40 year old Investing for the 1st time - How am I doing?

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Topic Author
lightnoise
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Joined: Tue Feb 28, 2017 3:18 pm

40 year old Investing for the 1st time - How am I doing?

Post by lightnoise » Thu Mar 02, 2017 1:34 pm

Hello Bogleheads,

This is my 1st post. I want to thank you for the generosity of your time and wisdom and would like to request your feedback on the below.

A little intro about me

I was taught at a very early age to save money and live well below your means.

But the one thing I never really learned until now was how to GROW the money that has been so diligently saved. I’ve been lucky to have steady employment in my chosen field since I was 22 yrs. old and I’ve been very mindful of saving as much as I could but still enjoying life and spending money as appropriate.

All my savings was either stashed away in savings accounts collecting at most 1% or, in the case of 401k money, not invested at all, but stored away in Fidelity money market funds collecting close to 0%. It was right around the 2008 crash that I started earning a decent amount of money but due to a combination of anxiety around another market crash, laziness, and a lack of investment education, I never bothered to invest any savings.

In Fall 2016, I turned 40. I now have a 3-year-old and have seriously started thinking about his education, his future, and our retirement goals. I read a lot (especially the Bogleheads wiki pages and the postings on this forum) and decided to take a plunge, open up Vanguard accounts and lump sum invest all my savings in the appropriate accounts. As it happens, I put everything in right before the fall elections.

This is where I stand currently:

Emergency funds: 6 months of expenses @ 50k, currently in a checking account but looking to move this to a combination of a credit union high interest checking and Ally savings accounts

Debt: Never carried any credit card or auto debt, paid off my student loans a decade ago and currently the only debt I hold is the mortgage on our current condo. It was purchased in late 2015 at a price of 500k. We put down 30%. Have a 15-year mortgage at 3.125% and remaining principal amount is $321K. Monthly payment of $2900 includes principal, interest, property taxes, and insurance.
I also own another condo in a major metropolitan area of the NE (also valued at $500k) but this has been fully paid off. My parent currently live there and pay the monthly $1000 maintenance. I don’t ask them for rent and I pay the property taxes, insurance, and all utilities including their cell phone bills.

Tax Filing Status: Married Filing Jointly. Current joint annual Gross income is 220K.

Tax Rate: 28% Federal, 3.75% State (honestly this is an educated guess but not entirely sure)

State of Residence: IL

Age: Mine-40, Wife-39

Our Average monthly spending: Total Spending is at ~8000 a month and this includes the mortgage on Condo 1, daycare costs (~1500 a month), the property taxes and utilities at paid off Condo 2, and ALL necessary and discretionary spending.

Our annual savings: My 401k – 18K, Wife’s 401k – 18K, 529 Plan – 18K, Remaining savings – 15K invested in a taxable brokerage account. This basically puts us at a savings rate of ~35-40%. Both of our employers DO NOT match anything on 401k and there is no profit sharing of any kind either.

Desired Asset allocation: 80% stocks / 20% bonds

Desired International allocation: 30% of stocks


Current retirement assets - ~847K total

Taxable at Vanguard– Currently @ 392K
58% VTSAX - Vanguard Total Stock Market Index Fund Admiral Shares (0.05%)
42% VTIAX - Vanguard Total International Stock Index Fund Admiral Shares (0.11%)

His Rollover IRA at Vanguard – Currently @ 381K
19% VMVAX - Vanguard Mid-Cap Value Index Fund Admiral Shares (0.08%)
14% VSIAX - Vanguard Small-Cap Value Index Fund Admiral Shares (0.08%)
19% VTIAX - Vanguard Total International Stock Index Fund Admiral Shares (0.11%)
25% VTSAX - Vanguard Total Stock Market Index Fund Admiral Shares (0.05%)
23% VWENX - Vanguard Wellington Fund Admiral Shares (0.18%)

Her Rollover IRA at Vanguard
– Currently @ 32K
34% VMVAX - Vanguard Mid-Cap Value Index Fund Admiral Shares (0.08%)
66% VSIAX - Vanguard Small-Cap Value Index Fund Admiral Shares (0.08%)

Her Roth IRA at Vanguard – Currently @ 27K
100% VTIAX - Vanguard Total International Stock Index Fund Admiral Shares (0.11%)

