How much to add to my son's 529?

[zetta]

When my son was born, my dad placed $20k in a 529 plan for him and transferred ownership of the plan to me. At that time I ran the numbers through a calculator and it appeared that with a 10% return that would be enough to cover 100% of costs at a public university when my son turned 18.

4 years and a stock market crash later, the account is currently worth $19.5k. The calculator says that if I want to cover 100% of a public university, I should add either a lump sum of $18k now, or make annual contributions of $2,500.

I have the money available, and plan to cover 100% of college costs (as my parents did for me, and my grandparents did for my parents). My emergency fund and retirement is fully funded, so that is not an issue. Should I move it all over now, move part now and part later, or make annual contributions?

[disneysteve]

There's no easy answer to that question. You are trying to project the cost of something 14-18 years from now. Obviously, the best of calculators are making all kinds of assumptions in that process that may or may not be accurate. Only time will tell.

My main concern with the 529 is over-funding it and having to pay a penalty to take out the excess. I'm leaning on the slightly conservative side and aiming to grow that account to what may be 65-75% of predicted costs and making up the rest from non-529 accounts. That way, I'm pretty much minimizing the chance that there will be too much in the 529.

Perhaps you can split the money. Put maybe 10K in the 529 and put the other 8K in a taxable account. Yes you'll pay taxes on the earnings but you'll also maintain full control over that money. If you need it for college, it will be there. If not, it can be used for other purposes.