College age kid wrecked his car...

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Topic Author
Cosmic Pony
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College age kid wrecked his car...

Post by Cosmic Pony » Fri May 08, 2020 8:57 pm

Hello Bogleheads.

My college aged son hit a deer last night and totaled his car, he will need one to get to work/school. Fortunately he came through it unharmed. He graduates 2021. I figure I will need to pay $8,000 to $10,000 to replace the car. Not sure to finance or pay cash. I am 59 unemployed with no near term prospects, my wife has a secure job that pays $55,000/year and healthcare that just covers our monthly bills. No mortgage or other debt. I believe that puts us in the 12% bracket. We have:

$40,000 in money market accounts
$259,000 in VTI in a taxable account (sitting at roughly a 20% loss)
$100,000 in a separate taxable account with diversified stocks that have been held long term (10 to 15 yrs) and have significant capital gains (3x and 4x original value), but none as high as they were pre covid
$1,500,000 invested in IRAs in a diversified portfolio of roughly 40% bond index funds and 60% diversified blue chip stocks and VTI. (Yes, should have been heavier bonds but oh well.)

Options appear to be:

A) Finance over 48 months at 3.99% and turn the loan over to the kid when he graduates in a year, but will cost us year one interest payments and stretch the budget if I can't find work for a while
B) Tap into the $40,000 - which I must admit is high for a safety net- but makes me feel more secure in a covid world
C) Sell some of the stocks that have gained in my taxable account
C) Sell some of my VTI at a loss and use the loss to offset gains when I sell stocks in my taxable account in the future
4) Tap $8,000 to $10,000 of the $1,500,000 in retirement accounts while in a lower tax bracket

The answers may be obvious to all of you. I'm a little rattled by the whole thing and need some outside perspective. Blessed that my son is safe.

Thanks.

Topic Author
Cosmic Pony
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Re: College age kid wrecked his car...

Post by Cosmic Pony » Fri May 08, 2020 9:00 pm

Correction, I am 59.5 so should be able to take funds from retirement accounts.

aristotelian
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Re: College age kid wrecked his car...

Post by aristotelian » Fri May 08, 2020 9:06 pm

I would take it from the taxable account and then rebalance your IRA to achieve your desired allocation. Seems like you'll be fine either way and the important thing is he is OK.

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grabiner
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Re: College age kid wrecked his car...

Post by grabiner » Fri May 08, 2020 9:10 pm

If you have a capital loss on some of your VTI shares, you should sell them to get the benefit of the capital loss, regardless of what else you do. This will offset any capital gains you happen to have, and if your losses exceed your gains, you can take $3000 per year off your ordinary income.

This would give you the cash to pay for the car. If you don't want to sell stock, you can reinvest the rest of the taxable account (beyond the emergency fund) into another stock fund, and move another $10,000 from bonds to stock in the IRA to keep your previous stock holding.

If you sell VTI for a capital loss, don't buy it (as either a mutual fund or ETF) within 30 days before or after, or you will have a wash sale and not be allowed to deduct your capital loss. You can buy some other stock fund in the IRA which is not substantially identical to VTI. (It is OK to keep your current holdings of VTI in the IRA.)
Wiki David Grabiner

Topic Author
Cosmic Pony
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Re: College age kid wrecked his car...

Post by Cosmic Pony » Fri May 08, 2020 9:14 pm

Thanks Grabbiner. Not sure I understand your second paragraph.

Topic Author
Cosmic Pony
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Re: College age kid wrecked his car...

Post by Cosmic Pony » Fri May 08, 2020 9:24 pm

So, the responses to my question suggests another question that perhaps I should post separately. My wife and I were always in a higher tax bracket as dual earners. Last year I lost my job and so did she within a few months. She then took a lower paying job mostly for healthcare. Given how I've layed out our assets, are there other strategies we should adopt to move assets between taxable and IRA accounts now that we're making less money?

We will have generous SS benefits ($5,500/month) if we make it to 67, god willing.

helloeveryone
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Re: College age kid wrecked his car...

