Saving for college for 2 kids: 3 and 0

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CyclingDuo
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Re: Saving for college for 2 kids: 3 and 0

Post by CyclingDuo » Sat Feb 11, 2017 12:06 am

Alto Astral wrote:I don't know. I've heard too many new stories about opiod epidemics. Happens to really good people; even nurses. There is a good podcast called "Embedded" from NPR on this.
Reality for most of us is that one needs to save for children's education funds. It's one of the top things to save for along with retirement, buying a home, etc.

Starting a college fund early and often is the common advice to meet the goals. If one wants to focus on not saving for their education because of stories, or opinions that there is a small chance their children will turn out to be drug addicts, then that is a choice those parents are allowed to make.

I, for one, think it is misplaced pessimism. Heck, we could also avoid saving for retirement because we have heard about many people dying before the age of 65. In fact, 30% of Americans die before the age of 65, so why save money for retirement - right? We might be one of 30%. :twisted:
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MindTheGAAP
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Re: Saving for college for 2 kids: 3 and 0

Post by MindTheGAAP » Sat Feb 11, 2017 12:26 am

Alto Astral wrote:
MindTheGAAP wrote:
KlangFool wrote:
Alto Astral wrote:
MindTheGAAP wrote:
Why does it need to be private university? I went to one but it was somewhat part of the deal with my folks for paying for it. I don't think I necessarily got a better degree out of it - I think it was just a different experience.
Hey, who does not want their newborn to go to Harvard?
Alto Astral,

For example, me. It does not worth the money and effort at the undergraduate level.

KlangFool

Agree. MBA or similar would be worth it for networking.
Isn't undergrad the foundation though? I bet State+Harvard will be great. But MIT+Harvard? Whoa!

I am not at all trying to sound cocky here; this is all hypothetical and a couple of decades away. But I always felt the undergrad was on me and then the masters was on them. Besides the Harvard classmates have an average 7 year experience (if memory serves me right) So they would be in a better financial position (since they hopefully don't have any student debt due to a crazy dad who planned a whacky idea on a drunk Friday night)
Depends on how you see University. I got my Masters of Accountancy but it basically just proved I could learn textbook accounting. I learned everything I really need to know from being at the Big Four and then my consulting job after that.

Example - my kids would be better off, I think, I with going to UT McCombs BS for Undergrad and my and the missus being able to retire without depending on them vs them going to Harvard/ Yale/ etc. It also heavily depends on their area of study.
"One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute" - William Feather

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Alto Astral
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Re: Saving for college for 2 kids: 3 and 0

Post by Alto Astral » Sat Feb 11, 2017 1:26 am

Okay, I read your post 3 times before replying since you said "being a professor myself". My professors made who I am and pushed me further than I ever imagined I could do. I read it one more time since you said "been on both sides of this issue".
willthrill81 wrote: Having been on both sides of this issue, I can say that I firmly believe that parents' first duty is to provide for their own retirement. Helping your children through college only to need help from them later doesn't benefit anyone.
I agree with that. While I don't mind skipping a meal or so, I cannot imagine putting my wife through that. So if it comes to that, then the kids go to state university on loans - they have a whole life to pay it off. However, I am not sure if the parents know this when they are doing this. For example, had it not been for your 25-35 expenses number, I would have merrily saved only 11 times earnings. I would have funded my kids probably through their Phd programs (I kid - those programs are mostly fully funded either via waivers or assistance-ships). Only to realize that my odds of going broke are a statistical certainty.
willthrill81 wrote: Here's a case in point:
"It’s no surprise then that about one in four Americans (with parents ages 65 and older) is helping a parent with his or her affairs, offering financial help or caring after them."
https://blog.mint.com/family/family-mat ... er-012517/

That should make parents think twice before even considering funding their kids' college when their own retirement isn't secure.
It broke my heart when I read the 23 year old daughter saving $20/week for her dad's old age. I agree with you 100%; our retirement comes first.
willthrill81 wrote: Further, despite being a professor myself, I don't believe that most of these 'big name' universities are worth the burdensome tuition costs. Almost wherever they go, students get out of college what they put into it.
While I agree with you, what about two people putting the same effort in Ivy vs State University? The Ivy kid's got to have a significant edge. While neither of us went to one, I have anecdotal experience. I went to a lower ranked school, got As, got into the honor society etc. I spent a couple of months around graduation looking for jobs. I started off with a few contracting gigs before I landed into a relatively stable job as a full-ime-employee. My wife went to a better ranked state school. She got a job via campus interview a few months before she even graduated. She did not spend a day looking for a job. I can only extrapolate this to someone at an Ivy League school. They probably have jobs lined up after their first summer internship. While we turned out okay, wouldn't a Ivy Leaguer turn out phenomenal?
willthrill81 wrote:
Alto Astral wrote:What percentage of my portfolio would you recommend would be an acceptable amount to spend on kids education? Or in other words, how much should I keep to fully fund our retirement, before we can contribute to our kids education. Some estimates say you need to have saved 11 times your current income to be able to retire modestly.
You need 25-35 times your desired income in retirement savings in order to have a solid chance (>95%) of retiring without going broke. Granted, you probably won't need the income you have now, but that number is far bigger than most non-investors think it is.

