How to invest when I Missed the 529 Boat and Child will start College in 3 years!

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Stillwater1971
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How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by Stillwater1971 »

So, I missed the boat on investing in a 529. :oops: Long story that isn't necessary here, but I'm a divorced Dad making about 74k gross and now I have the financial means to start putting money away now. One child and will graduate High School in 3 years. Expecting 4 year Public College. Hope to get lucky with some subsidized loans so I won't have to pay interest while he's in school. I could start paying off the loans 5-7 years from now when interests begins theoretically 7 years from now. OR I would like to start paying off the loans as early as 4 years from now if some of the loans are unsubsidized.

In the meantime, what would be the most effective , but also a smart-risk approach with a short time-horizon?
I've read CDs, I-bonds or something conservative is the best way to go.

Where is the best place to park money with a less than 10 year horizon?
niagara_guy
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by niagara_guy »

Money you will need in 3 years does not belong in the stock market. I would probably put it into a cd, but cds are paying nothing now. I would not put it into an investment that risks principal. I have no experience with I bonds or student loans.

Ideas to save on college costs:

Junior colleges are a good way to save on tuition. Some high schools will pay the college tuition for a student to go to college while enrolled in high school. AP classes get college credit (my kid saved me one semester of tuition with AP credits).

Live at home while in college

Here are 2 ways to get reduced (or free) tuition:

google 'work colleges.' there are several in the US where the student has to work a certain number of hours per week but gets reduced tuition. I have a relative at one who will graduate with virtually no debt.

Cottey College is a girls liberal arts school. A friend went there, they provide full scholarships for needy girls.
aristotelian
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by aristotelian »

If you get a state tax credit or deduction you can still use it as a pass through and hold the funds in bonds or cash. That said, make sure you are saving for your retirement. The kids can take loans and you can help with those as well as by paying up front.
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White Coat Investor
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by White Coat Investor »

Save some money in advance, choose an inexpensive school, have junior get scholarships, work at school, work during the summers and use some of your cash flow.

But if someone has to borrow for school, let it be junior, not you.
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lobsterman2112
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by lobsterman2112 »

Stillwater1971 wrote: Sat Oct 16, 2021 9:40 am So, I missed the boat on investing in a 529. :oops: Long story that isn't necessary here, but I'm a divorced Dad making about 74k gross and now I have the financial means to start putting money away now. One child and will graduate High School in 3 years. Expecting 4 year Public College. Hope to get lucky with some subsidized loans so I won't have to pay interest while he's in school. I could start paying off the loans 5-7 years from now when interests begins theoretically 7 years from now. OR I would like to start paying off the loans as early as 4 years from now if some of the loans are unsubsidized.

In the meantime, what would be the most effective , but also a smart-risk approach with a short time-horizon?
I've read CDs, I-bonds or something conservative is the best way to go.

Where is the best place to park money with a less than 10 year horizon?
As a wise man told me: You can take a loan for college. You can't take a loan for retirement.

Give your child what you can. Let him take a loan for the rest. It also gives him some "skin in the game". Maybe enough so that he'll choose a major that would lead to a better career post-graduation. Or at least realize that he may benefit from a vocational school if college isn't working out for him.

You don't want to break your retirement for him and then be stuck working an extra 5-10 years to make up what you gave him.
Blue456
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by Blue456 »

Stillwater1971 wrote: Sat Oct 16, 2021 9:40 am So, I missed the boat on investing in a 529. :oops: Long story that isn't necessary here, but I'm a divorced Dad making about 74k gross and now I have the financial means to start putting money away now. One child and will graduate High School in 3 years. Expecting 4 year Public College. Hope to get lucky with some subsidized loans so I won't have to pay interest while he's in school. I could start paying off the loans 5-7 years from now when interests begins theoretically 7 years from now. OR I would like to start paying off the loans as early as 4 years from now if some of the loans are unsubsidized.

In the meantime, what would be the most effective , but also a smart-risk approach with a short time-horizon?
I've read CDs, I-bonds or something conservative is the best way to go.

Where is the best place to park money with a less than 10 year horizon?
State schools instead of ivy league schools are generally much cheaper (my wife went that way and has 100k less in loans). Have the kid pick up loans and work over the summer.
Goal33
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by Goal33 »

Not trying to be snarky, but your income is low enough that your kid will probably get a lot of free money (financial aid). If your ex makes less, and they can use her financials, will be even better.

I don’t think you should worry much about it.

