from now. I pointed out the greed in those able to invest thinking that they should be able to do so tax free. I figure it should never be that way, for anybody. Free rides are for those who can't get a better ride, and they're not very good rides at all.

If you think taxes are the problem, you're blind & inexperienced. Wall St will undoubtedly ding you a lot harder over the next 15 years than taxes on your 529 ever will.
There is no advantage or point to the 529 plan in most states, as you pay the exact same tax if you invested in these funds directly outside of the 529 plan. If I invested in a stock fund I only pay capital gains tax on my earnings, so it isn't any different. There really is no point to the 529 plan any more and it should just be cancelled.

For people in most states there is only negative consequences now in investing in 529 vs directly into a fund. No point in 529 plans for these people as they get no tax advantage and are restricted from their money.

Atleast if grandma invest the money in her own name outside of the 529 plan it doesn't count against the person financial aid, but if she puts the money in a 529 it does count against them. Really people who are smart would stop using a 529 plan as it has significantly higher consequences to use.
 
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Jhhnn

No Lifer
Nov 11, 1999
61,106
13,039
136
There is no advantage or point to the 529 plan in most states, as you pay the exact same tax if you invested in these funds directly outside of the 529 plan. If I invested in a stock fund I only pay capital gains tax on my earnings, so it isn't any different. There really is no point to the 529 plan any more and it should just be cancelled.

For people in most states there is only negative consequences now in investing in 529 vs directly into a fund. No point in 529 plans for these people as they get no tax advantage and are restricted from their money.
It would still offer state tax advantages for many. A list of states offering tax breaks wrt 529 plans-

http://www.finaid.org/savings/state529deductions.phtml

Grandparents, for example, can create 529's for their grandchildren & withdrawals would only be taxed as capital gains. That's particularly valuable for the affluent paying for very expensive schools. It bypasses estate taxes, probate & any squabbling that may occur over the estate. Affluent families often have such squabbles, freezing disbursements from the estate that students need now, not years from now.

My wife worked for lawyers for decades. In one instance, a very wealthy family was still squabbling 11 years later. It's what happens with a string of bitter ex-wives & highly competitive family factions.
 

DCal430

Diamond Member
Feb 12, 2011
6,021
9
81
It would still offer state tax advantages for many. A list of states offering tax breaks wrt 529 plans-

http://www.finaid.org/savings/state529deductions.phtml

Grandparents, for example, can create 529's for their grandchildren & withdrawals would only be taxed as capital gains. That's particularly valuable for the affluent paying for very expensive schools. It bypasses estate taxes, probate & any squabbling that may occur over the estate. Affluent families often have such squabbles, freezing disbursements from the estate that students need now, not years from now.

My wife worked for lawyers for decades. In one instance, a very wealthy family was still squabbling 11 years later. It's what happens with a string of bitter ex-wives & highly competitive family factions.
A wealthy grandparents would just create an generation skipping trust. This offers for more protection and flexibility than a 529 plan.
 

WackyDan

Diamond Member
Jan 26, 2004
4,794
68
91
I wonder what percentage of the money is in those 6.25 million accounts? My guess is not that much.

Regardless, nothing has changed for the money you contributed, so what's the issue?
Average amount is $21k.

"Regardless, nothing has changed for the money you contributed, so what's the issue?"

Yes it will change if passed. That money isn't static. It is still earning year over year. That is money I invested and continue to invest monthly under the valid assumption that gains wouldn't be taxed as long as they were used for education. If you can't be bothered to understand how a 529 and other investments work, I'd shy away from statements like you made.
 
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fskimospy

Elite Member
Mar 10, 2006
70,068
18,808
136
Average amount is $21k.

"Regardless, nothing has changed for the money you contributed, so what's the issue?"

Yes it will change if passed. That money isn't static. It is still earning year over year. That is money I invested and continue to invest monthly under the valid assumption that gains wouldn't be taxed as long as they were used for education. If you can't be bothered to understand how a 529 and other investments work, I'd shy away from statements like you made.
This change in the law only affects new contributions. If you can't be bothered to understand how the law works I would shy away from statements about it.

I wonder what the median amount is. My guess is a LOT less than $21k.
 