Post by helloeveryone » Fri May 08, 2020 9:35 pm

Cosmic Pony wrote:
Fri May 08, 2020 8:57 pm
Hello Bogleheads.

My college aged son hit a deer last night and totaled his car, he will need one to get to work/school. Fortunately he came through it unharmed. He graduates 2021. I figure I will need to pay $8,000 to $10,000 to replace the car. Not sure to finance or pay cash. I am 59 unemployed with no near term prospects, my wife has a secure job that pays $55,000/year and healthcare that just covers our monthly bills. No mortgage or other debt. I believe that puts us in the 12% bracket. We have:

$40,000 in money market accounts
$259,000 in VTI in a taxable account (sitting at roughly a 20% loss)
$100,000 in a separate taxable account with diversified stocks that have been held long term (10 to 15 yrs) and have significant capital gains (3x and 4x original value), but none as high as they were pre covid
$1,500,000 invested in IRAs in a diversified portfolio of roughly 40% bond index funds and 60% diversified blue chip stocks and VTI. (Yes, should have been heavier bonds but oh well.)

Options appear to be:

A) Finance over 48 months at 3.99% and turn the loan over to the kid when he graduates in a year, but will cost us year one interest payments and stretch the budget if I can't find work for a while
B) Tap into the $40,000 - which I must admit is high for a safety net- but makes me feel more secure in a covid world
C) Sell some of the stocks that have gained in my taxable account
C) Sell some of my VTI at a loss and use the loss to offset gains when I sell stocks in my taxable account in the future
4) Tap $8,000 to $10,000 of the $1,500,000 in retirement accounts while in a lower tax bracket

The answers may be obvious to all of you. I'm a little rattled by the whole thing and need some outside perspective. Blessed that my son is safe.

Thanks.
perhaps consider a $4000-$6000 car for him. obviously how much you spend is very personal but if cash flow is an issue and you don't want to tap retirement - $4-6k may be easier and still achieve a fairly reliable car. (just at a quick cars.com glance - ford focus or toyota corolla....I'm sure there are Hyundai's or Kias that would fit that range)

Dontridetheindexdown
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Re: College age kid wrecked his car...

Post by Dontridetheindexdown » Fri May 08, 2020 9:39 pm

Here is another option:

College-age kid buys whatever he can afford to drive, using money he earns or borrows.

You and your wife get on with your lives, as best you can.

Everybody lives happily ever after.

dru808
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Re: College age kid wrecked his car...

Post by dru808 » Fri May 08, 2020 9:42 pm

Is insurance not involved? Insurance + the difference loaned to him from taxable.
60% US equity | 25% International equity | 15% US Treasury bonds

dru808
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Re: College age kid wrecked his car...

Post by dru808 » Fri May 08, 2020 9:43 pm

Dontridetheindexdown wrote:
Fri May 08, 2020 9:39 pm
Here is another option:

College-age kid buys whatever he can afford to drive, using money he earns or borrows.

You and your wife get on with your lives, as best you can.

Everybody lives happily ever after.
Dang I wanted to say it but wuuu huuu! 1000% agree
60% US equity | 25% International equity | 15% US Treasury bonds

magicrat
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Re: College age kid wrecked his car...

Post by magicrat » Fri May 08, 2020 9:46 pm

I totaled my car at thanksgiving when I was a junior in college. I spent the rest of the year without a car. The next summer my dad loaned me $5k at market rate interest and I bought a Buick Lesabre. Good lesson in responsibility.

cogito
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Re: College age kid wrecked his car...

Post by cogito » Fri May 08, 2020 9:50 pm

Just a thought. 10k will pay for quite a few Uber rides.

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Watty
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Re: College age kid wrecked his car...

Post by Watty » Fri May 08, 2020 10:04 pm

Cosmic Pony wrote:
Fri May 08, 2020 8:57 pm
Options appear to be:
There may be another option.