His 401k – Currently @ 7K (new job started just a few month ago)
100% Vanguard 2040 Target Retirement Fund (0.91%)
This is a pretty lousy 401k program with limited choices, high expense ratios, and no company match

Her 401k – Currently @ 8K (also a new job started just a few month ago)
100% Vanguard 2040 Target Retirement Fund (0.16%)
This is a decent 401k program with reasonable expense ratios BUT no company match

Current 529 Plan assets - ~56K total

100% Index Age Based 0-6 years portfolio (0.17%)

Contributions

New annual Contributions

$18K his 401k (ZERO employer matching contributions)
$18K her 401k ZERO employer matching contributions)
$15K Taxable investments (contribute monthly)
$18K 529 plan (contribute twice a month)

Questions:

1. Generally speaking, how am I doing in terms of savings and investing? Any glaring issues?

2. As it stands today, even though my desired allocation is 80:20, my current allocation (per Personal Capital) is 97:3. What is the best strategy to get to 80:20? Should I slowly sell of stocks and move towards Bonds or should I do it all at once? This asset allocation change would occur in my rollover IRA account. Is that the best place to do this?

3. Since I am new to investing and only started about 5 months ago, I have not yet re-balanced (obviously still trying to move towards my desired asset allocation). Is annual re-balancing generally the suggested method and if so again, should that occur in my rollover IRA account?

4. I don’t believe we are eligible to contribute to ROTH Ira based on our income. Is that correct? Therefore, the only other option I seem to have is putting extra savings into the taxable account. I’ve read a bit about doing backdoor Roth but I’m still confused as to whether that would apply in my scenario and if so I don’t quite understand how I would actually execute that. Any suggestions would be helpful.

5. What is the difference between backdoor Roth, mega backdoor Roth, and Roth conversion? Similar to the question above, do I qualify for either and is either a good idea?

6. I contribute annually 18k to our son’s 529 plan. I used the Vanguard college calculator and it spit out a 450K number for 4 years of private school education when my son will be attending college in 15 years. Based on that, I decided on a 18k annual contribution. I am wondering however if I should reduce that and contribute more each year to our taxable investment account. Any suggestions?

Again, thank you all for taking the time out of your busy days to respond.
Last edited by lightnoise on Thu Mar 02, 2017 3:59 pm, edited 3 times in total.

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ERMD
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Re: 40 year old Investing for the 1st time - How am I doing?

Post by ERMD » Thu Mar 02, 2017 3:02 pm

you have just about 900k invested at this point. your "magic number" for retirement is probably somewhere between 2.5 and 3 million dollars. assuming retirement at 59.5, you're doing just fine. you'll probably even be fine for early retirement if you keep this pace up.

450k is an insane target for a 529, in my opinion. i'm planning for half of that.

a backdoor roth is an option for anyone over the income limits, including you. i'd suggest reducing your taxable or 529 contributions until you hit the maximum 5500 per person for 2 backdoor roths.
between scotch and nothing, i'll take scotch. -- faulkner

Topic Author
lightnoise
Posts: 39
Joined: Tue Feb 28, 2017 3:18 pm

Re: 40 year old Investing for the 1st time - How am I doing?

Post by lightnoise » Thu Mar 02, 2017 3:30 pm

ERMD wrote:you have just about 900k invested at this point. your "magic number" for retirement is probably somewhere between 2.5 and 3 million dollars. assuming retirement at 59.5, you're doing just fine. you'll probably even be fine for early retirement if you keep this pace up.

450k is an insane target for a 529, in my opinion. i'm planning for half of that.
a backdoor roth is an option for anyone over the income limits, including you. i'd suggest reducing your taxable or 529 contributions until you hit the maximum 5500 per person for 2 backdoor roths.
Thanks ERMD. The reason I asked about the possibility of a backdoor roth and if it makes sense in my case is because of the IRA aggregation rule given the current size of my IRA account. IF I did not have a current IRA account or if it was much much smaller, I think it would have been pretty simple. Hence, my confusion.

bdpb
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Re: 40 year old Investing for the 1st time - How am I doing?