Edit: save for your retirement
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JoeRetire
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by JoeRetire »

Stillwater1971 wrote: Sat Oct 16, 2021 9:40 am So, I missed the boat on investing in a 529. :oops: Long story that isn't necessary here, but I'm a divorced Dad making about 74k gross and now I have the financial means to start putting money away now. One child and will graduate High School in 3 years. Expecting 4 year Public College. Hope to get lucky with some subsidized loans so I won't have to pay interest while he's in school. I could start paying off the loans 5-7 years from now when interests begins theoretically 7 years from now. OR I would like to start paying off the loans as early as 4 years from now if some of the loans are unsubsidized.

In the meantime, what would be the most effective , but also a smart-risk approach with a short time-horizon?
I've read CDs, I-bonds or something conservative is the best way to go.

Where is the best place to park money with a less than 10 year horizon?
You haven't missed he boat. You can still get some tax advantages to using a 529 plan.
Just select the appropriate time-based investment in the plan.
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NabSh
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by NabSh »

First of all make sure you save for the retirement.
There are plenty of options to pay for college (work study, college loans...). There is only one option to pay for retirement.

Second it's never too late. If the state has 529 tax credit, then make sure to use that ( even if just to use as pass through).
KlangFool
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by KlangFool »

OP,

1) Why do you need to save and pay for your kids' college education?

2) Why do you think that you can afford to pay for your kids' college education?

It is a LUXURY that few can afford.

It is very simple.

Do not save and pay for the college education. You cannot afford to do so. Let the kids take the student loan if they want to go to college. You could help to pay off the student loan if you can afford to later.

Do not pay for your kids' college education and then burden them with your retirement. They can borrow for college education. You cannot borrow for your retirement.

In my neighborhood of median annual income of 150K per year. Most parent do not pay for their kids' college education. They cannot afford to.

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TheHiker
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by TheHiker »

We had money to pay for for child's college so we did not qualify for need-based aid anywhere. here is what we did.

Did not have 529, but put some money aside in a savings account.
Took all AP classes offered at high school - you get credit for them at college.
Chose a state school that offered merit scholarship and priority class enrollment.
Maxed out class schedule to graduate in three years. Having priority enrollment was essential for getting into required classes as many popular classes have a waitlist.
The child did some work while at college (TA, paper grader etc) to help pay the bills.
mrsmitt
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by mrsmitt »

It is all about priorities. With 150k income a family should be able to save for college if this is their top priority.

For all of you stating that you cannot take a loan to retire. This is not a good point as you can control your expenses and in most cases the age for of retirement.

At the end of the day all parents need to decide how much they are willing to sacrifice to give a better head start to their kids.

KlangFool wrote: Sat Oct 16, 2021 1:07 pm OP,

In my neighborhood of median annual income of 150K per year. Most parent do not pay for their kids' college education. They cannot afford to.

KlangFool
Goal33
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by Goal33 »

I still think everybody on this thread is missing the big thing here. OP will not be in a position where he needs to pay for college. Income is too low. There will be plenty of financial aid.
Last edited by Goal33 on Sat Oct 16, 2021 1:36 pm, edited 1 time in total.
KlangFool
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by KlangFool »

mrsmitt wrote: Sat Oct 16, 2021 1:24 pm
It is all about priorities. With 150k income a family should be able to save for college if this is their top priority.
mrsmitt,

But, they don't save for college education. Plus, they do not save for retirement too. How reasonable is it to expect someone with gross income of 70K to save for college education?

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Goal33
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by Goal33 »

KlangFool wrote: Sat Oct 16, 2021 1:36 pm How reasonable is it to expect someone with gross income of 70K to save for college education?
It’s not. There will be financial aid (grants) at that income level. The education and possibly room and board will be free.
Pdxnative
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by Pdxnative »

Goal33 wrote: Sat Oct 16, 2021 1:36 pm I still think everybody on this thread is missing the big thing here. OP will not be in a position where he needs to pay for college. Income is too low. There will be plenty of financial aid.
This is not accurate at most schools, especially most public schools. The schools with very generous financial aid are for the most part highly selective. So yes, the obvious best solution here is for the kids to attend Harvard or MIT. The odds of that aren’t high even for the very best students.

OP, a 529 might have value for you if there’s a tax benefit, especially if it can be carried forward. Also, some 529s have a guaranteed income option that might be your best bet, or the appropriate target date fund. Most people finance college through some combination of saving, current income, and borrowing. Also, scholarships and tax credits help reduce costs for some. You’re not that far behind the majority of people frankly.