What types of cars do you and your wife drive, and how much are they worth?

If one of them is not real valuable it might make sense to let your son drive one of those cars and then you could get a replacement car for one of you. When he graduates he can get his own car and you can sell your old car.

That way you would know the history of the car he is driving and have a good idea about how reliable it will be.
Cosmic Pony wrote:
Fri May 08, 2020 8:57 pm
B) Tap into the $40,000 - which I must admit is high for a safety net- but makes me feel more secure in a covid world
There is no real need to have that much in the money market fund since if you had an emergency since you have at least three other account that you could use in an emergency.
Cosmic Pony wrote:
Fri May 08, 2020 8:57 pm
$259,000 in VTI in a taxable account (sitting at roughly a 20% loss)
$100,000 in a separate taxable account with diversified stocks that have been held long term (10 to 15 yrs) and have significant capital gains (3x and 4x original value), but none as high as they were pre covid
You can tax loss harvest the VTI then rebuy it in 30 days to avoid the wash sale rules. In between you can buy something that is similar, but not identical so you do not miss out on a big market move. Make another post and ask about what would qualify as not being being identical if you need help with that.

You can take the long term capital gains up to the top of the federal 12% tax bracket and pay 0% in federal capital gain taxes. You would need to also look at your state taxes to see how your state would tax the capital gains. You can do dummy tax returns to figure out the taxes but regardless of what you do about the car I would be sure to take advantage of that by the end of the year.

If you have more capital losses than gains then you can use $3,000 of that to offset ordinary income and carry over any more to future tax years.

You might want to make another post using this format as a guideline to get better general suggestions since it looks like there are a number of things you can do to improve your portfolio.

viewtopic.php?t=6212

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grabiner
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Re: College age kid wrecked his car...

Post by grabiner » Fri May 08, 2020 10:15 pm

Cosmic Pony wrote:
Fri May 08, 2020 9:14 pm
Thanks Grabbiner. Not sure I understand your second paragraph.
grabiner wrote:This would give you the cash to pay for the car. If you don't want to sell stock, you can reinvest the rest of the taxable account (beyond the emergency fund) into another stock fund, and move another $10,000 from bonds to stock in the IRA to keep your previous stock holding.
If you sell your VTI for the purpose of taking the tax loss, you don't need to get out of the stock market. You can sell this stock and buy other stock, so that you will still get the same benefit if the market recovers; this technique is known as tax loss harvesting.

And if you do tax loss harvesting, it doesn't matter what account you buy the replacement stock in. If you sell stock in your taxable account and buy stock in your IRA, you keep the same exposure to the stock market. Doing this might make sense if you intend to use the money in your taxable account for some other purpose. (I did this; I sold stock in my taxable account, used that cash to pay off my mortgage, and bought an equal amount of stock in my employer plan.)
Wiki David Grabiner

tibbitts
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Re: College age kid wrecked his car...

Post by tibbitts » Fri May 08, 2020 10:53 pm

Cosmic Pony wrote:
Fri May 08, 2020 8:57 pm
Hello Bogleheads.

My college aged son hit a deer last night and totaled his car, he will need one to get to work/school. Fortunately he came through it unharmed. He graduates 2021. I figure I will need to pay $8,000 to $10,000 to replace the car. Not sure to finance or pay cash. I am 59 unemployed with no near term prospects, my wife has a secure job that pays $55,000/year and healthcare that just covers our monthly bills. No mortgage or other debt. I believe that puts us in the 12% bracket. We have:

$40,000 in money market accounts
$259,000 in VTI in a taxable account (sitting at roughly a 20% loss)
$100,000 in a separate taxable account with diversified stocks that have been held long term (10 to 15 yrs) and have significant capital gains (3x and 4x original value), but none as high as they were pre covid
$1,500,000 invested in IRAs in a diversified portfolio of roughly 40% bond index funds and 60% diversified blue chip stocks and VTI. (Yes, should have been heavier bonds but oh well.)