LegendKiller

Lifer
Mar 5, 2001
18,261
68
86
This change in the law only affects new contributions. If you can't be bothered to understand how the law works I would shy away from statements about it.

I wonder what the median amount is. My guess is a LOT less than $21k.
It doesn't matter. People who can save should be able to and encouraged to.

This is nothing more than attempt to get people on the government tit even more.
 

fskimospy

Elite Member
Mar 10, 2006
70,068
18,808
136
It doesn't matter. People who can save should be able to and encouraged to.

This is nothing more than attempt to get people on the government tit even more.
People are already incentivized to save with preferential tax treatment.
 

Jhhnn

No Lifer
Nov 11, 1999
61,106
13,039
136
Average amount is $21k.

"Regardless, nothing has changed for the money you contributed, so what's the issue?"

Yes it will change if passed. That money isn't static. It is still earning year over year. That is money I invested and continue to invest monthly under the valid assumption that gains wouldn't be taxed as long as they were used for education. If you can't be bothered to understand how a 529 and other investments work, I'd shy away from statements like you made.
Perhaps you offer false assumptions & trumped up outrage.

If you assume taxes never change, you assume wrong.

As has been pointed out repeatedly this measure would in no way affect tax treatment of existing 529 contributions, earnings & then tax exempt withdrawals years down the road.

You lose nothing that was promised at the time, taxes being a year by year thing. If you feel that you were deceived, it was because you deceived yourself into thinking it would never change.

Going on about it the way you have, particularly considering it hasn't happened & that it won't be the end of the world if it does is quite childish. You can go on like a little princess whining incessantly about what she didn't get or you can man-up & look for the good in changing situations, make what you can of them.

There's only one constant in this life, & that's change. See if you can meet it with some integrity.
 

Jhhnn

No Lifer
Nov 11, 1999
61,106
13,039
136
It doesn't matter. People who can save should be able to and encouraged to.

This is nothing more than attempt to get people on the government tit even more.
Yeh, the tit you're hooked up to has few vacancies, huh?

Other than the financial elite, we all need tit, & we prefer Job Creator Tit. It's the best tit there is for the vast majority of us. Funny how it keeps getting harder & harder for people to get a hold of it.
 

LegendKiller

Lifer
Mar 5, 2001
18,261
68
86
Yeh, the tit you're hooked up to has few vacancies, huh?

Other than the financial elite, we all need tit, & we prefer Job Creator Tit. It's the best tit there is for the vast majority of us. Funny how it keeps getting harder & harder for people to get a hold of it.
What's laughable is that you guys are cheering for it while it solves nothing but affect the next most marginal student from getting a education without huge debt. It doesn't come close to solving the cost problem for those at the bottom end since the savings will be wiped out by a few years of increases, thus, their debt burden becomes larger too.

I'd think you'd be cheering for something that was a bit more meaningful than taxing those evil savers.
 

nickqt

Diamond Member
Jan 15, 2015
5,999
4,038
136
What's laughable is that you guys are cheering for it while it solves nothing but affect the next most marginal student from getting a education without huge debt. It doesn't come close to solving the cost problem for those at the bottom end since the savings will be wiped out by a few years of increases, thus, their debt burden becomes larger too.

I'd think you'd be cheering for something that was a bit more meaningful than taxing those evil savers.
First off, even with the new changes (that are only being proposed and have not taken effect, and will most likely not take effect) 529s don't become worthless. They just become less good.

Second, two years of free community college would likely make up for any lost savings from 529s and then some, since 2 years of core requirements wouldn't require, uh, any savings. So all of that money that you've put into a 529 continues growing for two more years before you even need to take it out.
 

ivwshane

Lifer
May 15, 2000
28,182
7,997
136
What's laughable is that you guys are cheering for it while it solves nothing but affect the next most marginal student from getting a education without huge debt. It doesn't come close to solving the cost problem for those at the bottom end since the savings will be wiped out by a few years of increases, thus, their debt burden becomes larger too.

I'd think you'd be cheering for something that was a bit more meaningful than taxing those evil savers.
Cheering for it? Cheering for a proposal that removes what amounts to a rarely used tax benefit that is used by a majority of people that don't need a tax break, all in order to give everyone a helping hand? How dare we!

Perhaps you can point us to another politician that has offered a "real solution" that we can all cheer for instead. Don't have one? Then GTFO!
 