With a 9% withdrawal rate (which you would logically need with only 11 times your desired income), your odds of not running out of money over a 30 year retirement are only about 7%.
You just blew my mind away with that number . All this time I was smung thinking I was on the right track. Woe is me!

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Alto Astral
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Re: Saving for college for 2 kids: 3 and 0

Post by Alto Astral » Sat Feb 11, 2017 1:30 am

CyclingDuo wrote:
Alto Astral wrote:I don't know. I've heard too many new stories about opiod epidemics. Happens to really good people; even nurses. There is a good podcast called "Embedded" from NPR on this.
Reality for most of us is that one needs to save for children's education funds. It's one of the top things to save for along with retirement, buying a home, etc.

Starting a college fund early and often is the common advice to meet the goals. If one wants to focus on not saving for their education because of stories, or opinions that there is a small chance their children will turn out to be drug addicts, then that is a choice those parents are allowed to make.

I, for one, think it is misplaced pessimism. Heck, we could also avoid saving for retirement because we have heard about many people dying before the age of 65. In fact, 30% of Americans die before the age of 65, so why save money for retirement - right? We might be one of 30%. :twisted:
Touché! You got me.

I definitely want to start saving into a college plan. Be it Roth IRA, 529 or taxable. It was the UTMA portion that freaked me a bit. I don't know - I was an okay kid at 21. But then I was broke. Who knows how I would think if I knew I had $100K? There is a more than 50% chance that I would have tried a dot com startup that time with the money.

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Alto Astral
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Re: Saving for college for 2 kids: 3 and 0

Post by Alto Astral » Sat Feb 11, 2017 1:38 am

MindTheGAAP wrote:
Alto Astral wrote:
MindTheGAAP wrote:
KlangFool wrote:
Alto Astral wrote: Hey, who does not want their newborn to go to Harvard?
Alto Astral,

For example, me. It does not worth the money and effort at the undergraduate level.

KlangFool

Agree. MBA or similar would be worth it for networking.
Isn't undergrad the foundation though? I bet State+Harvard will be great. But MIT+Harvard? Whoa!

I am not at all trying to sound cocky here; this is all hypothetical and a couple of decades away. But I always felt the undergrad was on me and then the masters was on them. Besides the Harvard classmates have an average 7 year experience (if memory serves me right) So they would be in a better financial position (since they hopefully don't have any student debt due to a crazy dad who planned a whacky idea on a drunk Friday night)
Depends on how you see University. I got my Masters of Accountancy but it basically just proved I could learn textbook accounting. I learned everything I really need to know from being at the Big Four and then my consulting job after that.

Example - my kids would be better off, I think, I with going to UT McCombs BS for Undergrad and my and the missus being able to retire without depending on them vs them going to Harvard/ Yale/ etc.
I agree with you. And I don't want to fund their Harvard/Yale degrees at the cost of our retirement. I am not sure if I will be doing that if put the money in taxable vs 529 (all this is after maxing out 401k and Roth IRA. Klang likely feels I am the fool who is too young & optimistic and not preparing enough for survival during hard times
MindTheGAAP wrote:It also heavily depends on their area of study.
Oh, yes. If my daughter wants to go into early childhood education, that would pay around $50K out of school, I may not be keen on spending $347K and sending her to Harvard

aristotelian
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Re: Saving for college for 2 kids: 3 and 0

Post by aristotelian » Sat Feb 11, 2017 7:56 am

Alto Astral wrote: Oh, yes. If my daughter wants to go into early childhood education, that would pay around $50K out of school, I may not be keen on spending $347K and sending her to Harvard
If she goes to Harvard, she will probably not go into early childhood...And she will probably be just fine on her own.

MindTheGAAP
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Re: Saving for college for 2 kids: 3 and 0

Post by MindTheGAAP » Sat Feb 11, 2017 7:59 am

Alto Astral wrote: Klang likely feels I am the fool who is too young & optimistic and not preparing enough
In that case I'm young and cynical since I'm not quite 29!
"One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute" - William Feather

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Re: Saving for college for 2 kids: 3 and 0

Post by Grt2bOutdoors » Sat Feb 11, 2017 8:22 am

Alto Astral wrote:
Grt2bOutdoors wrote:You need 20-25x expenses less Social Security (it will be there, don't worry) to enjoy retirement. Another way to view it is 4 percent of total retirement assets withdrawn annually. Forget about multiples of income, it's expenses that count.
Aha! That's the number I was looking for. Makes sense. I wasn't sure what number I should target. Does that factor in inflation too?
Yes, use of a real return factor in your planning takes into account inflation. You will track your progress as you get closer to goal post and adjust along the way, accumulating more can lead to retiring early or possibly leaving a legacy behind.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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willthrill81
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Re: Saving for college for 2 kids: 3 and 0