Options appear to be:

A) Finance over 48 months at 3.99% and turn the loan over to the kid when he graduates in a year, but will cost us year one interest payments and stretch the budget if I can't find work for a while
B) Tap into the $40,000 - which I must admit is high for a safety net- but makes me feel more secure in a covid world
C) Sell some of the stocks that have gained in my taxable account
C) Sell some of my VTI at a loss and use the loss to offset gains when I sell stocks in my taxable account in the future
4) Tap $8,000 to $10,000 of the $1,500,000 in retirement accounts while in a lower tax bracket

The answers may be obvious to all of you. I'm a little rattled by the whole thing and need some outside perspective. Blessed that my son is safe.

Thanks.
I don't think anybody understands why $8-10k. If that's the replacement price of the vehicle, most people except probably wealthier Bogleheads would likely have had some kind of collision insurance. Or are you saying the difference between an insurance payout and the kind of car you want to get him is $8-10k?

02nz
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Re: College age kid wrecked his car...

Post by 02nz » Fri May 08, 2020 11:03 pm

Cosmic Pony wrote:
Fri May 08, 2020 9:24 pm
So, the responses to my question suggests another question that perhaps I should post separately. My wife and I were always in a higher tax bracket as dual earners. Last year I lost my job and so did she within a few months. She then took a lower paying job mostly for healthcare. Given how I've layed out our assets, are there other strategies we should adopt to move assets between taxable and IRA accounts now that we're making less money?

We will have generous SS benefits ($5,500/month) if we make it to 67, god willing.
How much of the $1.5M in IRAs is tax-deferred (traditional) and how much Roth? You will face some high-ish tax rates if you have Social Security and RMDs from a tax-deferred balance that size, and of course as time goes on the likelihood goes up that one of you has to file single, with even higher tax rates. It's a good idea, given your low income now, to draw down some of that tax-deferred balance. You don't have to spend it, you can do Roth conversions.

I would make sure at a minimum that the IRA withdrawals/Roth conversions fill up the roughly $100K or so of income every year (incl. standard deduction) where you currently pay an average of around 9% federal income tax. And you should max out Roth IRAs for both of you (since your wife has earned income, you can contribute even without earned income of your own). Do this even if it means spending from taxable to make Roth IRA contributions.
Last edited by 02nz on Fri May 08, 2020 11:15 pm, edited 1 time in total.

02nz
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Re: College age kid wrecked his car...

Post by 02nz » Fri May 08, 2020 11:11 pm

Dontridetheindexdown wrote:
Fri May 08, 2020 9:39 pm
Here is another option:

College-age kid buys whatever he can afford to drive, using money he earns or borrows.

You and your wife get on with your lives, as best you can.

Everybody lives happily ever after.
It amazes me how often this kind of advice is given on this board. Of course, OP shouldn't wreck his own finances to buy a a luxury car for the kid, but we're talking about someone with $2M in assets, who would be spending <$10K for something that will be essential for the son, especially a year from now when he graduates. Something reliable so he can get to class and later interviews and work on time. That seems unlikely to turn OP's son into some kind of trust fund baby.

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celia
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Re: College age kid wrecked his car...

Post by celia » Fri May 08, 2020 11:22 pm

Where is the college kid’s responsibility here?

Why can’t he/she figure this out, especially after totaling dad’s car?

For example, there’s probably some public transportation available, getting rides from a friend, moving closer to school, etc

We never bought a car for any of our kids. They figured things out on their own. It is part of being a responsible adult. It has nothing to do with their parents’ finances.

retired@50
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Re: College age kid wrecked his car...

Post by retired@50 » Fri May 08, 2020 11:27 pm

02nz wrote:
Fri May 08, 2020 11:11 pm
Dontridetheindexdown wrote:
Fri May 08, 2020 9:39 pm
Here is another option:

College-age kid buys whatever he can afford to drive, using money he earns or borrows.

You and your wife get on with your lives, as best you can.

