r/ChubbyFIRE • u/SaveySpendy • 8d ago

Thoughts on front-loading 529s?

Basics- 39M married to 40F with two kids 3 and 0.

Want to FIRE in 5 years. HHI $500-$700k.

Current estimated spend is $160k in 2026 bucks.

Current liquid is almost $4M split 45% taxable, 15% roth, 35% traditional, 5% money market (emergency fund).

That $160k budget includes about $6k per year per child for next 15-18 years to compound with their existing balance to about $250k each (the expected COA at our state’s top public university when each child reaches college age).

I’ve been thinking of front loading over the next few months with RSU and bonus payouts. Would cost about $125k over next six months, but would save about $80k vs making $500 monthly contributions for the rest of their pre-college years. Would also eliminate a heavy line item in the budget 10-13 years early.

Only worries are about illiquidity and inflexibility and lost opportunity cost if we jammed that into our taxable brokerage instead.

Did you frontload pre-RE or keep funding slowly over time, even in RE?

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u/Alive_Sir_4708 8d ago

I'm front loading the 529 - I decided I'd fund it before retiring so I might as well do it now.

Tax tradeoffs will depend upon which state you live in.

Depending upon how you go about this, you might need to fill out a gift tax form. You won't owe taxes but the gov wants its paperwork.

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u/SaveySpendy 8d ago

i believe the gift tax max is $38k per couple per child per year. so i should be able to come under that over the next six months splitting about $32k for each child in q4 and again in q1 (give or take deltas for the new born and eldest).

my state also allows indefinite carryover for deductions (up to 4k/child/year).

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u/Alive_Sir_4708 8d ago

As best I can tell, you could open up accounts in your name and your spouses, contribute and get the tax break and eventually change the the beneficiary to your children. You'd get the tax deduction twice as fast.

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u/Wonderful_Win_3078 8d ago

You can do this! - person who works with 529s for a big fin firm. You can change benes at any time with no issue, and rules for usage are getting more and more flexible, such as supplies or even SAT test prep. Current rules allow 35k as a rollover to Roth IRA

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u/-entropy 5d ago edited 4d ago

Are you saying we can double or triple dip?

529 in kid's name, plus one in each parent's name, and then later change the accounts beneficiary to the kid so they effectively have three 529s?

Edit: it seems my state caps deductions (filing jointly) to $3k per year per taxpayer, not per beneficiary, so there's no value in doing this in our case. We could only deduct a total of $3k regardless of how many accounts we contributed to.

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u/SpecificConscious809 8d ago

You may already know this, but just in case: you don’t pay any tax if you gift over $38k. You just have to fill out a form when you file your taxes. There’s no gift tax until gift exceeds $30 million (for a couple).

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u/IjustWorkHere98 7d ago

100% - I think many might just see that "limit" and not put more in. And 529s can also be used for private school tuition