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Quaker

Joined: 08/13/1998 Posts: 18723
Likes: 3558


Sounds like Illinois is well ahead of Maryland in its 529 plans


as Maryland both forces you to invest in certain "1% load" mutual funds and does NOT allow you to prepay your tuition. If you go to another state, the prepay tuition is a crap shoot and the state tax break is gone.

In general, IRAs are pre-tax; Roths and 529s are post tax.

If you feel taxes are historically low now and will rise, in theory you should pay the taxes and move the money into the Roth/529. The Roth is better imho because it lacks the restrictions that a 529 has. Perhaps it lacks RMDs though; which could be nice if you plan on paying tuition for generations of descendants? I won't deep dive on the Illinois state tax break, I'm just going to assume it is insignificant in the big picture.

I personally try to maximize my pre-tax contributions to my SEP-IRA. Realistically, it might be better estate planning to cash assets and convert them to Roth-IRA/529 to avoid the estate tax implications ... but I always worry that some day the market will go down and I'll regret I paid taxes and then lost tax free money afterwards.

Also, I may be vain and like the bigger number (untaxed) than the smaller (tax free) number?

Bottom line is if you can use any of the vehicles without inhibiting your cash flow or accumulating credit card debt; you are likely doing well.

(In response to this post by Zhoo)

Posted: 06/15/2021 at 2:14PM



+1

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Current Thread:
 
  
529 Plans and estate planning.... -- Zhoo 06/15/2021 12:23PM
  Will there even be tuition in the future? ** -- ryno hoo 06/15/2021 1:55PM
  529's can be great wealth transfer tools. -- SouthernHoo 06/15/2021 12:58PM
  I didnt know you could use your 529 for this -- Zhoo 06/15/2021 5:12PM
  Thanks for posting the link ** -- 105A 06/15/2021 3:57PM
  Not sure all states, but Va you have to use within 30 years -- Chesapeake HOO 06/15/2021 12:33PM
  Right now I have two accounts in my name -- Zhoo 06/15/2021 1:29PM
  100% yes. Can each have an account for each kid -- hoos2008 06/15/2021 3:15PM
  Tax deduction yes. But can contribute more -- hoos2008 06/15/2021 5:38PM
  Its a great way to get great gains early on -- Zhoo 06/15/2021 8:42PM
  Illinois....... -- Zhoo 06/15/2021 5:08PM

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