Post by willthrill81 » Sat Feb 11, 2017 10:09 am

Alto Astral wrote:
willthrill81 wrote: Further, despite being a professor myself, I don't believe that most of these 'big name' universities are worth the burdensome tuition costs. Almost wherever they go, students get out of college what they put into it.
While I agree with you, what about two people putting the same effort in Ivy vs State University? The Ivy kid's got to have a significant edge. While neither of us went to one, I have anecdotal experience. I went to a lower ranked school, got As, got into the honor society etc. I spent a couple of months around graduation looking for jobs. I started off with a few contracting gigs before I landed into a relatively stable job as a full-ime-employee. My wife went to a better ranked state school. She got a job via campus interview a few months before she even graduated. She did not spend a day looking for a job. I can only extrapolate this to someone at an Ivy League school. They probably have jobs lined up after their first summer internship. While we turned out okay, wouldn't a Ivy Leaguer turn out phenomenal?
I think it depends in large part on the student. Ivy League students do not always have greater success than everyone else, not by a long shot. I really think that a lot of the value lies in the prestige in many people's minds, along with the connections made while there, though those connections are certainly not exclusive to Ivy League schools either.

I would encourage you to read Stanley's "The Millionaire Mind" in which he discusses how American millionaires value their college experiences. The overwhelming majority of that group has at least a four year degree, and a substantial percentage, far higher than the general populace, have a graduate degree. But most of them believe that learning to work hard and with others was of much greater benefit to them than the knowledge they acquired during that time. It's worth a read.
willthrill81 wrote:You need 25-35 times your desired income in retirement savings in order to have a solid chance (>95%) of retiring without going broke. Granted, you probably won't need the income you have now, but that number is far bigger than most non-investors think it is.
You just blew my mind away with that number . All this time I was smung thinking I was on the right track. Woe is me![/quote]

If you already have 11 times your desired income saved, you're a lot closer to 25 times than you might think. At 5% real return, you're only about 14 years away from doubling it to 22 times, and that's assuming you didn't make additional contributions, which you probably will.

Woe to the typical 60-64 year old who has a total net worth, including their home, of $190k.
Alto Astral wrote:Klang likely feels I am the fool who is too young & optimistic and not preparing enough for survival during hard times.
Don't worry about that one bit. You should have a good emergency fund in place (3-6 months is the general 'minimum' recommendation), which is good enough for most "hard times."

I showed in a recent post that early withdrawals from retirement accounts only increased by about 2% from 2004 to 2010. So the overwhelming majority of people were not emptying their 401k to pay for groceries.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Alto Astral
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Re: Saving for college for 2 kids: 3 and 0

Post by Alto Astral » Sat Feb 11, 2017 12:04 pm

willthrill81 wrote:
Alto Astral wrote:
willthrill81 wrote: Further, despite being a professor myself, I don't believe that most of these 'big name' universities are worth the burdensome tuition costs. Almost wherever they go, students get out of college what they put into it.
While I agree with you, what about two people putting the same effort in Ivy vs State University? The Ivy kid's got to have a significant edge. While neither of us went to one, I have anecdotal experience. I went to a lower ranked school, got As, got into the honor society etc. I spent a couple of months around graduation looking for jobs. I started off with a few contracting gigs before I landed into a relatively stable job as a full-ime-employee. My wife went to a better ranked state school. She got a job via campus interview a few months before she even graduated. She did not spend a day looking for a job. I can only extrapolate this to someone at an Ivy League school. They probably have jobs lined up after their first summer internship. While we turned out okay, wouldn't a Ivy Leaguer turn out phenomenal?
I think it depends in large part on the student. Ivy League students do not always have greater success than everyone else, not by a long shot. I really think that a lot of the value lies in the prestige in many people's minds, along with the connections made while there, though those connections are certainly not exclusive to Ivy League schools either.
I agree they can get pretty good connections in the top State schools. Yes, a lot is in the mind - but won't it be in the mind of employers too on seeing the resume?
willthrill81 wrote: I would encourage you to read Stanley's "The Millionaire Mind" in which he discusses how American millionaires value their college experiences. The overwhelming majority of that group has at least a four year degree, and a substantial percentage, far higher than the general populace, have a graduate degree. But most of them believe that learning to work hard and with others was of much greater benefit to them than the knowledge they acquired during that time. It's worth a read.
Oh Yeah, great author. I read his other book "The millionaire next door". I will borrow this one from the library. Yes, his numbers were pretty good. But interestingly, most millionaire mostly want their kids to become doctors, lawyers etc vs doing what they did way back.
willthrill81 wrote:
willthrill81 wrote:You need 25-35 times your desired income in retirement savings in order to have a solid chance (>95%) of retiring without going broke. Granted, you probably won't need the income you have now, but that number is far bigger than most non-investors think it is.
Alto Astral wrote:You just blew my mind away with that number . All this time I was smung thinking I was on the right track. Woe is me!
If you already have 11 times your desired income saved, you're a lot closer to 25 times than you might think. At 5% real return, you're only about 14 years away from doubling it to 22 times, and that's assuming you didn't make additional contributions, which you probably will.
Not yet, I only have $340K in my 401k at age 37.
willthrill81 wrote: Woe to the typical 60-64 year old who has a total net worth, including their home, of $190k.
Alto Astral wrote:Klang likely feels I am the fool who is too young & optimistic and not preparing enough for survival during hard times.
Don't worry about that one bit. You should have a good emergency fund in place (3-6 months is the general 'minimum' recommendation), which is good enough for most "hard times."

