NOT saving for college

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NOT saving for college

Postby petej » Sun Sep 01, 2013 2:08 pm

Hi folks, two compelling articles I've come across recently making the argument against emphasizing saving for college.

http://www.huffingtonpost.com/jeff-bogl ... 72873.html

http://www.forbes.com/sites/janetnovack ... r-college/

I'd like to hear people's takes. I've got a 2 and 0 year-old, and my wife and I were considering cutting back on our own retirement contributions (she's taking time off until they're 5, so a total of 7 years out of the workforce) and emphasizing their 529s.
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Re: NOT saving for college

Postby livesoft » Sun Sep 01, 2013 2:16 pm

I would not cut back on retirement contributions to put even one cent towards college savings.

But I wouldn't spend thousands of dollars on a play structure either. My kids went to the neighbors or to the local park where such things exist.

Parents who have been putting $25,000 to $50,000 to even more per year into retirement plans can simply stop those contributions if needed when a kid goes to college and divert that money to college for a few years. Others will probably get financial aid or loans.
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Re: NOT saving for college

Postby Grt2bOutdoors » Sun Sep 01, 2013 2:22 pm

Retirement first.

But upon returning to workforce, would make it a #2 priority to start saving if you have any hopes of helping them down the road. Even a little bit can add up to alot later on.
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Re: NOT saving for college

Postby TomatoTomahto » Sun Sep 01, 2013 2:26 pm

Save for college only after maxing out tax-advantaged retirement savings.
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Re: NOT saving for college

Postby dickenjb » Sun Sep 01, 2013 3:55 pm

TomatoTomahto wrote:Save for college only after maxing out tax-advantaged retirement savings.


+1

To do otherwise is foolish.
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Re: NOT saving for college

Postby masteraleph » Sun Sep 01, 2013 4:21 pm

I'd actually differ from what others in here have said, at least for some circumstances, depending on your income.

Priority 1: Tax-advantaged retirement savings.
Priority 2: Paying off mortgage.
Priority 3: College savings.

The reason to insert priority #2 is for several reasons:

1) If you don't have a mortgage by the time child 1 goes to college, you'll now have a lot more disposable income to put towards college.
2) FAFSA and many colleges' financial aid departments don't take mortgages into account. They do, however, take savings into account. The net result is that they'll actually ask for more if you have put your money into savings and still owe money on the mortgage than if you don't have money in savings and don't have a mortgage.

Now, if you're likely to get no financial aid, I might alter this advice. But between mortgage payment value and (as others have noted) retirement contributions, you stand a much better chance of paying for everything out of pocket. It also sounds like you stand a good chance of both children being in college at the same time for 1 year, if not 2, which makes the likelihood of financial aid for those years even higher.
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Re: NOT saving for college

Postby RNJ » Sun Sep 01, 2013 4:43 pm

If its an either/or, here's a way of prioritizing: your kids can earn scholarships or borrow money for college; you won't be able to borrow for retirement.
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Re: NOT saving for college

Postby jdilla1107 » Sun Sep 01, 2013 4:58 pm



This read as an satirical article to me. Amazing to me that's actually serious. Dragging your kid to see a bunch of MLB ballparks instead of saving for college? A back yard play yard? When your kid is 18, working for minimum wage to put himself through school, you can tell him that he will have to work 300 hours to pay for the swing set he had when he was 10.

You don't need to do any of that garbage to have good life experiences.

The argument that you shouldn't save anything because it won't be significant enough is also garbage.
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Re: NOT saving for college

Postby nisiprius » Sun Sep 01, 2013 5:02 pm

Our kids had all the usual gripes and grumbles about their parents. Naturally, they were always comparing our shabby house and car to the spiffier dwellings and cars of some of their friends. And, naturally, they never seemed to notice or care that we had a spiffier house and car than some of their other friends. Well, anyway.

One of our children one point even criticized my wife for the conservative investment vehicle she had chosen. (A CD, bought close to the peak around 1980, paying 10% interest).

One of our children graduated debt-free.

