Saving for college

Discussion in 'Business, Investing & Finance' started by bradgator2, Mar 8, 2019.

  1. bradgator2

    bradgator2 Internet Bully
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    Alright, what was your strategy?

    Every month since both my kids were born I have put $100 for each into a 529. It'll be close to $30,000 for each when they are 18. Although that will certainly not cover all of college, it will be a huge help and roughly $30,000 more than what my parents gave me.

    I looked at the Florida prepaid stuff and something didnt sit right with me. My niece just graduated high school and they did the prepaid. Well... she went to a private college in Georgia (Berry College). So Florida said, no problem... here is your $9000 back. So they didnt lose anything, but are now woefully unprepared.

    Are there better ways?
     
  2. williston_gator

    williston_gator Twitter junkie
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    I may be a minority, but I'm going to push my kids to get scholarships and grants. I need that money for other immediate things.
     
    • g8r.tom

      g8r.tom Well-Known Member
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      My child goes to Santa Fe College, with hopes of transferring to UF. We didn't save. We just pay it now. We don't find college, at Santa Fe or UF to be so expensive it takes years to save for it.
      YMMV
       
      • bradgator2

        bradgator2 Internet Bully
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        Oh hell yeah. Every scholarship and advantage they can take. Bright Futures. We are already gearing up for high school dual enrollment and my oldest is in the 6th grade. Some sort of part time job for them, hopefully at Publix. I am blessed to be in the position to have an extra $200 a month to save for them. I would not, and will not, sacrifice saving for my retirement for their college.
         
        • TLB

          TLB Just chillin'
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          Too much depends upon where the kids will go to college, which leads to in-state or out-of-state tuition rates, IMO. Still, 529 can help you save which we do for our two kids. I had to cut back to minimum contributions on both as we're trying to get out debt as a priority right now. Grandparents continue to contribute to the 529 funds, so it they have grown much better than expected. Once we get over the debt hump, I expect to shift the extra funds towards Roth funds for the wife and I so we can tap them when the kids reach college if needed, or have it available for our (travel) needs = I view as more flexibility on how to spend the savings than a 529. But we're still doing 529 to provide some sort of base for college tuition.

          Oldest will most likely get scholarships, younger may but it's not as much of a sure thing. Ideally, I want both kids to come out without debt (as my grandfather afforded for my sister and I), so I'll encourage their working during school over taking on debt if our 529+Roth+income isn't enough at the time.

          I will strongly encourage my kids to get full employment after undergrad, in part to get real world experience but also to have an employer that will help cover costs of grad school should they choose to attend. This should also bring into focus the pursuit of an undergrad degree that is employable.

          We are fortunate this was such a priority for my grandfather. He paid for my sister and I to get thru undergrad (and, I think, my sister thru grad school if she went). My sister drank & partied her way off scholarship in the first year of college at LSU, so grandpa footed the remainder of the bill. He covered my undergrad: 2y SFCC, 2 quarters at Cleveland State in Ohio, and 2.5 more years at UF = total bill he gave me at the end for ~$26k, not that I had to pay it back, but he wanted me to know what he spent. He helped with tuition, books, and living expenses. When he passed, he left behind ~$400k in savings specifically to cover subsequent generations of education. His only child, my father, inherited it and talks of it being set up for my kids and my sister's kids...depending on how much is needed for him and his now second wife with health expenses in their later years. We'll see if any of that is available for our kids, I'm not counting on it. But, it will be a nice surprise if there is any there, and I plan to do similar for my descendants (have a generational savings set aside for this specific purpose).
           
          • no1g8r

            no1g8r Bringing Reason to the Masses
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            I did a 529 plan for my daughter, giving a balance of about $50k as of her high school graduation in 2017. I had always told her that I would save enough to pay for an in-state, live-at-home education and degree, and if she wanted something beyond that she would have to get scholarships or find other means to accomplish it.

            I talked tough then, but she's now living out of state, pursuing a dream as a professional ballerina, and taking 2 classes per semester towards a physical therapy degree someday. I'm paying as we go for all expenses other tuition for the 2 classes, which comes out of her 529.
             
            • MidwestChomp

              MidwestChomp Fun was the goal and we hit the bullseye
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              Trade school
               
              • Pablos Tunnel

                Pablos Tunnel Well-Known Member
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                My good friend is a solo plumber. Just him and his van. Cleared $200k last year. Call him on a weekend and its $200 just to show up. He is 48 and has over $600k in his SEP IRA. Owns his house and a rental. No debt. Wife is a nurse for the V.A. so medical ins is cheap. Son is a marine oversees and daughter is in law school. Trades are the next STEM occupations. Big demand.
                 