Everybody lives happily ever after.
It amazes me how often this kind of advice is given on this board. Of course, OP shouldn't wreck his own finances to buy a a luxury car for the kid, but we're talking about someone with $2M in assets, who would be spending <$10K for something that will be essential for the son, especially a year from now when he graduates. Something reliable so he can get to class and later interviews and work on time. That seems unlikely to turn OP's son into some kind of trust fund baby.
I think it depends on how one grows up. My parents never gave me a dime toward a car. I bought one at 16 with money I earned delivering newspapers and shoveling snow. When I turned 18, I started paying rent to live in the family home. I agree that the price of the car isn't likely to break the household budget, but the OP does seem concerned. At 59 with no job, and no prospects, he probably feels the need to hunker down. Best of luck.

Regards,
This is one person's opinion. Nothing more.

SS Rambo
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Re: College age kid wrecked his car...

Post by SS Rambo » Fri May 08, 2020 11:40 pm

A lot of my opinion here, but...

The best idea I saw mentioned is putting your credit card on their Uber/Lyft account to fund their transportation to/from work for the remaining 9months of time at school before they graduate. Much cheaper, pay as you go, win win. Insurance savings: $160/mo?

The advice people are giving to walk back on your offer to your child to provide their transportation to work (because these people didn’t get it from their own parents) is a bit bitter for my taste. Kudos to your generous support, financial lessons are important but there’re more than one way to teach them.

Lastly, I agree $10k for a college car is 10x too much, but that’s an opinion piece all of it’s own.

RomeoMustDie
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Re: College age kid wrecked his car...

Post by RomeoMustDie » Fri May 08, 2020 11:47 pm

celia wrote:
Fri May 08, 2020 11:22 pm
Where is the college kid’s responsibility here?

Why can’t he/she figure this out, especially after totaling dad’s car?

For example, there’s probably some public transportation available, getting rides from a friend, moving closer to school, etc

We never bought a car for any of our kids. They figured things out on their own. It is part of being a responsible adult. It has nothing to do with their parents’ finances.
Because wealth is generational. It's up to you to decide whether that's important to you. In my community and culture most people find it important. :beer

Kookaburra
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Re: College age kid wrecked his car...

Post by Kookaburra » Fri May 08, 2020 11:48 pm

Or you can do what my parents did for me:

Nothing. Unless you count cynically tell me “good luck” and point me to the bank for a car loan to add to the student loans.
Last edited by Kookaburra on Fri May 08, 2020 11:52 pm, edited 1 time in total.

rgs92
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Re: College age kid wrecked his car...

Post by rgs92 » Fri May 08, 2020 11:51 pm

I would buy him a decent safe car for around $20,000 and ask him to pay it off slowly over time when he graduates and gets a job.
College is hard enough and he needs this, and the accident was traumatic enough. I would definitely be inclined to just help him out without a second thought.

Just use some cash or IRA money or some combination, as there seems to be no penalty involved, just a bit of taxes.
(I would think, down the road, a parents often gets help from their kids, and your son will remember this. If it was me, I'd even consider forgiving the loan.)

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celia
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Re: College age kid wrecked his car...

Post by celia » Sat May 09, 2020 12:01 am

SS Rambo wrote:
Fri May 08, 2020 11:40 pm
The advice people are giving to walk back on your offer to your child to provide their transportation to work (because these people didn’t get it from their own parents) is a bit bitter for my taste.
OP is not walking away from the offer to provide transportation. Kid totaled the offered car which is pretty comparable to spending an extra $10K of parents’ money already. ( I didn’t see anything where the kid will replace it.) That does not imply the parent should provide transportation AGAIN for said kid.

It has nothing to do with how other Bogleheads were raised. I see it as the original offer is still in place, not that a second offer should be made.

tibbitts
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Re: College age kid wrecked his car...

Post by tibbitts » Sat May 09, 2020 12:05 am

No mortgage, employer-paid healthcare, and a $55k/year job just barely covers annual expenses?

supalong52
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Re: College age kid wrecked his car...