The other graduated not only debt-free, but with enough money left over to buy a car. (UGMA account, the money belonged to the kid. And it was a sensible car). Neither of them said much at the time. About five years after graduation, one of our children, who'd been talking to friends who were still paying off loans, had suddenly realized how nice it was not to have one, and thanked us. And in due course, so did the other.

Yeah yeah yeah we know all the clever-clever stuff about out-psyching the aid formula and we filled out the FAF and the FAFSA and we attended a session, highly recommended by the high school, that made both of us feel a little unclean, in which a consultant gave tips on "how to make your house disappear" and generally how to manipulate your balance sheet to look poor. Well, we didn't do any of that. We just forged straight ahead doing what common sense said to do. We filled out the FAF and the FAFSA honestly with no tricks, and they came back just as we knew they would saying that unless we were sending six or seven kids to college, no aid for us. And we saved for college, and we put the kids through college.

And each of them thanked us for it.
Last edited by nisiprius on Sun Sep 01, 2013 5:05 pm, edited 1 time in total.
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Re: NOT saving for college

Postby letsgobobby » Sun Sep 01, 2013 5:04 pm

Whatever. The idea that everyone will get scholarships and grants and find some alternative route to a four year degree possibly including military service, unpaid internships, or frank indentured servitude doesn't appeal to me. We'll just, gasp, pay for our own kids' consumption instead. Which is the contract we made when we elected to have kids in the first place.
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Re: NOT saving for college

Postby jdilla1107 » Sun Sep 01, 2013 5:05 pm

livesoft wrote:I would not cut back on retirement contributions to put even one cent towards college savings.


It really depends on how much you are saving for retirement. If you are maxing tax-advantage accounts and are currently saving into taxable, 529s allow you to have more tax advantaged space.
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Re: NOT saving for college

Postby livesoft » Sun Sep 01, 2013 5:09 pm

jdilla1107 wrote:It really depends on how much you are saving for retirement. If you are maxing tax-advantage accounts and are currently saving into taxable, 529s allow you to have more tax advantaged space.

Of course.
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Re: NOT saving for college

Postby JamesSFO » Sun Sep 01, 2013 5:11 pm

I thought the washington post columnist on Marketplace Money this weekend about college was well spoken: don't go into debt to pay for it. (It was Michelle Singletary - http://www.michellesingletary.com/)

And I thought that was a nice viewpoint to hear and emphasize compared to the hyper around getting lots into a 529.

I agree with the earlier poster emphasizing saving for yourself first, then mortgage, then college. I think this is a lot like putting on your oxygen mask before helping others. If you have "too little" money for college, there will be options--including loans--but if you have too little for retirement there won't be a lot of choices.
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Re: NOT saving for college

Postby Texas hold em71 » Sun Sep 01, 2013 6:20 pm

We did not save for college until we had maxed tax deferred savings and then we only saved enough for tuition and fees at a state school. Then we paid off the mortgage and then we started saving for living expenses during college. Then taxable investing. I still don't have enough in 529s for private colleges and do not intend to save for them. I will cross that bridge when I come to it. Right now the party line is private school acceptance will need to come with merit aid.
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Re: NOT saving for college

Postby dhodson » Sun Sep 01, 2013 6:47 pm

you have to be honest about yourself in regards to your priorities and what you can and cant do.

if you have a zillion dollars and dont plan to pay for their college then none of this matters.
if you have a zillion dollars and do plan to pay for their college then maximize the 529s in order to get tax free withdraws.
if you have very little and cant really maximize your retirement options then avoid 529s. you may feel bad about it but its the smart move likely for both you and them in the long run.
if you have the ability to max out your retirement options then again you need to be honest with yourself. If you know you are going to pay for their college then after maxing out your retirements then go the 529 route. You also have to be honest and realize almost all aid is loans which isnt all that helpful. You home mortgage currently likely has a lower rate and can be deducted. If you dont feel obligated to paying for college then after your retirement accounts, pay down the mortgage before using a taxable account.
In general avoid attempts by some "financial advisors" to use investments which "dont count" towards financial aide evaluation in order to hide your money. Most people who could use these investments have good income and this income will always count so you haven't really helped yourself (they seem not to point this out). You also are typically in a lousy investment just to get more college loans.
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Re: NOT saving for college

Postby livesoft » Sun Sep 01, 2013 7:07 pm

^ Sometimes education credits are better than a 529 plan.
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Re: NOT saving for college

Postby AustenNut » Sun Sep 01, 2013 7:45 pm

What is the recommendation for people who want to pay for an in-state college education for their children who are of more modest means than many on the board, but far better off than the average American?