Post by bdpb » Thu Mar 02, 2017 5:13 pm

lightnoise wrote: Tax Filing Status: Married Filing Jointly. Current joint annual Gross income is 220K.
Tax Rate: 28% Federal, 3.75% State (honestly this is an educated guess but not entirely sure)
State of Residence: IL

Current 529 Plan assets - ~56K total
100% Index Age Based 0-6 years portfolio (0.17%)

Contributions
$18K his 401k (ZERO employer matching contributions)
$18K her 401k ZERO employer matching contributions)
$15K Taxable investments (contribute monthly)
$18K 529 plan (contribute twice a month)

4. I don’t believe we are eligible to contribute to ROTH Ira based on our income. Is that correct? Therefore, the only other option I seem to have is putting extra savings into the taxable account. I’ve read a bit about doing backdoor Roth but I’m still confused as to whether that would apply in my scenario and if so I don’t quite understand how I would actually execute that. Any suggestions would be helpful.

6. I contribute annually 18k to our son’s 529 plan. I used the Vanguard college calculator and it spit out a 450K number for 4 years of private school education when my son will be attending college in 15 years. Based on that, I decided on a 18k annual contribution. I am wondering however if I should reduce that and contribute more each year to our taxable investment account. Any suggestions?
3.75% is the correct IL state tax rate.

You should be able to contribute directly to Roth IRAs. The income limits are 184k and 186k for 2016, 2017, respectively. Your gross minus your 401k contributions alone should put you under the limit. Other pre-tax deductions like health insurance premiums would put you even further under the limit. Max out Roth contributions before taxable investing.

Presumably, your 529 is the IL Bright Start 529. Hopefully (since you don't even know your state tax rate), you are taking an IL tax deduction for these contributions.

Topic Author
lightnoise
Posts: 39
Joined: Tue Feb 28, 2017 3:18 pm

Re: 40 year old Investing for the 1st time - How am I doing?

Post by lightnoise » Thu Mar 02, 2017 5:40 pm

bdpb wrote:
lightnoise wrote: Tax Filing Status: Married Filing Jointly. Current joint annual Gross income is 220K.
Tax Rate: 28% Federal, 3.75% State (honestly this is an educated guess but not entirely sure)
State of Residence: IL

Current 529 Plan assets - ~56K total
100% Index Age Based 0-6 years portfolio (0.17%)

Contributions
$18K his 401k (ZERO employer matching contributions)
$18K her 401k ZERO employer matching contributions)
$15K Taxable investments (contribute monthly)
$18K 529 plan (contribute twice a month)

4. I don’t believe we are eligible to contribute to ROTH Ira based on our income. Is that correct? Therefore, the only other option I seem to have is putting extra savings into the taxable account. I’ve read a bit about doing backdoor Roth but I’m still confused as to whether that would apply in my scenario and if so I don’t quite understand how I would actually execute that. Any suggestions would be helpful.

6. I contribute annually 18k to our son’s 529 plan. I used the Vanguard college calculator and it spit out a 450K number for 4 years of private school education when my son will be attending college in 15 years. Based on that, I decided on a 18k annual contribution. I am wondering however if I should reduce that and contribute more each year to our taxable investment account. Any suggestions?
3.75% is the correct IL state tax rate.
You should be able to contribute directly to Roth IRAs. The income limits are 184k and 186k for 2016, 2017, respectively. Your gross minus your 401k contributions alone should put you under the limit. Other pre-tax deductions like health insurance premiums would put you even further under the limit. Max out Roth contributions before taxable investing.

Presumably, your 529 is the IL Bright Start 529. Hopefully (since you don't even know your state tax rate), you are taking an IL tax deduction for these contributions.

Thank you BDPB. I'll take a closer look at those income limits. If I do in fact fall under the limit, does that mean that both my wife and myself can each contribute separately to our ROTH IRA accounts or is it a single contribution given that we are Married Filing Jointly?

Also, yes I am definitely taking the IL deduction for the 529 contributions

Grt2bOutdoors
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Re: 40 year old Investing for the 1st time - How am I doing?