Post by supalong52 » Sat May 09, 2020 12:06 am

So I assume no collision insurance on the totaled car? Are you going to get that for the next car? The lack of insurance seems to have put you in a bind so it may be worth it.

Luckywon
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Re: College age kid wrecked his car...

Post by Luckywon » Sat May 09, 2020 12:06 am

I'd use what's needed from the money market accounts to buy a safe replacement car for your son. In my opinion, you don't need to keep such a large emergency fund, given that you have access to your retirement funds if needed.

If you're inclined to assist your son I think that's great. I'm sure I'd feel the same way.

jjface
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Re: College age kid wrecked his car...

Post by jjface » Sat May 09, 2020 12:23 am

Op has nearly $2m. I would absolutely get a car for my kid with means like that. He hit a deer so I am assuming he wasn't being reckless and it was just an accident. Times are very different than when some bogleheads on here were growing up so thinking same should apply isn't the best advice imo. Deoends on the family at the end of the day. Up to them what they want as there is no definitive right answer. I would have a talk about having insurance though.

Op may want to consider retirement rather than feeling down and out. With $2m and a good social security amount on the horizon he should feel far more positive than he is. It is okay. You are doing well. If you want another job of course you can look for one. But I'd seriously consider some form of retirement and look back with pride on the work you did achieve and how you and your wife did well with your savings.

Just take the money from the 40k or from wherever you feel most comfortable. It doesn't really matter where.

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celia
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Re: College age kid wrecked his car...

Post by celia » Sat May 09, 2020 12:42 am

Cosmic Pony wrote:
Fri May 08, 2020 9:24 pm
Last year I lost my job and so did she within a few months. She then took a lower paying job mostly for healthcare. Given how I've layed out our assets, are there other strategies we should adopt to move assets between taxable and IRA accounts now that we're making less money?

We will have generous SS benefits ($5,500/month) if we make it to 67, god willing.
This is a separate topic, but now that you asked, you are in the ideal situation to start doing large Roth conversions, while your income is low.

I don’t want to go into too much detail here as it will de-rail the car topic. But you should search for threads talking about doing ‘large Roth conversions’ such as this one:
viewtopic.php?f=2&t=306792&p=5082396#p5082396
or
viewtopic.php?f=1&t=312958&p=5217806#p5217806
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

yosemite_mountain
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Re: College age kid wrecked his car...

Post by yosemite_mountain » Sat May 09, 2020 12:46 am

Please don't coddle your kid! It won't serve him well in the long term. He's an adult and if he wants a car; let him buy one for himself.

Paying for his college is generous enough.

yosemite_mountain
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Re: College age kid wrecked his car...

Post by yosemite_mountain » Sat May 09, 2020 12:51 am

02nz wrote:
Fri May 08, 2020 11:11 pm
Dontridetheindexdown wrote:
Fri May 08, 2020 9:39 pm
Here is another option:

College-age kid buys whatever he can afford to drive, using money he earns or borrows.

You and your wife get on with your lives, as best you can.

Everybody lives happily ever after.
It amazes me how often this kind of advice is given on this board. Of course, OP shouldn't wreck his own finances to buy a a luxury car for the kid, but we're talking about someone with $2M in assets, who would be spending <$10K for something that will be essential for the son, especially a year from now when he graduates. Something reliable so he can get to class and later interviews and work on time. That seems unlikely to turn OP's son into some kind of trust fund baby.
Its not about how much money OP has; its about raising the kid to make his own way in life.

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eye.surgeon
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Re: College age kid wrecked his car...

Post by eye.surgeon » Sat May 09, 2020 1:13 am

yosemite_mountain wrote:
Sat May 09, 2020 12:51 am
02nz wrote:
Fri May 08, 2020 11:11 pm
Dontridetheindexdown wrote:
Fri May 08, 2020 9:39 pm
Here is another option:

College-age kid buys whatever he can afford to drive, using money he earns or borrows.

