If you haven’t put much—or any—money in your kids’ 529
plans this year, there’s still time before you ring in 2016. You may even score
a year-end tax break, since 33 states and the District of Columbia give
tax deductions or credits for contributions. Sure, you can lay out less
for toys, tech gadgets, and other holiday gifts for your kids and stash the
dollars you save in their 529s. But there are less painful (for the kids) ways
to come up with cash. Here are some places to look:
bonuses. If you get a year-end bonus at work, use all or part of it to
feed your 529s.
- Ditto for
flex refunds. Do the same with any reimbursements you receive this
month from your health-care flexible-spending account (FSA).
vacation days. If you have cafeteria-style benefits, find out if you
can trade any unused vacation days for cash before the end of the year.
- Use new
income. If you’ve hit the annual maximum for Social Security payroll
deductions for the year ($118,500 in 2015), invest some or all of the
additional money you now see in your paycheck.
another paycheck. If you can’t find extra cash in your regular
paycheck, bring in another. Consider taking a temporary seasonal job, suggests
certified financial planner Christopher R. Wills of R. W. Rogé & Company in
Bohemia, N.Y. Better still, get a job at one of your favorite stores and buy
holiday gifts with your employee discount.
cash. Rebalance your taxable investment portfolio before the year
ends. If dividends and interest payments have pushed your cash holdings above
your desired allocation, shift the excess to your 529s, suggests Wills.
winners. CFP Rick Wagener of Wagener-Lee in Columbia, Md., advises selling
appreciated securities to raise cash, particularly if you won’t have to pay
taxes on long-term capital gains. You qualify if you’re in the 10 or 15 percent
federal bracket (2015 taxable income up to $74,900 for married couples filing
jointly; $37,450 for singles).
losers. If you’re in a higher bracket and need losses to offset
capital gains and ordinary income this year, sell some losers in your
portfolio. Shift a portion of the proceeds to your 529s.
through your desk. Wagener also suggests checking your desk drawers
and safe-deposit box for old U.S. Savings Bonds that are no longer
earning interest. Cash them in to raise 529 money, but remember that you’ll owe
federal income tax on their earnings.
- Tap the
grands. Thank goodness for generous grandparents, especially those who
prefer writing gift checks to shopping for presents. Invest a portion of the
money that your kids get from their grandparents, like my husband and I did.
Admittedly, there will be some backlash. When our daughters figured out that
some of their Christmas cash was going into their 529s instead of their purses,
they whined a bit. I felt like Scrooge, but our family stuck to our strategy.
The pay-off: When our first-born earned her master’s in accounting this year,
she thanked us for doing whatever it took to put her through college debt-free.
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