college savings & Roth

Hi, a question about tracking and accounts.

After a year of YNAB & paying off my debt, I chose to increase my retirement savings; it was always at 15% but now it's about 18% of my income. My plan is to increase this further with future raises until I get to about 20 or 23%. 

I also started saving a wee bit for my son's college. I opened a 529 that I am funding with just $25/mo. I am also funding a category for him, called young-adult-threshold, at about $80/mo that right now is just staying on my budget.  I plan to increase how much goes into that category each month as my budget becomes more sturdy. He's a preschooler right now, my aim is when he graduates high school to have a nice pile of money either for college or vocational training, to start a business, go on an adventure, or something else meaningful. I plan to increase how much I flow into this category as well over time.

As I've been researching this all, it seems that it is wise for us to have some 529 savings for tax diversification, but for the bulk of the money I want for his threshold fund to go into my Roth, since the Roth is more flexible.  I discovered this year that my work offers a Roth 457b; this is like a normal Roth, but you can contribute up to 19K per year, not 6K. I'm nowhere close to fully funding either my 401k or my newly-opened 457b so there is plenty of space to pull his threshold fund into those accounts.

I'm wondering if there's anyone else saving for college/young adult threshold funds using their Roth or retirement accounts and your thoughts on that?

I'm also wondering how I can track this in YNAB. If I put the balance of his threshold category into my Roth, is there a way to indicate that X amount of the Roth is earmarked for him? (I find it very motivating to see all the categories split out and would be loathe to lose that aspect in my quest to save) Maybe I could flow all of the college savings into a different investment line within the Roth, as a way of keeping it separate? But I really just want all of it in the same index fund that I chose for my retirement savings. 

Any thoughts on this approach I am considering? Thanks everyone!
 

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    • nolesrule
    • Stealing From the Future fix is an improvement but is incomplete....
    • nolesrule
    • 4 mths ago
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    I would not put money I absolutely want my kid to have into my retirement account. We opened custodial brokerage accounts for our kids and tax gain harvest every year in amounts below the kiddie tax limits. 

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    • nolesrule you didn't do a 529 at all? Are your accounts UTMA accounts or just regular investment accounts?

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    • nolesrule why wouldn't you?

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      • nolesrule
      • Stealing From the Future fix is an improvement but is incomplete....
      • nolesrule
      • 4 mths ago
      • 1
      • Reported - view

      Ivory Storm we have Florida Prepaid so locking away money in a 529 seemed unnecessary if they didn't go to college. 

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      • nolesrule
      • Stealing From the Future fix is an improvement but is incomplete....
      • nolesrule
      • 4 mths ago
      • Reported - view

      Ivory Storm I don't recommend holding it in Roth because it's precious tax advantaged space I would not give up for anything. Use it for retirement savings only. 

       

      Lastly be careful about saving too much for kids without securing your own retirement funding. 

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    • nolesrule this is where I get mixed up, at what point is retirement funding "secured"? If I am contributing 20% of my income to retirement and will retire at the usual age with a house paid off, no childcare obv,  . . doesn't that count as secure and now I can save for my son? Or is secure only when you are contributing up to the full limit of any and all tax advantaged spaces?

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  • Ivory Storm We're not able to give investment advice, but I would caution you that a Roth 457b is very different from a Roth IRA, and I'd be sure to read up on the differences before making any decisions.

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    • Matthew I've read a lot so far and don't see what you mean by the very in boldface. I'll contact HR and make sure everything is copacetic.

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    • Ivory Storm Sorry to be cryptic! The key difference is that generally you can't withdraw contributions from a Roth 457(b) until you're no longer working for that employer. ("Separated from service" is the term of art.) It's possible this varies by plan, so ask!

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    • Matthew yup that is highly relevant! I read allll the pages on my employer's website and you are correct, I can't withdraw before 59.5 years old unless I leave my employer . . . but I do plan on working till 63 at least. THANKS!

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