If you’re living in WA, then you’ve got no income tax, so there is zero reason to invest in the WA 529. These things change frequently, but last I checked the best ones are CA and Nevada. I don’t think WA even cracked the top 10.
Both CA and NV have a lot of good index fund options and low fees.
Also like Riverman said, you can do 5 years worth of contributions at once. The gift exclusion went up, so you can actually do 80K at once. If you’re married, then you can do 160K and just say 80K came from each of you (some exceptions may apply depending on how long you’ve been married, when the money was acquired, etc).
You can get creative and do even more though. You could set up a 529 in your name and put additional funds in it and then transfer it to your kid after 5 years (assuming you already did a lump sum). You could also repeat for wife. There are probably ways to shove even more in, but for one kid, above strategies should be more than enough. Even if you plan on sending your kids to private school for k-12 and want to use some for that (I think it’s capped at 10k/yr for pre-college schooling).
I-bonds are not bad but I think the EV over 18 yrs has to be behind the market. It’s quite unlikely that the rates will be this high for a long time.
Most (?all) of the prepaid tuition ones let you use the money at out of state schools, but you only get an amount equal to the in state price at the time that the kid is in college. If they didn’t allow that, no one would use them for exactly the reason you mentioned.
Only aware of how my state (VA) works, and it’s not that way. You getter the lesser of the in state price or your investment plus a return equal to a money market fund. So if you don’t go in-state and market does decently, unless I’m completely misunderstanding rules, you get pretty screwed.
Here are the rules:
At public or private colleges and universities outside Virginia, Prepaid529 pays the lesser of the following:
Payments + reasonable rate of return* on payments
or
The average Virginia public institution tuition and mandatory fees
This is determined by the Virginia529 Board and currently follows the quarterly performance of the Institutional Money Funds Index as reported in the Money Fund MonitorTM by iMoneyNet.
But you get screwed in that way even if you have good state colleges, don’t plan to move, and can force your kid to go to a college in state. Even if all of those things are true, if the market does well, you would have even more money in the 529 if you had just gone with the market. And there are definitely things that you could use that for. Lots of creative ways to get value out of extra 529 money if that is actually a problem.
I guess my point was that you will get something if you decide to go out of state, but I agree that you do have less flexibility. So while Virginia’s plan may take the prize for most terrible, you will still get some tax free growth on your college savings that you can use out of state.
People who are going for pre-paid tuition are going for a guaranteed minimum and are generally risk-averse. So I actually view it the opposite way. If someone does that Virginia plan, they only really get screwed if the market goes up less than tuition does. Otherwise they just grow with college inflation.
In other states, they (?mostly) don’t play that game with the lesser of two calcs. In those cases, you just get in state fees and tuition amount and if the market would have done better then it’s too bad for you and you should have done that.
I bought shares through Vanguard brokerage late last year and start of this year. Of course they are down significantly.
Being self employed I can contribute approx 40k to my Individual 401k (also via Vanguard) when I combine employer and employee contributions.
The amount in my brokerage is approx 40k.
Is it a bad idea to take that money and use it to make my 401k contributions?
My understanding is I would chalk up a capital loss, but then putting that money into index vanguard funds reduces my tax and gives me opportunity to capture gains in market recovery via index funds.
If they are all negative, he could move them now and then write the capital losses off against regular income (if he has no other capital gains to write them against this year) $3000 per year until they are used up.
There is no tax advantage to holding onto stonks that are down. You need to sell them to take advantage of the capital loss.
It’s not unreasonable to talk about class in relation to overall income distribution, and it’s not unreasonable to talk about class in relation to lifestyle security and purchasing power. There’s not really a way to enforce one definition or the other, despite how they diverge with time and space.
The Federal Reserve used to break income down into lower/mid/upper using thresholds of under 80% of median, 80% to 120% of median, and over 120% of median. This is probably useful for some purposes but American incomes are not tightly bunched around the median (to say the least) nor are they normally distributed around the median, so anyone around the thresholds is basically going to be effectively around the median in terms of life style.
Qualitatively, what do people think of as an upper middle class lifestyle? A number of things come to mind, but I think being able to send your kids to a private college without a scholarship would be a pretty big part of it.
I 100% don’t want to just sell them because they are low and then be out of the market, but in this case I would be taking those same funds and putting them back into the market in a diversified way, and capturing the tax benefits of the 401k.
If I didn’t sell those shares I would still try to get as close to the 40k cap as I could otherwise, but in this scenario it feels like I would be moving 40k from shares of 3 companies into a much more diverse investment, capturing the capital losses, and capturing the maximum tax break of my 401k funds.
I would say simply not worrying about money very often. Things like traveling and eating out basically when you feel like it, not sweating monthly bills and putting away enough money for a comfortable retirement by age 60 or so. I think in NYC or SF this would be like $500k of income, maybe half that in flyover country.
The problem is that puts your upper middle class income at the 90th+ percentile which is wild. It’s basically an admission that the ultra wealthy have consumed so much of American wealth that you’ve got to be a two professional household to attain a comfortable middle class lifestyle.
The top 40% have a massively different experience from people in the bottom 60%.
The top 10% have a massively different experience from the people in the three deciles below them.
The top 1% have a massively different experience from anyone else in the top 10%
The top .01% have a massively different experience from the top 1%.
At each of these levels there’s a pretty massive shift in material life quality. In the bottom 60% you’re deciding what basics of life (food, housing, spending less than two hours per day commuting, healthcare) you can live entirely without and which you will merely have to accept a massively substandard version of. Often you will be working 4-5x harder than people living in the higher social classes with multiple jobs and long commutes.
It gets better from there, but it’s only barely acceptable in the 6th and 7th deciles.