My family paid for all of my college expenses, something I was very grateful for, and am even moreso as I get older. They (a doctor and a CPA) had far more financial means than my spouse and I (two public school teachers). So even though my parents were willing to pay for an Ivy League education for me (I chose not to go that route), I know that isn't in the cards for any children my spouse and I may have. But to not pay for any of their college education is unthinkable for me.

To max out the taxable shelters ($17,500 403b, $17,500 457b, $5000 Roth = $40,000 per person, $80,000/year) just is not going to happen. So where is the balance point between saving for retirement and saving for college? We should have a pension, if that makes any difference.
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Re: NOT saving for college

Postby Texas hold em71 » Sun Sep 01, 2013 7:52 pm

AustenNut wrote:What is the recommendation for people who want to pay for an in-state college education for their children who are of more modest means than many on the board, but far better off than the average American?

My family paid for all of my college expenses, something I was very grateful for, and am even moreso as I get older. They (a doctor and a CPA) had far more financial means than my spouse and I (two public school teachers). So even though my parents were willing to pay for an Ivy League education for me (I chose not to go that route), I know that isn't in the cards for any children my spouse and I may have. But to not pay for any of their college education is unthinkable for me.

To max out the taxable shelters ($17,500 403b, $17,500 457b, $5000 Roth = $40,000 per person, $80,000/year) just is not going to happen. So where is the balance point between saving for retirement and saving for college? We should have a pension, if that makes any difference.


Under current FAFSA and tax law you are probably going to benefit more than the average person on this board. With a pension you should not have to save as much as those of us who do not have one.

You can put the money in a Roth and still withdraw it for education.
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Re: NOT saving for college

Postby livesoft » Sun Sep 01, 2013 7:55 pm

^You might research today how to fill out a FAFSA and see what your Expected Family Contribution might be on your salaries. You can do a few scenarios:

a. No taxable accounts, no 529 plans, just everything in retirement accounts as if you had saved only in retirement accounts, and
b. Lower retirement account numbers and some 529 plans.

How does the EFC change for you with the above?

Folks need to know that they can borrow from most 401(k) plans for any reason. I'm not so sure about about 403(b) plans, so check that for your situation. Also Roth IRA contributions can be withdrawn. IRA assets can be withdrawn penalty-free for qualified education expenses, too, right?
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Re: NOT saving for college

Postby livesoft » Sun Sep 01, 2013 7:58 pm

And though I pooh-poohed the play structure in the back yard, I am on record as saying that money gifts to children should be spent on experiences and laptops rather than squirrelling it away for college. Those $50 to $500 annual gifts aren't going to amount to more than a couple of books anyways.

Also, I am not against parents paying for college. My kids will not get financial aid and they will not have student loans no matter where they go to college. We even have 529 plans for our children.
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Re: NOT saving for college

Postby Grt2bOutdoors » Sun Sep 01, 2013 8:01 pm

http://www.washingtonpost.com/business/ ... story.html

Here's an article on what happens when you don't save enough for retirement and in the case of several of those interviewed, what happens even if you have saved for retirement.
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Re: NOT saving for college

Postby livesoft » Sun Sep 01, 2013 8:06 pm

^The article is not about that at all. Bull is working because he wants to and not because he has to.
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Re: NOT saving for college

Postby Grt2bOutdoors » Sun Sep 01, 2013 8:17 pm

livesoft wrote:^The article is not about that at all. Bull is working because he wants to and not because he has to.


Really? He says he's working because his wife is 17 years younger and he wants to leave her enough to live on after he's gone.

How about Eddie Beard, age 75 who was a clergyman with zero pension, now doing a similar route for the last 18 years for the postal pension?