I’d caution against putting too much stock in the phrase repeated here by some, that “your kids can borrow for college but you can’t borrow for retirement”. There are limits to what a kid can borrow for college, and in most cases it won’t cover the costs.
wayfarer
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by wayfarer »

I bond. Interest earned should meet education exclusion for federal tax at your income level when redeemed. No state tax on interest earned. Can roll over into 529 later if wanted but would suggest keep it in your name to avoid it being counted against financial aid. Pretty good interest rate currently and immediate future; beats any other conservative option (that you asked for).
KlangFool
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by KlangFool »

Pdxnative wrote: Sat Oct 16, 2021 1:52 pm
OP, a 529 might have value for you if there’s a tax benefit, especially if it can be carried forward.
Pdxnative,

I disagreed. Unless OP can max up all his tax-deferred accounts, there is NO REASON for OP to make an after-tax contribution to 529.

529 is not a tax benefit for OP. OP would pay more taxes for 529 versus Trad IRA and Trad 401K.

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teen persuasion
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by teen persuasion »

Goal33 wrote: Sat Oct 16, 2021 12:16 pm Not trying to be snarky, but your income is low enough that your kid will probably get a lot of free money (financial aid). If your ex makes less, and they can use her financials, will be even better.

I don’t think you should worry much about it.

Edit: save for your retirement
I'm not so sure. Running the tiny bit of info given thru the current EFC formula I guesstimate $10k EFC. That's well above the PELL grant threshold, so zero there, and that's the big govt one. State grants like TAP in NY use similar thresholds, so zero there, too. School money is highly variable.

Of course, FAFSA Simplification is coming down the pike, but it's not yet clear when or how it will be implemented.

OP, FAFSA uses prior-prior year tax return info. That means a student starting college 2024 will file the FAFSA in October 2023 using their parent's tax info from 2022. So next year's income will be used to determine the first SAI (Student Aid Index - new term replacing EFC/Expected Family Contribution).
kada
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by kada »

I wouldn't bother, you'd save a few hundred bucks if you put it into some bond funds in a 529. I'd focus on college scholarships as well as local govt/private scholarships.

An interesting strategy i never thought of was to apply to a large amount of small one time scholarships (like 100 of them $500 -$1000). They all use similar essay requirements so you can have a few "stock" essays you tailor small parts of to each specific scholarship. I heard of someone who got almost $10,000 with this. It's like letting your kid create their own job. You could work together a bit on it too, basically you compile a list of recurring scholarships and look up all of their deadlines to make sure everything is delivered on time.

More common is to apply for college scholarships for activities you did in highschool (arts, sports, writing or speaking contests, etc). A lot of private schools are pretty lenient with some (me for example i got a music scholarship but there was no requirement to actually play lol).
Pdxnative
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by Pdxnative »

KlangFool wrote: Sat Oct 16, 2021 1:56 pm
Pdxnative wrote: Sat Oct 16, 2021 1:52 pm
OP, a 529 might have value for you if there’s a tax benefit, especially if it can be carried forward.
Pdxnative,

I disagreed. Unless OP can max up all his tax-deferred accounts, there is NO REASON for OP to make an after-tax contribution to 529.

529 is not a tax benefit for OP. OP would pay more taxes for 529 versus Trad IRA and Trad 401K.

KlangFool
I understand your point. But OP is asking how best to save for college. You are advising he save for retirement instead. Eventually the tuition bill will come due.
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by KlangFool »

Pdxnative wrote: Sat Oct 16, 2021 2:25 pm
KlangFool wrote: Sat Oct 16, 2021 1:56 pm
Pdxnative wrote: Sat Oct 16, 2021 1:52 pm
OP, a 529 might have value for you if there’s a tax benefit, especially if it can be carried forward.
Pdxnative,

I disagreed. Unless OP can max up all his tax-deferred accounts, there is NO REASON for OP to make an after-tax contribution to 529.

529 is not a tax benefit for OP. OP would pay more taxes for 529 versus Trad IRA and Trad 401K.

KlangFool
I understand your point. But OP is asking how best to save for college. You are advising he save for retirement instead. Eventually the tuition bill will come due.
Pdxnative,

Money is fungible. Save for retirement first and pay tuition later saves more taxes.

KlangFool
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Topic Author
Stillwater1971
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by Stillwater1971 »

Goal33 wrote: Sat Oct 16, 2021 1:38 pm
KlangFool wrote: Sat Oct 16, 2021 1:36 pm How reasonable is it to expect someone with gross income of 70K to save for college education?
It’s not. There will be financial aid (grants) at that income level. The education and possibly room and board will be free.
Is that what you think? If there's anyone on here that's making my income level that's getting their kid through college for free, I am all ears. My co-worker's older daughter finished up college recently and when he applied for Financial Aid her first year, they got virtually NOTHING for FREE. The overwhelming majority was unsubsidized loans with some subsidized. I'm probably guilty for assuming, but I think one has to be near poverty level before the Government starts covering all the loans.