I showed in a recent post that early withdrawals from retirement accounts only increased by about 2% from 2004 to 2010. So the overwhelming majority of people were not emptying their 401k to pay for groceries.
I will look up that post

KlangFool
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Re: Saving for college for 2 kids: 3 and 0

Post by KlangFool » Sat Feb 11, 2017 12:23 pm

Alto Astral wrote: I will look up that post
Alto Astral,

You are not an average. You cannot be 4.8% unemployed. Either you are employed or unemployed. Those numbers do not help you. You and your spouse are in the 100K to 150K range. Many of those jobs are subjected to age discrimination. If you are in one of those jobs, you and your spouse could be permanently unemployed and/or underemployed in the 40s and 50s. That is the greatest risk facing you now. That is the bad news.

The good news is if you are employed long enough (10+ years), this does not matter to you. At about 60K of annual expense, with 1.2 million (20X annual expense), you are almost financially independent. You could be underemployed and it won't matter. Between now and 10+ years later is your danger zone.

This was the reasoning behind my advice get to that number as soon as possible. Put the money into the taxable account. Do not worry about 529. If you make it, you can handle college funding without a problem.

I had been there. For the last 10+ years, I faced laid off every 3 to 12 months at every job. I survived some of them and I was unemployed for more than 1 year a few times. But, I still got here and in a position to "cash flow" my children's college education with one income.

Meanwhile, many of my peers in the 40s and 50s did not make it.

KlangFool

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TomatoTomahto
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Re: Saving for college for 2 kids: 3 and 0

Post by TomatoTomahto » Sat Feb 11, 2017 12:56 pm

Alto Astral wrote:Hey, who does not want their newborn to go to Harvard?
Answer: the parent of a Yale student. :D

This topic is a perennial one here, and my stamina is lower than that of the opposing side of the argument, so I'm not entering the discussion other than to say that I feel, strongly, that:
1 - fit matters a lot
2 - if your child fits at Yale level schools, and is accepted, the additional money will be well spent
Okay, I get it; I won't be political or controversial. The Earth is flat.

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willthrill81
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Re: Saving for college for 2 kids: 3 and 0

Post by willthrill81 » Sat Feb 11, 2017 1:00 pm

Alto Astral wrote:Oh Yeah, great author. I read his other book "The millionaire next door". I will borrow this one from the library. Yes, his numbers were pretty good. But interestingly, most millionaire mostly want their kids to become doctors, lawyers etc vs doing what they did way back.
That's very likely a result of the composition of most millionaires; over half come from the ranks of business (i.e. entrepreneurs, executives, etc.). They were personally successful, but they also saw many others who took a similar path struggle and often fail. Consequently, they want something more reliable for their children, even if it is unlikely to be as wildly profitable as their own ventures turned out to be.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Alto Astral
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Re: Saving for college for 2 kids: 3 and 0

Post by Alto Astral » Sat Feb 11, 2017 1:03 pm

KlangFool wrote:
Alto Astral wrote: I will look up that post
Alto Astral,

You are not an average. You cannot be 4.8% unemployed. Either you are employed or unemployed. Those numbers do not help you. You and your spouse are in the 100K to 150K range. Many of those jobs are subjected to age discrimination. If you are in one of those jobs, you and your spouse could be permanently unemployed and/or underemployed in the 40s and 50s. That is the greatest risk facing you now. That is the bad news.
Oh yes. IT is notorious for this. Not to mention outsourcing.
KlangFool wrote: The good news is if you are employed long enough (10+ years), this does not matter to you. At about 60K of annual expense, with 1.2 million (20X annual expense), you are almost financially independent. You could be underemployed and it won't matter. Between now and 10+ years later is your danger zone.

This was the reasoning behind my advice get to that number as soon as possible. Put the money into the taxable account. Do not worry about 529. If you make it, you can handle college funding without a problem.
Makes sense. I am already maxing out 401k. Next is Roth IRA. While my employer allows for a post-tax 401k (I think Roth 401k) - I will see if Mega Backdoor Roth applies to me. By taxable, you mean some vanguard fund in a general account, right? I will look into tax efficiency.
KlangFool wrote: I had been there. For the last 10+ years, I faced laid off every 3 to 12 months at every job. I survived some of them and I was unemployed for more than 1 year a few times. But, I still got here and in a position to "cash flow" my children's college education with one income.