Or the attorney, 73 years old, working because he needs the money to survive.
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Re: NOT saving for college

Postby JamesSFO » Sun Sep 01, 2013 8:26 pm

AustenNut wrote:What is the recommendation for people who want to pay for an in-state college education for their children who are of more modest means than many on the board, but far better off than the average American?

My family paid for all of my college expenses, something I was very grateful for, and am even moreso as I get older. They (a doctor and a CPA) had far more financial means than my spouse and I (two public school teachers). So even though my parents were willing to pay for an Ivy League education for me (I chose not to go that route), I know that isn't in the cards for any children my spouse and I may have. But to not pay for any of their college education is unthinkable for me.

To max out the taxable shelters ($17,500 403b, $17,500 457b, $5000 Roth = $40,000 per person, $80,000/year) just is not going to happen. So where is the balance point between saving for retirement and saving for college? We should have a pension, if that makes any difference.


I think start early having a frank discussion with your children about what you can and cannot afford. Pick a level you are willing/able to support and start saving.

Here is the Vanguard college savings calculator - http://www.archimedes.com/vanguard/csp.phtml

Play with different contribution levels, ~$150 month gets you year 1 of a public 4-year fully funded if you start at age 1. $300 gets about 2.5 years fully funded.

But again, I would recommend putting your oxygen mask on first. If you don't have much as you hope you will for college you can help your child with loans later or maybe your parents can help, or the school, or scholarships. If you don't have enough for your own retirement you are out of luck...
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Re: NOT saving for college

Postby surfhb » Sun Sep 01, 2013 9:04 pm

This thread reminds me of all my friends/ex friends who stopped having a social life when the kids were born, Their Facebook pages are their kid's....they stopped our boating trips....quit most social activities.

I just don't get it. My kids enrich my life....they don't consume it
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Re: NOT saving for college

Postby letsgobobby » Sun Sep 01, 2013 9:13 pm

What have all your ex friends figured out that you haven't?
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Re: NOT saving for college

Postby surfhb » Sun Sep 01, 2013 9:21 pm

letsgobobby wrote:What have all your ex friends figured out that you haven't?


They've decided that thier lives are centered around the children.
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Re: NOT saving for college

Postby grog » Sun Sep 01, 2013 9:23 pm

jdilla1107 wrote:


This read as an satirical article to me. Amazing to me that's actually serious. Dragging your kid to see a bunch of MLB ballparks instead of saving for college? A back yard play yard? When your kid is 18, working for minimum wage to put himself through school, you can tell him that he will have to work 300 hours to pay for the swing set he had when he was 10.

You don't need to do any of that garbage to have good life experiences.

The argument that you shouldn't save anything because it won't be significant enough is also garbage.


I also thought the Huff Po article was very weak. Hardly "compelling."
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Re: NOT saving for college

Postby HomerJ » Sun Sep 01, 2013 9:51 pm

letsgobobby wrote:What have all your ex friends figured out that you haven't?


Or what has he figured out that his ex friends haven't?
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Re: NOT saving for college

Postby HomerJ » Sun Sep 01, 2013 10:05 pm

All my kids have or will graduate from in-State U with zero debt.

It's not too bad here in Kansas. My middle daughter is a senior this year at KU and it's costing us 20k total. 10k for tuition, and 10k for room/board and sorority junk. She could live at home and it would only cost us $10k a year.

My son is only 11, and we have zero college savings for him... But that's because my wife will turn 59.5 his freshman year of college, so we can always use retirement funds if needed. I hope to just pay his tuition out of salary those 4 years, or maybe he can get a scholarship... He's a good test-taker like me.

My wife and I both graduated from State Us; we've been very successful financially. I see absolutely no reason to waste money on private out-of-state schools.
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Re: NOT saving for college

Postby ofcmetz » Mon Sep 02, 2013 5:20 pm

Before I learned more, I was funding a 529 plan but not our ROTH IRA's. I was influenced in changing by reading a lot of livesoft's posts when he discussed college savings.