                • Gator By Marriage

                  Gator By Marriage A convert to Gatorism
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                  While everyone's situation is different, I personally think 529s are a great idea. We started one for each of our children the month they were born. Our decision was based on seeing just how many recent college grads were dealing with crushing debt - and that was 17 years ago; it might be worse today. In addition to regularly throwing a few bucks in, we would also dump in any performance bonuses (I worked for the G; they weren't much), tax refunds, or any other "found money." With them both heading off to college this fall, we are currently sitting very well to finance it. I get the folks who want their kids to pay their own way, or at least to have some skin in the game. It just wasn't for us. I'll let you know in a few years if it was the right decision or not!
                  Another great thing about 529s is the ease in changing beneficiaries. Say your kid gets a scholarship and doesn't use the 529; if he/she doesn't use the money for grad school, you can always wait and see if they have kids and then make the grandkids the beneficiaries. Like every investment vehicle, there are drawbacks, for us however, it looks like we made the right choice. The only drawback for us was in ensuring we did not "over fund" it. Since hitting the bullseye is damn near impossible, our plan was put about 75% of what we estimated a 4 years to cost (others may choose a lower figure depending on how soon you can hit the mark before the kids will need it) and then started depositing our "found money" in a standard brokerage account. If we then needed more than was in the 529, we could hit the other account.
                   
                  • kepler

                    kepler Senior Member
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                    I love the prepaid program. You’re locking in todays rate for college 17 years later. Like all decisions college is a financial choice. Should you and your child choose to forgo the locked in rate for an out of state school at market rates, that’s a choice. I supplement two prepaid accounts with 529s to cover non- tuition expenses. We will see how it all turns out I guess.
                     
                    • BostonGator84

                      BostonGator84 Infrequent Frequenter

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                      I'm putting $50 a month for each kid into a 529. Not much but hoping over time it'll become a decent chunk of change to cover what scholarships won't.
                       
                      • Detroitgator

                        Detroitgator General Factotum
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                        This is going to be one of those posts that could be in half-a-dozen threads, and I'm going to catch the ire of the financial planners here (this is why I said I'd need to start a topic about "Personal Philosophy(ies)")... we keep no tax vehicle accounts like 401K, SEP, IRA... except for an HSA. I am constantly using post tax funds (unless i can use a 1031 exchange) to invest in other opportunities. We have one large, unsecured, cash account at Ally Bank that earns high interest (relatively speaking, at 2.25% currently for high balance, during "normal" times a long time ago, it was between 5-7% and acts like a regular checking account...basically an "unlocked" CD) that effectively serves as a savings account/emergency fund/whatever fund. We have a normal USAA checking account for bills. I have business checking accounts for each business entity that carry balances appropriate to what I need for each entity. The rest, a big pot, is in a brokerage account where I let it run on the defense stocks I mentioned and the swing trading I do for fun/rapid income for new near term opportunities. This is the pot that is the "college fund and everything else fund."

                        I believe in investing in oneself and in more businesses/assets that provide revenue streams. I have no desire to put my trust in accounts that exist at the whim of Congress and that I don't have access to without penalty or interest.

                        Lboy said I was an idiot for firing my CPA for pushing a SEP on me all the time, but I wouldn't have started a restaurant last month (and bought another distressed one) had I had those funds locked up in a SEP, CDs, or anything else. I'd rather pay taxes now, create more wealth/revenue streams, and have control than worry all the time about what is or isn't going to happen in the future.

                        I know I have more "risk tolerance" than most for doing this, but I see it just the opposite. I'm diversified across just about every asset class that exists, paper and real, while most kid themselves into thinking they are diversified across paper alone. I feel far greater peace and security knowing that if any one leg of my assets "fails," I've still got 5-6 other legs, almost all of which generate positive cash flow to keep building on what I have. I don't know fuk all about agriculture, custom kitchens/baths/cabinetry, or restaurants, but have businesses in all three (all three overseas, but export from two of them, one of them to the US). I'm a problem solver. I see a problem/opportunity, find the right people, and solve it with a business or by buying in. That's how I got into all three of those business areas.

                        This was fast and dirty with a ton left out, but you get the idea.

                        PS (and Kiyosaki haters have at me!!! ;) ).... you're house ain't an asset, it's an expense! ;)
                         
                        #12 Detroitgator, Mar 13, 2019
                        Last edited: Mar 13, 2019
                      • Politigator

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                        We have enough in 529s/ESAs to fund about 3 years of in state school. The rest will come out of either cash flow or liquid savings.

                        While 529s are good I wouldn't over fund them. It isn't uncommon for kids not to go college.

                        Also funding college is among the lower of the priorities. Funding retirement accounts is far more important.
                         