I appreciate everyone's input. I'm weighing your advice here and I'll figure it out. Thank you.

I have been making my priority to invest first in my retirements. But I also want to lend a hand to my son and he is doing little things like AP classes and working part-time. This generation of college aged students are truly getting screwed over on the costs of college which puts them in years or even decades of student debt. My generation (Gen X) was much more fortunate (and Boomers had it even better). I'm all for giving my son a chance to learn the process of having a loan and paying off debt, but if I can help it, I would like to prevent him from being in debt to the banks for quite some time.
KlangFool
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by KlangFool »

Stillwater1971 wrote: Sat Oct 16, 2021 4:01 pm
Goal33 wrote: Sat Oct 16, 2021 1:38 pm
KlangFool wrote: Sat Oct 16, 2021 1:36 pm How reasonable is it to expect someone with gross income of 70K to save for college education?
It’s not. There will be financial aid (grants) at that income level. The education and possibly room and board will be free.
Is that what you think? If there's anyone on here that's making my income level that's getting their kid through college for free, I am all ears. My co-worker's older daughter finished up college recently and when he applied for Financial Aid her first year, they got virtually NOTHING for FREE. The overwhelming majority was unsubsidized loans with some subsidized. I'm probably guilty for assuming, but I think one has to be near poverty level before the Government starts covering all the loans.

I appreciate everyone's input. I'm weighing your advice here and I'll figure it out. Thank you.

I have been making my priority to invest first in my retirements. But I also want to lend a hand to my son and he is doing little things like AP classes and working part-time. This generation of college aged students are truly getting screwed over on the costs of college which puts them in years or even decades of student debt. My generation (Gen X) was much more fortunate (and Boomers had it even better). I'm all for giving my son a chance to learn the process of having a loan and paying off debt, but if I can help it, I would like to prevent him from being in debt to the banks for quite some time.
Stillwater1971,

The bottom line is this. Even if you want to help your kids, 529 is the wrong way to go for you. You should max up your Trad 401K and IRA. You saves taxes. Then, you have tax saving money to help pay for college. Not having enough money and paying extra taxes via 529 is not going to help you.

<<My co-worker's older daughter finished up college recently and when he applied for Financial Aid her first year, they got virtually NOTHING for FREE. >>

How much time and effort did your co-worker spent in researching available aids?

I got lucky. My daughter did all the works and research. For example, she applied for small amount scholarship during exam week. Most people couldn't bother. She told me that VCU in Virginia is most generous in giving out scholarship in Virginia.

Some folks are resourceful. They spent the efforts and believed that their effort would be rewarded. Some folks believed that nothing can be done. They are both right. They acted as per their belief. It is a self-fulfilling prophecy.

What do you believe?

KlangFool
Last edited by KlangFool on Sat Oct 16, 2021 4:52 pm, edited 1 time in total.
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mrsmitt
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by mrsmitt »

It just speaks to their priorities. There is nothing wrong with that as long as they are aware of consequences of their choices.

For OP, again if higher education for his kid is on the top of his priorities, then it might be not such a bad idea to start savings now, especially if his state provides some tax benefits.
KlangFool wrote: Sat Oct 16, 2021 1:36 pm
mrsmitt wrote: Sat Oct 16, 2021 1:24 pm
It is all about priorities. With 150k income a family should be able to save for college if this is their top priority.
mrsmitt,

But, they don't save for college education. Plus, they do not save for retirement too. How reasonable is it to expect someone with gross income of 70K to save for college education?

KlangFool
carminered2019
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by carminered2019 »

KlangFool wrote: Sat Oct 16, 2021 1:07 pm
In my neighborhood of median annual income of 150K per year. Most parent do not pay for their kids' college education. They cannot afford to.

KlangFool
Those are irresponsible parents making average 150K and not have 529 for the kids.
Goal33
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by Goal33 »

Stillwater1971 wrote: Sat Oct 16, 2021 4:01 pm
Goal33 wrote: Sat Oct 16, 2021 1:38 pm
KlangFool wrote: Sat Oct 16, 2021 1:36 pm How reasonable is it to expect someone with gross income of 70K to save for college education?
It’s not. There will be financial aid (grants) at that income level. The education and possibly room and board will be free.
Is that what you think? If there's anyone on here that's making my income level that's getting their kid through college for free, I am all ears. My co-worker's older daughter finished up college recently and when he applied for Financial Aid her first year, they got virtually NOTHING for FREE. The overwhelming majority was unsubsidized loans with some subsidized. I'm probably guilty for assuming, but I think one has to be near poverty level before the Government starts covering all the loans.