Now we only save in retirement accounts and aren't able (or maybe willing) to use all our tax advantaged retirement space each year. If we ever did this then we would use a 529 plan for further savings. We figure we can help when the time comes by backing off of retirement savings and by taking money from ROTH's if necessary. Our available tax advantaged retirement space is about $63,500 a year.
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Re: NOT saving for college

Postby scubadiver » Mon Sep 02, 2013 7:42 pm

ofcmetz wrote:Before I learned more, I was funding a 529 plan but not our ROTH IRA's. I was influenced in changing by reading a lot of livesoft's posts when he discussed college savings.

I've been spending the three day weekend developing an investment policy statement and have come to develop a real appreciation for the wisdom of livesoft's recommendations. I think the general approach is particularly advantageous for our situation. We have two children that are four years apart, but the younger one just misses the cutoff and will actually graduate five years behind her older sister.

At today's rates for in-state tuition / room / board, our current retirement savings rate and our current 529 contribution rate, we'll be about $5K short each year if we took our Roth contributions, 529 contributions and after tax TSP contributions (still contributing enough to get the employer match) and diverted them towards college expenses. That's an amount that can easily be covered by withdrawing from the 529 savings.

Full disclosure: Three years ago my wife and I spent a bit over $2K on a play system for our daughter. Her reaction when she saw the play set in our yard was priceless....or at least worth the $2K we spent. :D We also contribute a modest amount each month to 529 savings and do intend to fully fund our children's college education at a state school. All things in moderation....
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Re: NOT saving for college

Postby travellight » Mon Sep 02, 2013 8:00 pm

I have saved nothing for my son. I'm focused on tax advantaged retirement and paying off the mortgage. His college costs will be my mortgage payment when he gets there.
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Re: NOT saving for college

Postby rallycobra » Mon Sep 02, 2013 8:35 pm

travellight wrote:I have saved nothing for my son. I'm focused on tax advantaged retirement and paying off the mortgage. His college costs will be my mortgage payment when he gets there.


+1. 14 yrs left on our 15 yr mortgage. The twins turn 1 in a couple of months. We are right on target. Once our taxable accounts are larger, we may consider putting a small amount into multiple 529's in NY and UT.
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Re: NOT saving for college

Postby Mister Whale » Mon Sep 02, 2013 8:55 pm

surfhb wrote:This thread reminds me of all my friends/ex friends who stopped having a social life when the kids were born, Their Facebook pages are their kid's....they stopped our boating trips....quit most social activities.

I just don't get it. My kids enrich my life....they don't consume it


I am very sorry that that is what this thread reminds you of.
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Re: NOT saving for college

Postby dickenjb » Mon Sep 02, 2013 9:12 pm

It takes a while but eventually people figure it out. The knee jerk reaction is , I just had a baby, now I need to open a 529 plan.

The folks who max out their 401(k) and work on paying down the mortgage with the idea that once the mortgage is paid they can use that cash flow to pay for college "get it". Heck if you have to you can even back off the 401(k) at that time.

I cringe when I hear people are saving in a 529 instead of maxing 401(k) (or TIRA/Roth).
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Re: NOT saving for college

Postby Grt2bOutdoors » Mon Sep 02, 2013 9:30 pm

dickenjb wrote:It takes a while but eventually people figure it out. The knee jerk reaction is , I just had a baby, now I need to open a 529 plan.

The folks who max out their 401(k) and work on paying down the mortgage with the idea that once the mortgage is paid they can use that cash flow to pay for college "get it". Heck if you have to you can even back off the 401(k) at that time.

I cringe when I hear people are saving in a 529 instead of maxing 401(k) (or TIRA/Roth).


Perhaps the knee-jerk reaction to open the 529 plan is because of recency bias - all the kids coming out of school with debt unable to repay it and it haunts them for the rest of their life - non-dischargable. Of course, the student loan and 529 propogranda machine is revved up in full force. Even sites like finaid.org start out with step 1 - http://www.finaid.org/parents/ with Start saving now for college now!

They should highlight more retirees struggling to stay afloat but you don't see that on the front pages of the newspaper, it gets little attention from the financial intermediaries - we have state sponsored 529 plans. We don't have state sponsored retirement plans for the masses not employed by the state, do we? The state is saying that saving for higher education is more important than saving for retirement. A misplaced sense of priorities, or is it?
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Re: NOT saving for college

Postby Texas hold em71 » Mon Sep 02, 2013 9:36 pm

Grt2bOutdoors wrote:
They should highlight more retirees struggling to stay afloat but you don't see that on the front pages of the newspaper, it gets little attention from the financial intermediaries - we have state sponsored 529 plans. We don't have state sponsored retirement plans for the masses not employed by the state, do we? The state is saying that saving for higher education is more important than saving for retirement. A misplaced sense of priorities, or is it?