Meanwhile, many of my peers in the 40s and 50s did not make it.

KlangFool
That's rough. And it could very well happen to us since its all too common in our IT industry.

WildBill
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Re: Saving for college for 2 kids: 3 and 0

Post by WildBill » Sat Feb 11, 2017 1:15 pm

Howdy again!
Alto Astral wrote:
WildBill wrote:Howdy
Howdy! Nobody has greeted me like that since I left TX after school more than a decade back. Sure sounds refreshing!
WildBill wrote: We saved considerable amounts in the 529 as we went as it became clear that they were students who would benefit from the best possible universities.
This may be my paternal bias, but I feel my 3 year-old daughter is one smart cookie. I totally see what you say here. The goal is not that she become some cardiac surgeon and make a ton. But if she ends up teaching in a university or research or public service; it will be backed by the best possible/affordable universities. If you don't mind me asking; at what age of your kids did you make this decision?

You will know pretty early, especially if their interests are in STEM areas. Our sons were both good students in all of their studies, but very interested in science and mathematics from a very early age. In early elementary school they were both advanced by multiple years in those subjects and started attending courses at a local college in about 7th grade. They are now both studying Mathematics/Applied Mathematics/CS at Ivy League schools. We saved from the beginning, but were more aggressive from about second grade on when it was pretty clear that they would benefit from the best university we could find.

The kicker is that they were able to earn extremely good money as tutors while they were in high school in Math and CS, and now can get tech company summer internships with companies like Google and Facebook that pay up to $8500 per month. Takes a lot of the sting out of the university expenses.
WildBill wrote: We did not stint on other investing, and fully funded retirement accounts and invested aggressively in taxable accounts. This requires living substantially below your means. So what? We have a strong bias to providing the best possible education for our sons and not burdening their lives with student loans. Matter of priorities. They have done their part with academic performance, strong work ethic and earnings from summer internships and outside work.
Amen to this. I spend nothing on myself. Not even the cheapest coffee. (Okay, maybe the cheapest vodka bottle every 2 months) And I am fine with it. Been a spartan and wife shares the frugal lifestyle. We only "splurge" on organic grocery. I've read too much about irradiation, hormones and pesticides to spook me out.
WildBill wrote: I am now retired and the 529s will pay full freight for 2 Ivy League schools, and we will not be living on the streets. We are not particularly smart or capable and if we can do it it can certainly be done.
I am so happy to hear this. My parents were really lower middle-class. No car. No vacations. No fancy stuff. But my sister is a doctor and I am a bl@@dy (forgive me lord) software engineer. I really want to go above and beyond for my kids like they did for me.

Pretty much same here. I went to a good school on an academic scholarship - could not have gone otherwise - and it changed my life. Same for my brother. I have great faith in the combination of education with an intellectually curious and motivated student.
WildBill wrote: These threads about funding college sometimes seem to get off point, with debates about relative merits of universities and contingency planning for disasters. Not sure why. It's not that hard.

Good luck to you and the classes of 2038 and 2041!
W B
Thanks!
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid

KlangFool
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Re: Saving for college for 2 kids: 3 and 0

Post by KlangFool » Sat Feb 11, 2017 1:24 pm

Alto Astral wrote:
KlangFool wrote:
Alto Astral wrote: I will look up that post
Alto Astral,

You are not an average. You cannot be 4.8% unemployed. Either you are employed or unemployed. Those numbers do not help you. You and your spouse are in the 100K to 150K range. Many of those jobs are subjected to age discrimination. If you are in one of those jobs, you and your spouse could be permanently unemployed and/or underemployed in the 40s and 50s. That is the greatest risk facing you now. That is the bad news.
Oh yes. IT is notorious for this. Not to mention outsourcing.
KlangFool wrote: The good news is if you are employed long enough (10+ years), this does not matter to you. At about 60K of annual expense, with 1.2 million (20X annual expense), you are almost financially independent. You could be underemployed and it won't matter. Between now and 10+ years later is your danger zone.

This was the reasoning behind my advice get to that number as soon as possible. Put the money into the taxable account. Do not worry about 529. If you make it, you can handle college funding without a problem.
Makes sense. I am already maxing out 401k. Next is Roth IRA. While my employer allows for a post-tax 401k (I think Roth 401k) - I will see if Mega Backdoor Roth applies to me. By taxable, you mean some vanguard fund in a general account, right? I will look into tax efficiency.
KlangFool wrote: I had been there. For the last 10+ years, I faced laid off every 3 to 12 months at every job. I survived some of them and I was unemployed for more than 1 year a few times. But, I still got here and in a position to "cash flow" my children's college education with one income.

Meanwhile, many of my peers in the 40s and 50s did not make it.

KlangFool
That's rough. And it could very well happen to us since its all too common in our IT industry.
Alto Astral,

<<By taxable, you mean some vanguard fund in a general account, right? I will look into tax efficiency.>>

Yes.

