529 Pointless for Veterans?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
glashutte
Posts: 32
Joined: Wed Aug 10, 2022 1:40 pm

529 Pointless for Veterans?

Post by glashutte »

Hello,

Is 529 pointless for veterans?
My 2 children will have college & room/board paid for using my GI Bill and also state benefits for veterans' children.

So if my kids college costs are already paid for, is there a point for me to invest into 529? Is there a workaround where they can use 529 for something other then college?
User avatar
MillennialFinance19
Posts: 586
Joined: Sat Feb 09, 2019 10:06 am

Re: 529 Pointless for Veterans?

Post by MillennialFinance19 »

If I was in this situation, I would not invest in a 529 plan, unless you or your spouse has plans to go to college. The Post 911 GI Bill is a gold mine. I personally used 100% of my benefit with little-to-no issues along the way.
VTI and chill until 57...
Tex
Posts: 203
Joined: Sat Aug 07, 2010 11:19 am

Re: 529 Pointless for Veterans?

Post by Tex »

I wouldn’t use it for college. Maybe if your kids go to private school for elementary, middle, or high school? Not sure if veteran benefits would cover that, but 529s are permissible for it.
feehater
Posts: 358
Joined: Fri Jul 14, 2017 10:14 am

Re: 529 Pointless for Veterans?

Post by feehater »

I’ve been wondering this too. At the very least you can withdraw the amount of “scholarships” penalty free, so you get the tax free growth, but then you have to pay income tax on it. The higher rate of income tax vs capital gains on a theoretical taxable account may or may not have made it a good gamble on the tax free growth.
Soon2BXProgrammer
Posts: 3289
Joined: Mon Nov 24, 2014 10:30 pm

Re: 529 Pointless for Veterans?

Post by Soon2BXProgrammer »

I used my GI bill benefit for myself, so I couldn't use it for my kids, so we have saved in a 529.

That being said, because of my disability status, they might end up getting free money through a scholarsihp, but i didn't want to count on that.

Every state is different, if your state has benefits for your kids then great, as long as you are planning to stay there. Some states don't. or they have requirements like 100% disability or death.
Earned 43 (and counting) credit hours of financial planning related education from a regionally accredited university, but I am not your advisor.
User avatar
White Coat Investor
Posts: 17409
Joined: Fri Mar 02, 2007 8:11 pm
Location: Greatest Snow On Earth

Re: 529 Pointless for Veterans?

Post by White Coat Investor »

I'm a veteran but don't qualify to use the GI Bill so yea, we have 529s for the kids.

In your case, they could be used for grandkids just by changing beneficiaries later. But it wouldn't be a bit priority for me.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
MBB_Boy
Posts: 899
Joined: Sat May 12, 2018 4:09 pm

Re: 529 Pointless for Veterans?

Post by MBB_Boy »

How old are your kids? Laws change, and you could see the ability to pass the GI bill on to kids eliminated or restricted to those who die in combat.

I'm also a veteran, and am opening a 529 to avoid putting all my eggs in the government basket. My kid is less than a year, so 18 years is a LONG time for the government to make things "better" and screw me
workingfornow
Posts: 67
Joined: Fri Jun 08, 2018 8:57 am

Re: 529 Pointless for Veterans?

Post by workingfornow »

Unless things have changed, I believe the Post 9/11 GI bill provides 36 months of funding, including a maximum tuition stipend that changes yearly and a generous housing/board allowance based on BAH for an E5 with dependents, based on locality. https://www.militarytimes.com/education ... its-guide/ The 36 months is transferable to dependents, and can be split among them. In practice, this can cover 4 years of college, given that 2 semesters is generally about 9 months. While the tuition stipend may not cover the full cost at some expensive private universities, some participate the in yellow ribbon program, which provides scholarships for the remaining tuition not covered by the GI bill. The GI bill is particularly great because none of it is considered a taxable scholarship, not even the room and board stipend.

So, if you have 2 kids, the GI bill should cover 4 years for one if them (or 2 years each for both). You can mix and match, depending on what’s most advantageous for you, for example if one of your kids goes to a school in a HCOL area, like New York if Los Angeles, you may want to preferentially use more of the GI bill for that child, so they can get the higher housing stipend, and use other funds for the second child. Or if one child goes to a lower cost state school and the second goes to a private who will cover all tuition/fees with the yellow ribbon program, you may decide to use the GI bill credits for that child. Unless things have changed, you can mix and match and transfer between beneficiaries later, so you don’t need to make a decision yet on who will get what…just be sure to list both kids initially. My experience may be outdated, since it’s been 10 years since they used it, and rules may change so be sure to do your due diligence,

Bottom line, I would consider a 529 even with the GI bill as you are likely still going to need to fund a total of 4 years if tuition, room, and board between your 2 kids. If you do end up overfunding, I believe the amount funded by the GI bill qualifies as a scholarship which would enable you to withdraw non qualified distributions penalty-free (although still paying tax on any gains). Again, check on everything I’m saying, as my info may be outdated.
Topic Author
glashutte
Posts: 32
Joined: Wed Aug 10, 2022 1:40 pm

Re: 529 Pointless for Veterans?

Post by glashutte »

Great advice everyone and thank you. All lots to consider..

If I contribute fully to 529 but kids actually never need to use it, what happens to it?

Has law ever changed that works against veterans regarding our GI Bill?
Topic Author
glashutte
Posts: 32
Joined: Wed Aug 10, 2022 1:40 pm

Re: 529 Pointless for Veterans?

Post by glashutte »

Great advice everyone and thank you. All lots to consider..

If I contribute fully to 529 but kids actually never need to use it, what happens to it?

Has law ever changed that works against veterans regarding our GI Bill?
mary1492
Posts: 716
Joined: Thu Oct 17, 2019 3:02 am

Re: 529 Pointless for Veterans?

Post by mary1492 »

.....
Last edited by mary1492 on Thu Sep 29, 2022 11:04 am, edited 1 time in total.
feehater
Posts: 358
Joined: Fri Jul 14, 2017 10:14 am

Re: 529 Pointless for Veterans?

Post by feehater »

glashutte wrote: Sun Aug 14, 2022 7:51 pm
Has law ever changed that works against veterans regarding our GI Bill?
Yes, they added some restrictions on who could transfer benefits four years ago. You now have to transfer before your 16th year. I personally find it highly unlikely they would ever change the benefit for people who already transferred like you.
User avatar
krafty81
Posts: 685
Joined: Thu Jul 05, 2018 2:01 pm
Location: San Diego, CA

Re: 529 Pointless for Veterans?

Post by krafty81 »

I am a vet. I transferred the GI Bill for first child to attend college. I had already done pre-paid 529s for both kids prior. I transferred first child 529 pre-paid to second one (Alabama allowed one transfer), so he got both 529 pre-paids which covered second child. So yes, a 529 is the way to go to ensure you have enough for both kids. Some considerations -

- Depending on your state, 529 tax breaks can be good. My state (CA) offers no breaks for 529 except tax-free earnings
- I liked pre-paid, in that I did not have to worry or track growth. 2008 crash happened just prior to my first starting college, which did not affect me.
- CA offers tuition free for UC or State schools for any vet with a disability (state resident)
- You do not have to use your own state's 529. Take a look at the rules for other states as well.

PM me for any questions.
Post Reply