We have Social Security. That is the retirement safety net put in place when elderly people were struggling to stay afloat. Maybe when you say state you literally mean the state and not the government?
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Re: NOT saving for college

Postby Grt2bOutdoors » Mon Sep 02, 2013 9:43 pm

Texas hold em71 wrote:
Grt2bOutdoors wrote:
They should highlight more retirees struggling to stay afloat but you don't see that on the front pages of the newspaper, it gets little attention from the financial intermediaries - we have state sponsored 529 plans. We don't have state sponsored retirement plans for the masses not employed by the state, do we? The state is saying that saving for higher education is more important than saving for retirement. A misplaced sense of priorities, or is it?


We have Social Security. That is the retirement safety net put in place when elderly people were struggling to stay afloat. Maybe when you say state you literally mean the state and not the government?


I did say "state". State sponsored plans are not put in place by direct legislation that confers any level of benefits to participants. Social Security was originated through a piece of legislation that was signed into law, it does confer a schedule of benefits based on certain mandated contributions. There is a distinct difference between a pay as you go insurance program and a savings program. Social Security is Old Age Disability Survivors Insurance (OASDI), a state sponsored 529 plan is a generally low cost, segregated from state obligations, defined contribution savings plan - what you put in plus market returns less some usually nominal expense ratio is yours designated for higher educational expenses.
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Re: NOT saving for college

Postby surfhb » Mon Sep 02, 2013 9:46 pm

Mister Whale wrote:
surfhb wrote:This thread reminds me of all my friends/ex friends who stopped having a social life when the kids were born, Their Facebook pages are their kid's....they stopped our boating trips....quit most social activities.

I just don't get it. My kids enrich my life....they don't consume it


I am very sorry that that is what this thread reminds you of.


Ah well....my point went over your head. Many folks forgo their retirements to pay for college tuition was what I was implying.

Maybe Im just out of my league here but even with a low 6 figure salary, there's no way possible to save for retirement and college for my 2 children.
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Re: NOT saving for college

Postby Dianne » Mon Sep 02, 2013 10:50 pm

To those who say you should pay for your children's education without financial aid, things have changed in the past 15 years. Tuition has gone up much faster than inflation, and so has financial aid. Some private schools give out copious amounts of grant aid now, and not just to students that you might consider "poor." It's a negotiation, not a handout. Check out Harvard's Net Cost Calculator and play with the numbers. Private schools are like car dealerships now — they try to figure out the maximum price they can charge you before your child decides to go somewhere else and they have to take someone off the waitlist whose SAT score will drag down their ranking.

Would you walk into a car dealership and shout, "Hey, I've saved up $50,000 to buy a car today! What do they cost?" If not, then you should not save for your child's education. Put your money into your retirement plan and your mortgage, and assume that the resulting financial stability will give you the ability to help your kids out as much as they need. But never underestimate what the school might be willing to pay to get your child on their campus if you aren't a billionaire. They know that even mere millionaires might send their kids to state schools to save money. You can have negotiating power, if you prepare properly. And Bogleheads are in the best position to get that negotiating power -- we tend to save money early, in tax-deferred vehicles, then retire and reduce our earned income just as the kids go to college.

The articles that tell people to save for higher education are directed at people who aren't saving at all, and the hook of saving for their children is expected to motivate them to cut back expenses. But this doesn't apply to Bogleheads, who are already living below their means. Never put money in a 529 Plan when you could be putting it in a retirement plan.
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Re: NOT saving for college

Postby stoptothink » Mon Sep 02, 2013 11:21 pm

Come January I'll be the stepfather to a 2.5yr old. Up until very recently (July), my fiancee was very aggressively funding her daughter's 529 account but was putting nothing towards retirement (and her employer matches 10%). She was able to put herself through school and raise a child completely on her own without incurring any debt of any kind, but she also didn't have a penny in retirement and was leaving a ton of money on the table while putting aside funds for her daughters college education which may never even happen. I made a deal with her that I would set aside a sum that equaled 10% of her income in a money market account each month and at the end of the year put it in her daughter's 529 if she diverted those funds into at least getting her company match. Come January, maximizing both our 401k and Roths, and my HSA happens before the 529 is addressed at all. It was a very difficult discussion, I think she decided to go along not necessarily because she agrees but because she trusts me.