DCal430

Diamond Member
Feb 12, 2011
6,021
9
81
First off, even with the new changes (that are only being proposed and have not taken effect, and will most likely not take effect) 529s don't become worthless. They just become less good.

Second, two years of free community college would likely make up for any lost savings from 529s and then some, since 2 years of core requirements wouldn't require, uh, any savings. So all of that money that you've put into a 529 continues growing for two more years before you even need to take it out.
Actually in many states they do become worthless, there is zero advantage to them over direct investing, and even some downsides.

Again we have free community college here already for most people, so that doesn't do dang thing.
 

nickqt

Diamond Member
Jan 15, 2015
5,999
4,038
136
Actually in many states they do become worthless, there is zero advantage to them over direct investing, and even some downsides.

Again we have free community college here already for most people, so that doesn't do dang thing.
You can invest in different state's 529s.

http://www.savingforcollege.com/intro_to_529s/can-I-have-529-plans-from-multiple-states.php

And most states do not have free community college.

So, when measuring pros and cons, you have to take into account that most likely more students would be getting free CC education for two years than do now. Most likely more than the amount of people who use 529s.

Not that I think 529s need to be changed from how they work now.
 

LegendKiller

Lifer
Mar 5, 2001
18,261
68
86
Cheering for it? Cheering for a proposal that removes what amounts to a rarely used tax benefit that is used by a majority of people that don't need a tax break, all in order to give everyone a helping hand? How dare we!

Perhaps you can point us to another politician that has offered a "real solution" that we can all cheer for instead. Don't have one? Then GTFO!
That's the problem, they are distracting knuckle draggers like you with bread and circuses and you clamor to blame others. They love it. "Hey, look, blame the upper middle class!"

lol.
 

DCal430

Diamond Member
Feb 12, 2011
6,021
9
81
You can invest in different state's 529s.

http://www.savingforcollege.com/intro_to_529s/can-I-have-529-plans-from-multiple-states.php

And most states do not have free community college.

So, when measuring pros and cons, you have to take into account that most likely more students would be getting free CC education for two years than do now. Most likely more than the amount of people who use 529s.

Not that I think 529s need to be changed from how they work now.
If you invest in a different state 529, you DON'T get that state benefits, that isn't how a 529 plan works. Many states do not have benefits for 529 plan, investing in another state doesn't change that, you don't get that benefit.
 

nickqt

Diamond Member
Jan 15, 2015
5,999
4,038
136
If you invest in a different state 529, you DON'T get that state benefits, that isn't how a 529 plan works. Many states do not have benefits for 529 plan, investing in another state doesn't change that, you don't get that benefit.
You might not get your state's tax deduction, but 529 plans in different states pay different amounts and perform better than others. Which could easily compensate for any lack of a state tax deduction...assuming that your state does offer a state tax deduction.

Which all goes to show that 529s do not become inherently useless, even if the proposed changes go into effect, which again, they most likely won't, making all of this moot.
 

DCal430

Diamond Member
Feb 12, 2011
6,021
9
81
You might not get your state's tax deduction, but 529 plans in different states pay different amounts and perform better than others. Which could easily compensate for any lack of a state tax deduction...assuming that your state does offer a state tax deduction.

Which all goes to show that 529s do not become inherently useless, even if the proposed changes go into effect, which again, they most likely won't, making all of this moot.
No, you can invest in those same funds or funds the same or higher returns directly, so again for people in many states they would have zero benefits.
 

WackyDan

Diamond Member
Jan 26, 2004
4,794
68
91
If you invest in a different state 529, you DON'T get that state benefits, that isn't how a 529 plan works. Many states do not have benefits for 529 plan, investing in another state doesn't change that, you don't get that benefit.
That benefit if your state offers it is often moot. Anyone who chooses their state 529 due to the tax incentive offered, if any isn't doing their homework.

I looked closely at the NC 529. For the tax incentives, the performance of the NC 529 was horrible. Opening the 529 on the Utah fund far exceeded the tax benefit on NC's fund.

Additionally, NC enacted a change a few years back that sets income limits on that tax benefit. If your income grows, the benefit also gets minimized.
 

nickqt

Diamond Member
Jan 15, 2015
5,999
4,038
136

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