I appreciate everyone's input. I'm weighing your advice here and I'll figure it out. Thank you.

I have been making my priority to invest first in my retirements. But I also want to lend a hand to my son and he is doing little things like AP classes and working part-time. This generation of college aged students are truly getting screwed over on the costs of college which puts them in years or even decades of student debt. My generation (Gen X) was much more fortunate (and Boomers had it even better). I'm all for giving my son a chance to learn the process of having a loan and paying off debt, but if I can help it, I would like to prevent him from being in debt to the banks for quite some time.
Yea it is what I think and know.

Of course it will depend on the generosity of the university based on your expected contribution when you fill out the fasfa.

While it’s a respectable income, you are not going to have a high expected contribution.
KlangFool
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by KlangFool »

carminered2019 wrote: Sat Oct 16, 2021 4:26 pm
KlangFool wrote: Sat Oct 16, 2021 1:07 pm
In my neighborhood of median annual income of 150K per year. Most parent do not pay for their kids' college education. They cannot afford to.

KlangFool
Those are irresponsible parents making average 150K and not have 529 for the kids.
Average American save less than 5% of their gross income across all income levels. Why should you expect average folks save enough for their retirement and college education?

KlangFool
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Retired Bill
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by Retired Bill »

Would suggest fill out the FAFSA form to get a feel for what is expected to be your contribution, and to learn which assets are not counted in the formula. Avoid investing into accounts that would increase your expected contribution to dependents higher education.
Retired Bill
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by Retired Bill »

Would suggest fill out the FAFSA form to get a feel for what is expected to be your contribution, and to learn which assets are not counted in the formula. Avoid investing into accounts that would increase your expected contribution to dependents higher education.
Retired Bill
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by Retired Bill »

Here is a part of FAFSA instructions.

"Parents’ Net Worth of Current Investments
This is question 89 on the FAFSA.

The response indicates the student’s parents’ total net worth (current value minus debt) of current investments as of the day the FAFSA was completed.

Investments include real estate (other than the home in which the student’s parents live), rental property (includes a unit within a family home that has its own entrance, kitchen, and bath rented to someone other than a family member), trust funds, UGMA and UTMA accounts owned by the parent, money market funds, mutual funds, certificates of deposit, stocks, stock options, bonds, other securities, installment and land sale contracts (including mortgages held), commodities, etc.

Note: UGMA and UTMA accounts owned by the student are considered assets of the student, and must be reported as an asset of the student on the FAFSA, regardless of the student’s dependency status. Do not include UGMA and UTMA accounts for which the parents are the custodian but not the owner.

Investments also include qualified educational benefits or education savings accounts such as Coverdell savings accounts, 529 college savings plans, and the refund value of 529 prepaid tuition plans. If the student is Dependent, the accounts are reported as parental investments, including all accounts owned by the student and all accounts owned by the parents for any member of the household.

Investments do not include the home in which the student’s parents live, the value of life insurance, ABLE accounts, retirement plans (401[k] plans, pension funds, annuities, non-education IRAs, Keogh plans, etc.) or cash, savings, and checking accounts already reported in question 88.

If the student is Dependent, the response can be blank only if parents’ current assets do not exceed the asset threshold amount determined by CPS, or the student meets the simplified needs test or qualifies for an automatic zero Expected Family Contribution (EFC)."
Breezy
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by Breezy »

Check out the scholarship page for the public universities in you state to see what scholarships they offer to in-state students. I was pleasantly surprised to see automatic awards based on SAT score and GPA - that's it, no income requirements. The higher both were, the more you got, but kids with 3.2 were eligible. Once we saw this, we had our son take one of those SAT prep courses for like $300-500 (can't recall) and he did well enough that about 70% of his in-state tuition is paid for.

So, that's my advice - find out what's offered from each specific school and then aim for that. It might be that the lower-ranked schools offer the most scholarships. In my state, it's still a good school. Also, in my city, there are automatic transfer programs at the community colleges that often come with scholarships, especially if students do honors at the community college.