Maybe it's because I come from a family where 4 of the 5 children completed college (all within the last decade and 3 with advanced degrees) and have 2 younger step-sisters currently on their way to doing the same, none having received a single penny from mom. Maybe it's because I don't yet have any children of my own. Maybe it's because it's highly unlikely that my fiancee and I will both be able to maximize our tax-advantaged retirement accounts for the next few years. Funding the college of my (future) children is far down the list of my financial priorities.
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Re: NOT saving for college

Postby letsgobobby » Tue Sep 03, 2013 12:03 am

There are so many values tied up in these threads. It's hard to separate the finance from the culture. My wife's parents contributed a significant portion of their four kids' college costs, despite being refuges from the Vietnam war, despite being a laborer at a machine shop eventually laid off to be a stay at home dad, and a milk carton assembly line worker before getting hired on for the USPS. And they saved for retirement, too, though they're far from rich, of course. But they rarely (never?) took vacations when younger, never went out to eat, still live in the original 1200 sf home they bought 25 years ago (and managed to raise the four kids in), and until this year drove a 1995 Nissan entra. That's entra, because the "S" fell off a long time ago. So I don't believe for a second that today's upper middle class parents can't afford to save for college and retirement. I do believe its impossible to save for retirement and college while also eating six meals out per week, driving late model cars, taking vacations to sunny places in the winter, and upgrading to a larger home four times in twenty years, thereby hitting college with a brand new and very large thirty year mortgage.

This is all separate from whether it's actually wise to save for college, which is a completely separate question. It is possible to be punished for saving under the current formula.

For a certain number of Bogleheads, the question is what to do after all tax advantaged retirement accounts have been maxed out. Mortgage? 529? Taxable investing? Variable annuity? It gets cloudy.
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Re: NOT saving for college

Postby Winthorpe » Tue Sep 03, 2013 12:22 am

letsgobobby wrote:So I don't believe for a second that today's upper middle class parents can't afford to save for college and retirement. I do believe its impossible to save for retirement and college while also eating six meals out per week, driving late model cars, taking vacations to sunny places in the winter, and upgrading to a larger home .....


So true. Many average middle class people successfully save for both and still live a nice life. It's all a matter of priorities.
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Re: NOT saving for college

Postby dozer183e » Tue Sep 03, 2013 2:34 am

This is difficult for me to process right now. My wife and I have opted to work overseas and earn a small income as a life choice - we are doing what we love and believe in. However, we do have four children, and we are trying to put away whatever we can for them to help them in college. We have opted not to use a 529, just a taxable mutual fund account, as we want to keep these funds flexible in case the kids choose not to go to college, or if some other pressing matter arises. We are able to max out our IRAs, and put a very little extra away in an employer sponsored 403b.

We have always figured if our kids go to college, after grants, they will need to either work to help pay their costs, or take loans. We will have some money to help them, but just a fraction of their needs. (this is how both of us went through college)

Now reading these articles I am wondering about FAFSA and the EFC. Along with saving for "college" in this taxable account, we add other savings, ie. future vehicle, house downpayment, etc for when we return to the US (unknown date). Our living costs are low here so we can do that. It sounds like maybe I should increase my 403b contributions, and decrease the other savings in order to decrease the amount FAFSA will consider when calculating EFC. I'd leave the "college" portion available, the risk would be if I need the other funds before retirement age (about mid 5 digits). This could decrease my EFC by about $3,000 (per year per kid = lots). At college time (and we may have 3 or even 4 in college at the same time!) perhaps we scale back the retirement savings (could look at it as pre-contributed now) to help with college costs.
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Re: NOT saving for college

Postby interplanetjanet » Tue Sep 03, 2013 6:07 am

I haven't saved separately for my children's college educations. I expect to cash-flow it out of my normal budget - when they turn 18, I'll no longer owe child support on each one of them in turn, so my plan is to just take about the same amount of money and put it towards their education. That plus a bit of financial aid they seem likely to get should cover things at a good public institution in my state - and in California there are some very good ones indeed.