Post by Grt2bOutdoors » Thu Mar 02, 2017 5:54 pm

529 plan, invest at re-evaluate at years 6, 9, 12. What do I mean by reevaluate? You will know by age 6 if child is bright, you will know at age 6, how account is performing. If account value is $100k at age 6, a 6% return could get you to $200k with no additional contributions on your part. If the market takes a dive and does not recover at age 12, you'll know to save more. Saving $180k over 10 years?, only if child is going full pay to top 10 school like U.of Chicago, but if child doesn't get into or want to go to such a pricey school, you will have overfunded the account (first world problems). You could hedge your bets and use a taxable account to save after saving amount that caps out state deduction on taxes.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Artisan
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Re: 40 year old Investing for the 1st time - How am I doing?

Post by Artisan » Thu Mar 02, 2017 6:51 pm

450K for 4 years of a private college in 15 years is probably pretty accurate. Current costs are near 300K at some schools.

I used a calculator when my children were just born and the estimate it gave me was extremely accurate.

The issue as mentioned is what if they receive a scholarship or go to a public university where the costs are lower?

You might want to lower the contribution to the 529 and fund a UTMA account with the difference.

Topic Author
lightnoise
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Joined: Tue Feb 28, 2017 3:18 pm

Re: 40 year old Investing for the 1st time - How am I doing?

Post by lightnoise » Thu Mar 02, 2017 7:11 pm

Any advice on the asset allocation part of my post is also greatly appreciated. Thank you to all who have replied so far.

Artisan
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Re: 40 year old Investing for the 1st time - How am I doing?

Post by Artisan » Thu Mar 02, 2017 7:51 pm

You should repost with the percentages of each fund invested as a percentage of the total invested, not a % of that individual account. You could also list the choices available in each account.

That being said...

I think you are over complicating things. Unless you are trying to tilt towards small cap/midcap value VTSAX contains both.

I'm not a big fan of combining target and balanced funds in the same portfolio as stock or bond index funds. Do you have access to a total bond market fund or is that why you are using the target and Wellington? If you do you could just use a simple 3 fund portfolio VTSAX, VTIAX and a bond fund. If you want to keep the tilt to small cap value you could use that fund as well.

I think 80%/20 is aggressive for a 40 year old. I would consider 70%/30% but that's just me. YMMV.

Captain Oveur
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Re: 40 year old Investing for the 1st time - How am I doing?

Post by Captain Oveur » Thu Mar 02, 2017 7:57 pm

If his income is 220K, that would put him OVER the Roth limit of $184K for MFJ I thought?

Grt2bOutdoors
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Re: 40 year old Investing for the 1st time - How am I doing?

Post by Grt2bOutdoors » Thu Mar 02, 2017 8:05 pm

Agree, 80/20 is not for faint of heart, 70/30 until 50-55, then 60/40 or 50/50 if you find yourself not willing, able or need to take risk. If you find you have reached closer to target than expected, dial back the risk. However, if the market takes a big dive, rebalance according to your desired asset allocation but don't think you need to up risk above and beyond to catch-up, that will be a mistake.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Northern Flicker
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Re: 40 year old Investing for the 1st time - How am I doing?

Post by Northern Flicker » Thu Mar 02, 2017 8:17 pm

One detail is that, while VSIAX is called a small-cap value index, it is really a small and midcap value index, so it is not necessary to hold a midcap value index, and doing so just complicates the allocation.
Index fund investor since 1987.

bdpb
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Re: 40 year old Investing for the 1st time - How am I doing?

Post by bdpb » Fri Mar 03, 2017 12:40 pm

Captain Oveur wrote:If his income is 220K, that would put him OVER the Roth limit of $184K for MFJ I thought?
The Roth limit is based on MAGI. The OP's gross income is 220k.

220,000 gross income
+???????? other income, dividends, etc.
-36,000 401k contributions
-???????? pre-tax health, dental premiums, FSA contributions
---------
184,000 MAGI

Also, 184k is the beginning of the Roth limit phase-out and extends to 194k before completely ineligible.

bdpb
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Re: 40 year old Investing for the 1st time - How am I doing?

Post by bdpb » Fri Mar 03, 2017 12:44 pm

lightnoise wrote: Thank you BDPB. I'll take a closer look at those income limits. If I do in fact fall under the limit, does that mean that both my wife and myself can each contribute separately to our ROTH IRA accounts or is it a single contribution given that we are Married Filing Jointly?
IRA accounts are owned by individuals, so each could contribute 5.5k to their own IRA.