As much as you and your student can avoid debt, the better. It's truly a burden for them. Also, it's hard to see it when they're in high school, but taking a year off to work and mature is not a bad thing. Neither is taking an extra year or two to finish by going part time and working part time.
NoblesvilleIN
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by NoblesvilleIN »

Here is what we did, several years ago (kids have been out for a few years now), it may be something for you to consider:

My state (Indiana) offered a $1,000 tax CREDIT (not deduction) for a $4,000 contribution per year to the Indiana 529 plan. Each year of college, we made a $4000 contribution to each kids 529 and took the tax credit on our state taxes. I then paid used that $4,000 to help pay for the 2nd semester - so basically a pass thru account. The rest of the cost came from other funds (scholarship, inheritance, savings).
manatee2005
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by manatee2005 »

lobsterman2112 wrote: Sat Oct 16, 2021 12:10 pm
Stillwater1971 wrote: Sat Oct 16, 2021 9:40 am So, I missed the boat on investing in a 529. :oops: Long story that isn't necessary here, but I'm a divorced Dad making about 74k gross and now I have the financial means to start putting money away now. One child and will graduate High School in 3 years. Expecting 4 year Public College. Hope to get lucky with some subsidized loans so I won't have to pay interest while he's in school. I could start paying off the loans 5-7 years from now when interests begins theoretically 7 years from now. OR I would like to start paying off the loans as early as 4 years from now if some of the loans are unsubsidized.

In the meantime, what would be the most effective , but also a smart-risk approach with a short time-horizon?
I've read CDs, I-bonds or something conservative is the best way to go.

Where is the best place to park money with a less than 10 year horizon?
As a wise man told me: You can take a loan for college. You can't take a loan for retirement.

Give your child what you can. Let him take a loan for the rest. It also gives him some "skin in the game". Maybe enough so that he'll choose a major that would lead to a better career post-graduation. Or at least realize that he may benefit from a vocational school if college isn't working out for him.

You don't want to break your retirement for him and then be stuck working an extra 5-10 years to make up what you gave him.
I know that wise man. He is me 😀
manatee2005
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by manatee2005 »

carminered2019 wrote: Sat Oct 16, 2021 4:26 pm
KlangFool wrote: Sat Oct 16, 2021 1:07 pm
In my neighborhood of median annual income of 150K per year. Most parent do not pay for their kids' college education. They cannot afford to.

KlangFool
Those are irresponsible parents making average 150K and not have 529 for the kids.
I don’t have 529k for my kids.
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yatesd
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by yatesd »

carminered2019 wrote: Sat Oct 16, 2021 4:26 pm
Those are irresponsible parents making average 150K and not have 529 for the kids.
[/quote]


Not sure why there is an assumption that parents have a responsibility to pay for college. IMHO Colleges are the most corrupt institutions that exist in the US. There is no reason, college costs shouldn’t be plummeting with massive online courses available through accredited Universities.
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by Grt2bOutdoors »

Stillwater1971 wrote: Sat Oct 16, 2021 4:01 pm
Goal33 wrote: Sat Oct 16, 2021 1:38 pm
KlangFool wrote: Sat Oct 16, 2021 1:36 pm How reasonable is it to expect someone with gross income of 70K to save for college education?
It’s not. There will be financial aid (grants) at that income level. The education and possibly room and board will be free.
Is that what you think? If there's anyone on here that's making my income level that's getting their kid through college for free, I am all ears. My co-worker's older daughter finished up college recently and when he applied for Financial Aid her first year, they got virtually NOTHING for FREE. The overwhelming majority was unsubsidized loans with some subsidized. I'm probably guilty for assuming, but I think one has to be near poverty level before the Government starts covering all the loans.

I appreciate everyone's input. I'm weighing your advice here and I'll figure it out. Thank you.

I have been making my priority to invest first in my retirements. But I also want to lend a hand to my son and he is doing little things like AP classes and working part-time. This generation of college aged students are truly getting screwed over on the costs of college which puts them in years or even decades of student debt. My generation (Gen X) was much more fortunate (and Boomers had it even better). I'm all for giving my son a chance to learn the process of having a loan and paying off debt, but if I can help it, I would like to prevent him from being in debt to the banks for quite some time.
You have to look at the way public colleges were funded back in your era, the state governments were more generous in their funding contributions to the cost of running the public universities. Not so today, today the burden of paying for education has shifted from the state agencies to the end user of the education, the tax payer. The advent of unlimited borrowing in the education loan market has made the transition easier for the schools, they simply say, don't have the money? no problem, "have we got a loan for you" in the disguise of "giving you financial aid". Cost of schooling has increased multiples of the rate of inflation, a basic financial calculator will tell you that even if you do shop around for colleges. I wonder what the price of books are these days? I remember being shocked at the prices then, I can only imagine now.

OP - good for you! You want to help your kid out, a noble thing to do. Its likely the child will not be able to borrow more than a certain amount anyway, anything after that ultimately does fall on the parent's shoulders unless the child is deemed independent.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Grt2bOutdoors
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by Grt2bOutdoors »

yatesd wrote: Sun Oct 17, 2021 3:47 pm
carminered2019 wrote: Sat Oct 16, 2021 4:26 pm
Those are irresponsible parents making average 150K and not have 529 for the kids.