KlangFool

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Alto Astral
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Re: Saving for college for 2 kids: 3 and 0

Post by Alto Astral » Sat Feb 11, 2017 4:02 pm

TomatoTomahto wrote:
Alto Astral wrote:Hey, who does not want their newborn to go to Harvard?
Answer: the parent of a Yale student. :D
LOL. (My wife says I should really be saying "ha ha". She says LOL will give my age away )
TomatoTomahto wrote: This topic is a perennial one here, and my stamina is lower than that of the opposing side of the argument, so I'm not entering the discussion other than to say that I feel, strongly, that:
1 - fit matters a lot
2 - if your child fits at Yale level schools, and is accepted, the additional money will be well spent
tru dat

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Alto Astral
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Re: Saving for college for 2 kids: 3 and 0

Post by Alto Astral » Sat Feb 11, 2017 5:17 pm

KlangFool wrote:OP,
3) Look into Mega Backdoor Roth IRA for money beyond Backdoor IRA or invest in the taxable account.
My company's benefit portal only shows "Pre-Tax 401l" and "Roth 401k" as options. It does not show any options for "after tax and company contribution". So I guess the Mega Backdoor does not apply to me (at least at my pay grade) based on:
"Some 401Ks not only permit $17.5K of either tax-deferred or Roth contributions, but ALSO permit you to contribute your own, after-tax money into the plan up to the $52K limit. "

Reference: http://whitecoatinvestor.com/the-mega-b ... -roth-ira/

KlangFool
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Re: Saving for college for 2 kids: 3 and 0

Post by KlangFool » Sat Feb 11, 2017 5:26 pm

Alto Astral wrote:
KlangFool wrote:OP,
3) Look into Mega Backdoor Roth IRA for money beyond Backdoor IRA or invest in the taxable account.
My company's benefit portal only shows "Pre-Tax 401l" and "Roth 401k" as options. It does not show any options for "after tax and company contribution". So I guess the Mega Backdoor does not apply to me (at least at my pay grade) based on:
"Some 401Ks not only permit $17.5K of either tax-deferred or Roth contributions, but ALSO permit you to contribute your own, after-tax money into the plan up to the $52K limit. "

Reference: http://whitecoatinvestor.com/the-mega-b ... -roth-ira/
Alto Astral,

It is a good idea to have some investment in the taxable account. Then you have money in all 3 tax conditions: taxable, Roth, Trad. 401K. You have maximum flexibility in spending the money from the taxable account.

KlangFool

Topic Author
Alto Astral
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Re: Saving for college for 2 kids: 3 and 0

Post by Alto Astral » Sat Feb 11, 2017 6:02 pm

KlangFool wrote:
Alto Astral wrote:
KlangFool wrote:OP,
3) Look into Mega Backdoor Roth IRA for money beyond Backdoor IRA or invest in the taxable account.
My company's benefit portal only shows "Pre-Tax 401l" and "Roth 401k" as options. It does not show any options for "after tax and company contribution". So I guess the Mega Backdoor does not apply to me (at least at my pay grade) based on:
"Some 401Ks not only permit $17.5K of either tax-deferred or Roth contributions, but ALSO permit you to contribute your own, after-tax money into the plan up to the $52K limit. "

Reference: http://whitecoatinvestor.com/the-mega-b ... -roth-ira/
Alto Astral,

It is a good idea to have some investment in the taxable account. Then you have money in all 3 tax conditions: taxable, Roth, Trad. 401K. You have maximum flexibility in spending the money from the taxable account.

KlangFool
Thanks, I finally came around :) Took a few whacks on the head, but I got another post going on about this: viewtopic.php?f=1&t=210781

Topic Author
Alto Astral
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Re: Saving for college for 2 kids: 3 and 0

Post by Alto Astral » Sat Feb 11, 2017 6:07 pm

willthrill81 wrote:
Alto Astral wrote:Oh Yeah, great author. I read his other book "The millionaire next door". I will borrow this one from the library. Yes, his numbers were pretty good. But interestingly, most millionaire mostly want their kids to become doctors, lawyers etc vs doing what they did way back.
That's very likely a result of the composition of most millionaires; over half come from the ranks of business (i.e. entrepreneurs, executives, etc.).
Yes, they were mostly entrepreneurs
willthrill81 wrote:They were personally successful, but they also saw many others who took a similar path struggle and often fail. Consequently, they want something more reliable for their children, even if it is unlikely to be as wildly profitable as their own ventures turned out to be.
Oh yes, relative job stability is pretty awesome. They are more likely so see the businesses they interact with go under than say a doctor see another's license revoked.