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ERMD
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Re: 40 year old Investing for the 1st time - How am I doing?

Post by ERMD » Fri Mar 03, 2017 12:53 pm

Artisan wrote:450K for 4 years of a private college in 15 years is probably pretty accurate. Current costs are near 300K at some schools.

I used a calculator when my children were just born and the estimate it gave me was extremely accurate.

The issue as mentioned is what if they receive a scholarship or go to a public university where the costs are lower?

You might want to lower the contribution to the 529 and fund a UTMA account with the difference.
if you assume the same rate of growth, sure. and so you can take that 300k 4 year school right now, and project 25 years into the future at a continued 5% annual cost increase. by those numbers, tuition will be 1.1 million dollars for 4 years. and that's not next century -- that's the year 2042. does anyone really think that's going to be the case? 1) it seems unlikely costs will continue to rise at the same rate, and 2) the other points you mention are important to consider (scholarships, public university, or even the possibility that your child won't go to college at all for one reason or another!) :happy

for all these reasons, and more, we're currently planning to have less than half of that amount saved.
between scotch and nothing, i'll take scotch. -- faulkner

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ERMD
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Re: 40 year old Investing for the 1st time - How am I doing?

Post by ERMD » Fri Mar 03, 2017 12:54 pm

ERMD wrote:
Artisan wrote:450K for 4 years of a private college in 15 years is probably pretty accurate. Current costs are near 300K at some schools.

I used a calculator when my children were just born and the estimate it gave me was extremely accurate.

The issue as mentioned is what if they receive a scholarship or go to a public university where the costs are lower?

You might want to lower the contribution to the 529 and fund a UTMA account with the difference.
if you assume the same rate of growth, sure. and so you can take that 300k 4 year school right now, and project 25 years into the future at a continued 5% annual cost increase. by those numbers, tuition will be 1.1 million dollars for 4 years. and that's not next century -- that's the year 2042. does anyone really think that's going to be the case? 1) it seems unlikely costs will continue to rise at the same rate, and 2) the other points you mention are important to consider (scholarships, public university, or even the possibility that your child won't go to college at all for one reason or another!) :happy

for all these reasons, and more, we're currently planning to have less than half of that amount saved.
between scotch and nothing, i'll take scotch. -- faulkner

Grt2bOutdoors
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Re: 40 year old Investing for the 1st time - How am I doing?

Post by Grt2bOutdoors » Fri Mar 03, 2017 1:04 pm

ERMD wrote:
Artisan wrote:450K for 4 years of a private college in 15 years is probably pretty accurate. Current costs are near 300K at some schools.

I used a calculator when my children were just born and the estimate it gave me was extremely accurate.

The issue as mentioned is what if they receive a scholarship or go to a public university where the costs are lower?

You might want to lower the contribution to the 529 and fund a UTMA account with the difference.
if you assume the same rate of growth, sure. and so you can take that 300k 4 year school right now, and project 25 years into the future at a continued 5% annual cost increase. by those numbers, tuition will be 1.1 million dollars for 4 years. and that's not next century -- that's the year 2042. does anyone really think that's going to be the case? 1) it seems unlikely costs will continue to rise at the same rate, and 2) the other points you mention are important to consider (scholarships, public university, or even the possibility that your child won't go to college at all for one reason or another!) :happy

for all these reasons, and more, we're currently planning to have less than half of that amount saved.
+1 Trees do not grow to the sky forever. Eventually, they either adapt or get sick and die. Right now, the patient is more than halfway to life support.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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ERMD
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Re: 40 year old Investing for the 1st time - How am I doing?

Post by ERMD » Fri Mar 03, 2017 1:07 pm

Grt2bOutdoors wrote:
ERMD wrote:
Artisan wrote:450K for 4 years of a private college in 15 years is probably pretty accurate. Current costs are near 300K at some schools.

I used a calculator when my children were just born and the estimate it gave me was extremely accurate.

The issue as mentioned is what if they receive a scholarship or go to a public university where the costs are lower?