                        • Gator By Marriage

                          Gator By Marriage A convert to Gatorism
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                          Old saying: you can borrow for college, but you can’t borrow for retirement.
                          You also make a good point about the danger of overfunding a 529. While we pretty much assumed our kids were going to college (and so far so good), we did actually have to stop contributing at one point because we were in danger of having more than they would need. Much better at that point to keep up the contributions, but to a standard inv. account.
                           
                        • itsgr82bag8r

                          itsgr82bag8r Political Forum Fire Starter
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                          “Borrow” all you need and a little bit more for partying because Bernie is going to erase all that debt & you don’t want to miss out on a groovy art degree.
                           
                          • BMF

                            BMF Bad Mother....
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                            I had a 529 for my son, saved about $11k in it (I didn't start it until he was 8 years old....as I was only 22 when he was born). Anyhow, I ended up rolling my Post 9-11 GI Bill to him....so he never needed the money in the 529. Then he flunked out of school after one semester. I cashed in the account (and claimed it was for educational expenses) and invested it elsewhere. My son, now 26, had a baby last year so I opened a Uniformed Trust for Minors account w/ $3k into an index fund and I'm putting $60/month into it (and plan to put $100 on his birthday and Christmas into it). Hopefully he'll grow up to be responsible. He can take ownership of it at 18 years old, so I don't plan to let him know that. I'd like to use it for educational purposes or for a down payment on a house some day.
                             
                          • Politigator

                            Politigator L-boy's Cousin
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                            I don't think I said you are an idiot, you just previously phrased it in a much more abrupt and less insightful way than you did above.

                            For people that want to stay liquid for various business ventures that is totally fine. I have no issue with that.

                            I guess I'm a little puzzled in that with some of the income figures you have posted in the past, throwing $25k to $55k in a retirement plan wouldn't seem like a big stretch, especially given you are saving 37% tax rate up front.

                            With a Roth IRA you can always take out contributions penalty and tax free if you really needed them.

                            While politicians can indeed change tax laws on a whim, I've never understood running from tax advantaged retirement vehicles because the tax code could change, but not think that capital gains and ordinary income rates could go up on taxable investments

                            But yes legislation can change. It appears congress is getting close to passing "SECURE", which has some nice features for future retirees, but throws a bit of a wrench in estate planning by eliminating stretch RMDs for beneficiaries. It gets even worse if tax deferred assets are held in trust, because trust tax rates are much higher than normal. If it passes I'll probably switch to 100% Roth for new contributions , which is far more estate planning friendly and avoids trust taxation issues.

                            Agree that a personal residence is not an investment. Technically per macroeconomic jargon it is considered investment, but practically it isn't, or isn't a good investment. You can take it further in that a personal residence may be a decent investment to the extent you purchase what you otherwise would have rented, but throwing more money at a larger house is mostly a money drain. Higher taxes, higher utilities, and lots more Sq feet to fill up with furniture and decor.
                             
                            • divits

                              divits A Muffin of the Studly Variety
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                              Lucked out with the Florida pre-paid. We paid the lump sum up front when each kid was born. The program started the same year my son was born when college was still affordable. Best investment I ever made based on how quickly and explosively college costs grew from the time I started to the time the kids needed it. Bright futures helped even more. Hell, my daughter's sorority dues and crap they had to buy was probably more than what her tuition cost me.

                              Lump sum payment for 120 hours of 4 year school and 1year of dorm for a child born now is $37,000. The same plan cost me $5500 for my son.
                               
                              #18 divits, Jul 9, 2019
                              Last edited: Jul 11, 2019
                              • bradgator2

                                bradgator2 Internet Bully
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                                My sister got close to the same deal with her kids. They were born in 2000 and 2002. I think it was $7500 each for the lump sum. When my first daughter was born in 2007, I was excited to check out the plans and sign up. It was shockingly expensive. $22,000 for the lump sum payment if my memory is correct. I am on the website now, for a kid born this year... it is $29,472 for the lump sum payment (4 year university plan). That is why I went the 529 option. I really cant complain, I have a 9.4% rate of return on both accounts since inception and it is growing nicely.

                                So, for my niece, she choose a small (very expensive) school outside the state. The program said, "No problem, she cant use this program but here is your $7500 back." Needless to say, her folks are now shockingly unprepared to help her.
                                 
                              • Gator By Marriage

                                Gator By Marriage A convert to Gatorism
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                                As a point of reference for those who haven't looked at college prices lately, out of state cost for UF (room, board, tuition, books & incidentals) is around $43K for the 2019-20 school year. In state is roughly a little less than half that. Your timing was exceptional.
                                 

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