Topic Author
Alto Astral
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Re: Saving for college for 2 kids: 3 and 0

Post by Alto Astral » Sat Feb 11, 2017 6:16 pm

WildBill wrote:Howdy again!
Alto Astral wrote:
WildBill wrote:Howdy
Howdy! Nobody has greeted me like that since I left TX after school more than a decade back. Sure sounds refreshing!
WildBill wrote: We saved considerable amounts in the 529 as we went as it became clear that they were students who would benefit from the best possible universities.
This may be my paternal bias, but I feel my 3 year-old daughter is one smart cookie. I totally see what you say here. The goal is not that she become some cardiac surgeon and make a ton. But if she ends up teaching in a university or research or public service; it will be backed by the best possible/affordable universities. If you don't mind me asking; at what age of your kids did you make this decision?
You will know pretty early, especially if their interests are in STEM areas. Our sons were both good students in all of their studies, but very interested in science and mathematics from a very early age. In early elementary school they were both advanced by multiple years in those subjects and started attending courses at a local college in about 7th grade. They are now both studying Mathematics/Applied Mathematics/CS at Ivy League schools. We saved from the beginning, but were more aggressive from about second grade on when it was pretty clear that they would benefit from the best university we could find.

The kicker is that they were able to earn extremely good money as tutors while they were in high school in Math and CS, and now can get tech company summer internships with companies like Google and Facebook that pay up to $8500 per month. Takes a lot of the sting out of the university expenses.
Good to know. Wow, local college in 7th grade! You got a couple of smart cookies there. Okay, I will keep an eye out; right now my 3-year old's science is "the one that's not a planet is Pluto" and her math is "if I have two quarters and daddy gives me another one, I got 3" - after bringing out both hands and all fingers :)

am
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Re: Saving for college for 2 kids: 3 and 0

Post by am » Sat Feb 11, 2017 8:21 pm

With Illinois 529, not only are earnings taxed and penalized, but original contributions have a 20k/yr deduction which must be given back if not used for education.

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Alto Astral
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Re: Saving for college for 2 kids: 3 and 0

Post by Alto Astral » Sun Feb 12, 2017 1:39 am

am wrote:With Illinois 529, not only are earnings taxed and penalized, but original contributions have a 20k/yr deduction which must be given back if not used for education.
That's true. I remember Mr Bogle mentioning in an interview that he found 529s somewhat restrictive. Now I see why - if you don't use it for the intended purpose you are somewhat screwed.

Topic Author
Alto Astral
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Re: Saving for college for 2 kids: 3 and 0

Post by Alto Astral » Sun Feb 12, 2017 1:43 am

CyclingDuo wrote:Heck, we could also avoid saving for retirement because we have heard about many people dying before the age of 65. In fact, 30% of Americans die before the age of 65, so why save money for retirement - right? We might be one of 30%. :twisted:
Sorry, I don't day-dream :D Wish I had a pensioned job from the 80s and not need to stress so much about 401ks and what not.

Kstatefan40
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Re: Saving for college for 2 kids: 3 and 0

Post by Kstatefan40 » Sun Feb 12, 2017 2:38 am

Young relatively recent graduate here who has an undergrad from a small state university and a graduate degree from a top 60-ish private university.

I'm not sure that spending $250k+ on a college education is the wisest investment of either your money or your kids' money should they get loans. There will be options cheaper than that which provide the same piece of paper and may provide a more realistic experience. I've noticed that people from my small state university compete very favorably against those coming out of private / top tier schools. Obviously, Harvard could set your kids off on a great foot. However, you will find that the student who has drive, knows what they want to get from a college education, and uses experiences outside of the classroom to their advantage will be in a very similar position. Employers want to know what people have accomplished, not where they went to school.

am
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Re: Saving for college for 2 kids: 3 and 0

Post by am » Sun Feb 12, 2017 10:18 am

Alto Astral wrote:
am wrote:With Illinois 529, not only are earnings taxed and penalized, but original contributions have a 20k/yr deduction which must be given back if not used for education.
That's true. I remember Mr Bogle mentioning in an interview that he found 529s somewhat restrictive. Now I see why - if you don't use it for the intended purpose you are somewhat screwed.
Restrictive but very favorable. I max out al possible tax deferred accounts including non gov 457b,back door roths and am left with taxable investing, 529s give me a tax break to 20k, index options from vanguard, tax free growth, and creditor protection(high risk profsssion). What's not to like?

WildBill
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Re: Saving for college for 2 kids: 3 and 0

Post by WildBill » Mon Feb 13, 2017 12:23 am

Alto Astral wrote:
am wrote:With Illinois 529, not only are earnings taxed and penalized, but original contributions have a 20k/yr deduction which must be given back if not used for education.
That's true. I remember Mr Bogle mentioning in an interview that he found 529s somewhat restrictive. Now I see why - if you don't use it for the intended purpose you are somewhat screwed.
Yes and no. Here is a thought. You are the father of very young children. You are currently considering an investment horizon of 15-18 years, when your children will be attending university. You see the mild penalties for investing in 529s and withdrawing for non-educational purposes and hesitate.

Back off for a minute and look at a longer game.

One of the things that totally rearranged my thinking was a point Charles Ellis made in "Winning the Loser's Game". His observation was that for a father of young children his investment horizon reasonably extends to the children of his children, i.e. a century.