You might want to lower the contribution to the 529 and fund a UTMA account with the difference.
if you assume the same rate of growth, sure. and so you can take that 300k 4 year school right now, and project 25 years into the future at a continued 5% annual cost increase. by those numbers, tuition will be 1.1 million dollars for 4 years. and that's not next century -- that's the year 2042. does anyone really think that's going to be the case? 1) it seems unlikely costs will continue to rise at the same rate, and 2) the other points you mention are important to consider (scholarships, public university, or even the possibility that your child won't go to college at all for one reason or another!) :happy

for all these reasons, and more, we're currently planning to have less than half of that amount saved.
+1 Trees do not grow to the sky forever. Eventually, they either adapt or get sick and die. Right now, the patient is more than halfway to life support.
right. the party really seems to be over if we're taking about the days of jumbo student loans for everyone who wants to earn their doctorate in jazz dance. too much recent publicity about grads stuck with irreconcilable debt, bickering over debt-forgiveness feasibility, predatory for-profit institutions, etc.
between scotch and nothing, i'll take scotch. -- faulkner

beattherush
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Couple of questions not addressed so far

Post by beattherush » Fri Mar 03, 2017 1:26 pm

1) Are you done having kids?

One big risk with a 529 is that you eventually don't need the funds for education. Kids decide not to go to college, they take the deal at U of I, or other options we don't like to think about. Still, if your kid does not go to expensive private school, you're stuck with high penalties.

So you can hedge that two ways.

If you have multiple kids, you can roll plans to other eligible family members. So set up two plans and fund each at 1/2

If you intend to stick with 1 I think i'd dial down your target to 1/2 a private school tuition (I agree 450k is the right planning number for tuition. Might be a tad low)

Illinois' plan is a pretty good deal though and the state tax deduction is helpful.

2) You will be hitting 59 1/2 around college age. So keep in mind that your retirement accounts are equivalent to your 529 at that point but don't have the education restriction (but 529s do have additional significant tax benefits for education expenses). You will have a few funding options at that point.

Good luck... you have "rich man's problems" at this point.

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lightnoise
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Re: Couple of questions not addressed so far

Post by lightnoise » Fri Mar 03, 2017 1:31 pm

Good luck... you have "rich man's problems" at this point.
Totally agree with this. We're very lucky to be able to plan in this way. To answer your other questions, yes, we are done having kids. Am I right in understanding that a 529 plan can also be used for graduate school education OR that I can even transfer the remaining amount to a niece or nephew if I choose to do so without any penalties?

Artisan
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Re: 40 year old Investing for the 1st time - How am I doing?

Post by Artisan » Fri Mar 03, 2017 2:41 pm

ERMD wrote:
Grt2bOutdoors wrote:
ERMD wrote:
Artisan wrote:450K for 4 years of a private college in 15 years is probably pretty accurate. Current costs are near 300K at some schools.

I used a calculator when my children were just born and the estimate it gave me was extremely accurate.

The issue as mentioned is what if they receive a scholarship or go to a public university where the costs are lower?

You might want to lower the contribution to the 529 and fund a UTMA account with the difference.
if you assume the same rate of growth, sure. and so you can take that 300k 4 year school right now, and project 25 years into the future at a continued 5% annual cost increase. by those numbers, tuition will be 1.1 million dollars for 4 years. and that's not next century -- that's the year 2042. does anyone really think that's going to be the case? 1) it seems unlikely costs will continue to rise at the same rate, and 2) the other points you mention are important to consider (scholarships, public university, or even the possibility that your child won't go to college at all for one reason or another!) :happy

for all these reasons, and more, we're currently planning to have less than half of that amount saved.
+1 Trees do not grow to the sky forever. Eventually, they either adapt or get sick and die. Right now, the patient is more than halfway to life support.
right. the party really seems to be over if we're taking about the days of jumbo student loans for everyone who wants to earn their doctorate in jazz dance. too much recent publicity about grads stuck with irreconcilable debt, bickering over debt-forgiveness feasibility, predatory for-profit institutions, etc.
Perhaps but perhaps not. There doesn't seem to be any shortage of students attending these very expensive schools.

Perhaps one day students will come to terms with the notion that they shouldn't attend colleges they cannot afford, that there are many less expensive alternatives that provide an excellent education and the overuse of loan forgiveness will disappear. If demand decreases so will the price.

Grt2bOutdoors
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Re: 40 year old Investing for the 1st time - How am I doing?