Not sure why there is an assumption that parents have a responsibility to pay for college. IMHO Colleges are the most corrupt institutions that exist in the US. There is no reason, college costs shouldn’t be plummeting with massive online courses available through accredited Universities.
[/quote]

Are the prices of "online classes" from said accredited universities any cheaper than those in physical locations? Until the price of the "goods" declines, you'll continue to see inflated price tags. Of course, there are many who don't mind paying higher prices in exchange for new dorms, new stadiums, a multi million dollar a year (insert your sport right here) coach, new gym, are we missing anything? The WSJ just published a rather lengthy front page article on how Baylor jacked up the price of schooling so it could pay for its new football stadium and aspire to become a research institution, but who paid for it? Those who could least afford to. They actively solicited attendance from lower income and middle income families and told them "financial aid" were parent plus loans that required repayment to begin two years after they took them out. People who couldn't afford the loans had their wages garnished. Its really Buyer Beware! in the realm of higher education, as it seems that the administrators don't care where the money comes from, so long as it's flowing their way. Don't get hung up on a name!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Queen300
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by Queen300 »

I felt like we missed the boat, too, on saving for our kids' college. Stay-at-home parent went back to work 4 months before the oldest child's first college tuition was due. Since we were already accustomed to living on one income, this second income went straight into savings. This savings account was used to pay tuition and housing. As the savings built, the first 10K accumulated went into a CD that matured a month before the next college tuition was due. Plodding along, thankfully faster than the bills were due, we built a CD ladder with $10K CDs maturing every July and December.

No doubt, folks on this forum will have a better answer for accumulating more wealth in better investments, but this worked well for us.
It has provided enough for 3 kids to each get through 4 years (8 semesters) at state universities.
Stock market downturns?...No sweat. So thankful to still be able to say, we've got this!
The peace of mind was well worth it.
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by Grt2bOutdoors »

mrsmitt wrote: Sat Oct 16, 2021 4:24 pm It just speaks to their priorities. There is nothing wrong with that as long as they are aware of consequences of their choices.

For OP, again if higher education for his kid is on the top of his priorities, then it might be not such a bad idea to start savings now, especially if his state provides some tax benefits.
KlangFool wrote: Sat Oct 16, 2021 1:36 pm
mrsmitt wrote: Sat Oct 16, 2021 1:24 pm
It is all about priorities. With 150k income a family should be able to save for college if this is their top priority.
mrsmitt,

But, they don't save for college education. Plus, they do not save for retirement too. How reasonable is it to expect someone with gross income of 70K to save for college education?

KlangFool
You honestly do not have a full picture of someone's financial situation to be drawing conclusions from gross income. Do you know or maybe you believe that health insurance covers the full costs of a household member who requires certain treatments or drugs that are not covered under a plan. Or perhaps there are many dependents who are covered under that gross income. Or perhaps the cost of living chews up a good portion of that income after taxes - rent isn't cheap, not everyone owns a home and even if they do own a home there may be little to no equity in the home especially if it was recently bought. Or perhaps, the household only just recently began earning such an income unless they are Bogleheads who start out making six figures right out of college? What about if its 4 years to go before the child begins college and the breadwinner suddenly lucks out on a promotion that puts them at the magic $150K number. I'm not making excuses for anyone, but personal finance is just that "personal" and there is no one shoe fits all.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
invest4
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by invest4 »

lobsterman2112 wrote: Sat Oct 16, 2021 12:10 pm As a wise man told me: You can take a loan for college. You can't take a loan for retirement.
Goal33 wrote: Sat Oct 16, 2021 12:16 pm Edit: save for your retirement
NabSh wrote: Sat Oct 16, 2021 1:00 pm First of all make sure you save for the retirement.
This...first and foremost.

Then...

* Understand your potential for financial aid
* Junior college first
* State university to finish
* Living at home
* Loans if required (you can also help later)

Of course, some people want their kid to have the "college experience" or place a high value on a private college, etc. Everyone has their own views / priorities and nothing wrong with that. For most people, I would offer the above is a super reasonable and economical approach to providing for their education...whether parental assistance is full, partial, or none. YMMV.
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by trueblueky »

If the first year begins in 2024, the fourth year ends in 2028.

While four years of college stretches over five tax years, the best tax break is just for four years. Plan to maximize that break.

State 529 tax breaks can be substantial. Check your state.