And a 529 in that scenario is not restrictive but ideal. It is transferable between generations, open ended and so far perpetual. A small investment today that does not have to be used for children could easily compound and be fully funding the education of your grandchildren. Or even another generation. Restrictive? Maybe not.

That insight by Mr. Ellis greatly influenced my thinking.

Good luck

W B
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid

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Alto Astral
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Re: Saving for college for 2 kids: 3 and 0

Post by Alto Astral » Mon Feb 13, 2017 2:09 pm

Kstatefan40 wrote:Young relatively recent graduate here who has an undergrad from a small state university and a graduate degree from a top 60-ish private university.

I was an undergrad from a very very small state university and a grad from a 200ish private university.
Kstatefan40 wrote:I'm not sure that spending $250k+ on a college education is the wisest investment of either your money or your kids' money should they get loans.
I believe it's subjective. There are high finance jobs that pay $500K and there are ones that pay $250K - a year. So that investment *could* probably be recouped very fast.
Kstatefan40 wrote:There will be options cheaper than that which provide the same piece of paper and may provide a more realistic experience. I've noticed that people from my small state university compete very favorably against those coming out of private / top tier schools. Obviously, Harvard could set your kids off on a great foot.
I would go so far as to say that any school is really incidental. I've known people who were metal workers, botanists and civil engineers in an earlier life who leave me (BS+MS in Computer Science) in the dust with their skill and proficiency in information technology. And I was a good student too. So while I believe that good work ethics will get you far, think how much farther it would get you with top schools - of course its subjective.
Kstatefan40 wrote:However, you will find that the student who has drive, knows what they want to get from a college education, and uses experiences outside of the classroom to their advantage will be in a very similar position.
While, students with drive etc will eventually make it, I believe Ivy Leagues provide the initial boost. Like the personal anecdote I mentioned earlier: being from a lower ranked school, I had to search a few months to get my first gig. My wife from a better ranked state school had her pick from campus-interviews and never spent a day looking for jobs outside. We are in IT and finance and none of our peers are from Harvard or Yale (maybe our CEOs). Your experience may be different, but my question is, where are those Ivy grads? That's where I'd like my kids to go too (if I can afford it and if they are a fit for that)
Kstatefan40 wrote:Employers want to know what people have accomplished, not where they went to school.
Being someone in hiring myself, its not that straightforward. And a good school sure does make a good impression. Of course you are comparing apples and mangoes with accomplished vs Harvard. What you should be comparing is accomplished+Harvard vs accomplished+State. While I would bet that both are equally qualified/competent - one of them has a higher price tag.

I guess my belief is, if it won't break the bank, the best possible university is the worth the cost if your kids are a good fit there.

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Alto Astral
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Re: Saving for college for 2 kids: 3 and 0

Post by Alto Astral » Mon Feb 13, 2017 2:41 pm

am wrote:
Alto Astral wrote:
am wrote:With Illinois 529, not only are earnings taxed and penalized, but original contributions have a 20k/yr deduction which must be given back if not used for education.
That's true. I remember Mr Bogle mentioning in an interview that he found 529s somewhat restrictive. Now I see why - if you don't use it for the intended purpose you are somewhat screwed.
Restrictive but very favorable. I max out al possible tax deferred accounts including non gov 457b,back door roths and am left with taxable investing, 529s give me a tax break to 20k, index options from vanguard, tax free growth, and creditor protection(high risk profsssion). What's not to like?
I put the 20k as a trial on my 2016 return and it reduces my state tax by $750. Of course, the 2016 contribution deadline was Dec 31st.

Kstatefan40
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Re: Saving for college for 2 kids: 3 and 0

Post by Kstatefan40 » Tue Feb 14, 2017 4:52 pm

Alto Astral wrote: I guess my belief is, if it won't break the bank, the best possible university is the worth the cost if your kids are a good fit there.


I understand. It may be a difference of perspective in some respects. I'm in IT / technology for a career, and I guess what I see is the bigger name private universities tend to produce ego that is not always healthy to an organization, and I was recently in an organization that had had an overly toxic culture because of it. Perhaps that's a hiring problem and not a university problem (small sample size, not necessarily causal.)

But I think your last point, quoted above, is the most important. The best school is not necessarily the one that ranks the highest. It's the one that's the best fit for the kid.

Setting the "Ivy League expectation" can put a little too much pressure on them that isn't necessarily healthy, and I've seen bad results from that - the same is true of people who set the expectation that their kid will get a D1 scholarship when they're 10 (and that is getting more common.)

I always remember when I worked in the US Senate, we had a fellow intern from an elite school (top 10) respond to a tour group question of "Why did you choose to intern here?" with "This is just where people like me end up." Mommy and daddy paid $50k+ tuition a year funding an elite education. Needless to say, he didn't just "end up" there. Around 2 years after graduation he was still waiting tables at a restaurant across the street from the Capitol. But, again, this is anecdotal and a small sample size, but it isn't automatic regardless of which school you go to.

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