Post by Grt2bOutdoors » Fri Mar 03, 2017 2:56 pm

Artisan wrote:
ERMD wrote:
Grt2bOutdoors wrote:
ERMD wrote:
Artisan wrote:450K for 4 years of a private college in 15 years is probably pretty accurate. Current costs are near 300K at some schools.

I used a calculator when my children were just born and the estimate it gave me was extremely accurate.

The issue as mentioned is what if they receive a scholarship or go to a public university where the costs are lower?

You might want to lower the contribution to the 529 and fund a UTMA account with the difference.
if you assume the same rate of growth, sure. and so you can take that 300k 4 year school right now, and project 25 years into the future at a continued 5% annual cost increase. by those numbers, tuition will be 1.1 million dollars for 4 years. and that's not next century -- that's the year 2042. does anyone really think that's going to be the case? 1) it seems unlikely costs will continue to rise at the same rate, and 2) the other points you mention are important to consider (scholarships, public university, or even the possibility that your child won't go to college at all for one reason or another!) :happy

for all these reasons, and more, we're currently planning to have less than half of that amount saved.
+1 Trees do not grow to the sky forever. Eventually, they either adapt or get sick and die. Right now, the patient is more than halfway to life support.
right. the party really seems to be over if we're taking about the days of jumbo student loans for everyone who wants to earn their doctorate in jazz dance. too much recent publicity about grads stuck with irreconcilable debt, bickering over debt-forgiveness feasibility, predatory for-profit institutions, etc.
Perhaps but perhaps not. There doesn't seem to be any shortage of students attending these very expensive schools.

Perhaps one day students will come to terms with the notion that they shouldn't attend colleges they cannot afford, that there are many less expensive alternatives that provide an excellent education and the overuse of loan forgiveness will disappear. If demand decreases so will the price.
Just as there was no shortage of lemmings buying homes in the Inland Empire of California making $5.50 picking strawberries or those who fell for the "their not making any more land" or perhaps those who were buying mutual funds or stocks so long as the name "tech", "internet" and "clicks" were mentioned in the same line. It's the same as those who are paying 1.50% annual expense ratios with a 5.75% load for Class A shares when they could head over to Vanguard and get the same type of fund but pay less.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Dottie57
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Re: 40 year old Investing for the 1st time - How am I doing?

Post by Dottie57 » Fri Mar 03, 2017 3:35 pm

Grt2bOutdoors wrote:
Artisan wrote:
ERMD wrote:
Grt2bOutdoors wrote:
ERMD wrote:
if you assume the same rate of growth, sure. and so you can take that 300k 4 year school right now, and project 25 years into the future at a continued 5% annual cost increase. by those numbers, tuition will be 1.1 million dollars for 4 years. and that's not next century -- that's the year 2042. does anyone really think that's going to be the case? 1) it seems unlikely costs will continue to rise at the same rate, and 2) the other points you mention are important to consider (scholarships, public university, or even the possibility that your child won't go to college at all for one reason or another!) :happy

for all these reasons, and more, we're currently planning to have less than half of that amount saved.
+1 Trees do not grow to the sky forever. Eventually, they either adapt or get sick and die. Right now, the patient is more than halfway to life support.
right. the party really seems to be over if we're taking about the days of jumbo student loans for everyone who wants to earn their doctorate in jazz dance. too much recent publicity about grads stuck with irreconcilable debt, bickering over debt-forgiveness feasibility, predatory for-profit institutions, etc.
Perhaps but perhaps not. There doesn't seem to be any shortage of students attending these very expensive schools.

Perhaps one day students will come to terms with the notion that they shouldn't attend colleges they cannot afford, that there are many less expensive alternatives that provide an excellent education and the overuse of loan forgiveness will disappear. If demand decreases so will the price.
Just as there was no shortage of lemmings buying homes in the Inland Empire of California making $5.50 picking strawberries or those who fell for the "their not making any more land" or perhaps those who were buying mutual funds or stocks so long as the name "tech", "internet" and "clicks" were mentioned in the same line. It's the same as those who are paying 1.50% annual expense ratios with a 5.75% load for Class A shares when they could head over to Vanguard and get the same type of fund but pay less.
My parents said they would pay for college at the state university. Therefore I went there. It cost a lot less back then :o

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