Corrected date.
Last edited by trueblueky on Mon Oct 18, 2021 7:29 am, edited 1 time in total.
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camillus
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by camillus »

The best bang for your buck might come from:

1) controlling the cost of college via school selection & scholarships

2) making sure the degree leads to a viable career

2) saving for your own retirement

4) buying I-bonds to pay for the last year of college (these I-bonds could displace a bond position in your portfolio)

(I-bonds may be a good short term college savings vehicle as I believe they are tax free for education purposes)
51% US / 34% ex-US / 15% “bond”
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StevieG72
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by StevieG72 »

I started late with a 529. My state has a tax deduction for 529 plans. I started 4 yrs ago contributing 10k a year. The account has reached 50k and I have stopped contributing, with the plan to save for 1/3, borrow 1/3, and cash flow 1/3 of the costs.
Fools think their own way is right, but the wise listen to others.
WhiteMaxima
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by WhiteMaxima »

Some state has guaranteed tuition 529 program, you could lock in credit in advance. Tuition inflation is more than CPI during the last couple of decades. You dollar will at least keep with tuition inflation.
FandangoDave5010
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by FandangoDave5010 »

This message is for Grandparents, like DW and myself. If you are financially comfortable in retirement and have RMDs coming in that you really don't need, you may consider setting up 529 College Accounts for your grandkids. I have because I object to getting 1% on bank savings accounts when college loans are frozen at 8%. I remember the days of S&L when I got 15% on 25K CDs! Of course that was a farce, too, just like todays Federal loan program for college students.

Our daughter was a music student. Not really a marketable skill! Since we were paying the college bills, I insisted that her major be music education. She went to a reputable school and had private lessons from members of the Philadelphia Orchestra and really learned to enjoy, teach and conduct music! Education is where the music jobs are, not so in performance. Twenty years into public school teaching, she is earning $100K with social security and pension. If you're paying, keep an eye on what they are doing. Such is the market place for college graduates.
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by BernardShakey »

trueblueky wrote: Sun Oct 17, 2021 5:02 pm If the first year begins in 2024, the fourth year ends in 2029.

While four years of college stretches over five tax years, the best tax break is just for four years. Plan to maximize that break.

State 529 tax breaks can be substantial. Check your state.
If a freshman in the fall of 2024, the 4th year would end in the spring of 2028 (not 2029).
An important key to investing is having a well-calibrated sense of your future regret.
BernardShakey
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by BernardShakey »

yatesd wrote: Sun Oct 17, 2021 3:47 pm
carminered2019 wrote: Sat Oct 16, 2021 4:26 pm
Those are irresponsible parents making average 150K and not have 529 for the kids.

Not sure why there is an assumption that parents have a responsibility to pay for college. IMHO Colleges are the most corrupt institutions that exist in the US. There is no reason, college costs shouldn’t be plummeting with massive online courses available through accredited Universities.
[/quote]

It's simply demand. There are lots of families out there who will do whatever it takes (including overspending) to give their children the "best" education possible. Whether it is worth it or not is another question. But the demand is there.
An important key to investing is having a well-calibrated sense of your future regret.
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by BernardShakey »

KlangFool wrote: Sat Oct 16, 2021 4:54 pm
carminered2019 wrote: Sat Oct 16, 2021 4:26 pm
KlangFool wrote: Sat Oct 16, 2021 1:07 pm
In my neighborhood of median annual income of 150K per year. Most parent do not pay for their kids' college education. They cannot afford to.

KlangFool
Those are irresponsible parents making average 150K and not have 529 for the kids.
Average American save less than 5% of their gross income across all income levels. Why should you expect average folks save enough for their retirement and college education?

KlangFool
150k annual income is not at all "average." It's almost 2.5 times the US average. So, yes, I'd expect someone making 150k to put some money away for college (assuming that helping their kids out with college costs is their desire). And, yes, saving for retirement too.
An important key to investing is having a well-calibrated sense of your future regret.
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Re: How to invest when I Missed the 529 Boat and Child will start College in 3 years!

Post by KlangFool »

BernardShakey wrote: Mon Oct 18, 2021 12:16 am
KlangFool wrote: Sat Oct 16, 2021 4:54 pm
carminered2019 wrote: Sat Oct 16, 2021 4:26 pm
KlangFool wrote: Sat Oct 16, 2021 1:07 pm
In my neighborhood of median annual income of 150K per year. Most parent do not pay for their kids' college education. They cannot afford to.

KlangFool
Those are irresponsible parents making average 150K and not have 529 for the kids.
Average American save less than 5% of their gross income across all income levels. Why should you expect average folks save enough for their retirement and college education?

KlangFool
150k annual income is not at all "average." It's almost 2.5 times the US average. So, yes, I'd expect someone making 150k to put some money away for college (assuming that helping their kids out with college costs is their desire). And, yes, saving for retirement too.
The low saving rate is consistent across all income levels. The reality doesn't match your expectations.

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