Dianne wrote:And Bogleheads are in the best position to get that negotiating power -- we tend to save money early, in tax-deferred vehicles, then retire and reduce our earned income just as the kids go to college.

This may be true for many, but some of us started our families young - my children will start hitting college before I turn 40. On the plus side, when I'm in my peak earning years I expect my children to all be gone and my lifestyle inflation to be low, so I should really be able to power through saving. With any luck, grandchildren will come along about when I do end up retiring and I can spoil them rotten. :)
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Re: NOT saving for college

Postby Peterinch » Tue Sep 03, 2013 7:04 am

I am fortunate to be able to fund my retirement plans and have an emergency fund, so I have a choice about whether or not to save for college. By saving for college, I am teaching my children not to squander my money on the latest plaything, as recommended in the Huffington Post article. They could certainly work long hours at a job during college and take on decades of debt to pay their own way, but if I have the means to prevent this, why not? Also, as I expect to have to pay for college, why not save now in a 529 where the gains are not taxed, rather than just wating to rely on my earnings during the college years?
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Re: NOT saving for college

Postby michaelsieg » Tue Sep 03, 2013 7:32 am

+1. 14 yrs left on our 15 yr mortgage. The twins turn 1 in a couple of months. We are right on target. Once our taxable accounts are larger, we may consider putting a small amount into multiple 529's in NY and UT.

Interesting thread. I also agree to save for retirement first, but I am not sure if it makes sense to start a 529 account late, as some posters plan to do (i.e. a few years before college). The fees in these accounts are in general higher than regular after tax savings and one of the main advantages of 529 plans IMO is the tax free growth of these accounts - so if one chooses to go the 529 path, it makes sense to "front-load" the account while the kids are young and hopefully have some tax free growth of these investments.
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Re: NOT saving for college

Postby dhodson » Tue Sep 03, 2013 7:47 am

michaelsieg wrote:
+1. 14 yrs left on our 15 yr mortgage. The twins turn 1 in a couple of months. We are right on target. Once our taxable accounts are larger, we may consider putting a small amount into multiple 529's in NY and UT.

Interesting thread. I also agree to save for retirement first, but I am not sure if it makes sense to start a 529 account late, as some posters plan to do (i.e. a few years before college). The fees in these accounts are in general higher than regular after tax savings and one of the main advantages of 529 plans IMO is the tax free growth of these accounts - so if one chooses to go the 529 path, it makes sense to "front-load" the account while the kids are young and hopefully have some tax free growth of these investments.


thats why you look at utah or one of the other low cost via vanguard providers. you are still correct, its just that a utah 529 will still beat taxable. The other problem with starting late is that its harder to invest more aggressively given the shorter time period.
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Re: NOT saving for college

Postby Grt2bOutdoors » Tue Sep 03, 2013 7:47 am

michaelsieg wrote:
+1. 14 yrs left on our 15 yr mortgage. The twins turn 1 in a couple of months. We are right on target. Once our taxable accounts are larger, we may consider putting a small amount into multiple 529's in NY and UT.

Interesting thread. I also agree to save for retirement first, but I am not sure if it makes sense to start a 529 account late, as some posters plan to do (i.e. a few years before college). The fees in these accounts are in general higher than regular after tax savings and one of the main advantages of 529 plans IMO is the tax free growth of these accounts - so if one chooses to go the 529 path, it makes sense to "front-load" the account while the kids are young and hopefully have some tax free growth of these investments.


+1 - agree. You will generally reap more in gains when you have more time in which the investment can compound. In the case of a 529 plan whose goal is to have monies available in years 18,19,20,21 (give or take a year or two), the latter half of the investment cycle would be similar to one who is transitioning into retirement age and reducing risk - more fixed income, less equities.
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