You and your wife get on with your lives, as best you can.

Everybody lives happily ever after.
It amazes me how often this kind of advice is given on this board. Of course, OP shouldn't wreck his own finances to buy a a luxury car for the kid, but we're talking about someone with $2M in assets, who would be spending <$10K for something that will be essential for the son, especially a year from now when he graduates. Something reliable so he can get to class and later interviews and work on time. That seems unlikely to turn OP's son into some kind of trust fund baby.
Its not about how much money OP has; its about raising the kid to make his own way in life.
Too many here confuse supporting their kids during college with making them some type of trust fund baby. It's not the same thing.
Last edited by eye.surgeon on Sat May 09, 2020 1:21 am, edited 3 times in total.
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phxjcc
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Re: College age kid wrecked his car...

Post by phxjcc » Sat May 09, 2020 1:17 am

Despite the self reliance views that I hold....you asked for financial options, not child raising advice....

So, I would look into the retirement fund "special rules due to COVID 19" or WTH they are called and take it out of the retirement funds.

For 10 K out of 1.5M this is near a rounding error of three significant digits.
Sell what ever looks less likely to perform, and get on with your life.

Good luck.

Luckywon
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Re: College age kid wrecked his car...

Post by Luckywon » Sat May 09, 2020 1:21 am

phxjcc wrote:
Sat May 09, 2020 1:17 am

So, I would look into the retirement fund "special rules due to COVID 19" or WTH they are called and take it out of the retirement funds.
OP is 59 1/2 and is eligible to withdraw from his IRA without penalty. The special rules due to COVID allowing early distributions without penalty are moot.

maroon
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Re: College age kid wrecked his car...

Post by maroon » Sat May 09, 2020 2:16 am

Glad your son is okay after such an upsetting experience. Why spend $8K - $10K on a replacement vehicle? The car I'm driving right now - an older Forester - isn't worth that much.

invest4
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Re: College age kid wrecked his car...

Post by invest4 » Sat May 09, 2020 5:05 am

I very much appreciate the diverse comments provided to OP in regard to the level of responsibility that should be shouldered by the son. I often wonder about the "nurture vs nature" question when it comes to money matters and taking responsibility for ones self. I suspect it is a combination of both and the struggle lies in the balancing act.

I also thought 8-10K seemed a bit much for a college student's car. This is in the eye of the beholder...the appropriate amount for a safe, reliable vehicle relative to one's means. For myself, I have settled on 5-6K which seems to garner something between 2007-2008 with under 150K miles. I primarily consider Honda and Toyota (availability and reliability). Of course, to each their own.

In regard to the share of the burden, we are willing to provide a vehicle to our children during high school and college with the expectation they will secure part time jobs and increase their contribution for the ongoing use and maintenance of the car over time. Gas and oil changes...then minor repairs...insurance and so on and so forth. I don't really know if it's the optimal approach...we just do the best we can as parents to find the "sweet spot" of hopefully instilling certain attitudes toward money and responsibility such as:

* Living beneath your means (we advocate buying used cars for example)

* Need to have and do well at your job so you may have the things you need (like gas for your car) and some of what you want (sushi lunch with friends)

* Savings (ensuring you have sufficient reserves for unexpected items such as car repairs)

Rightly or wrongly (and not surprisingly), I find that I am also guided by my own experiences in life. I received less when I was younger (parents had less means), but my in-laws have been generous to my wife and I (greater means) during our married lives. Of course, it is all intermingled with the deep love and appreciation we have that creates a desire to make all of our parents proud and feel that we have been deserving and smart with their gifts (big or small). We remain hopeful we can strike the right balance of everything for our own children...the journey continues.

mouses
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Re: College age kid wrecked his car...

Post by mouses » Sat May 09, 2020 6:14 am

I bought a used Lexus for $6500. I don't know why the OP is planning to spend $10k on a car.

OnTrack2020
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Re: College age kid wrecked his car...

Post by OnTrack2020 » Sat May 09, 2020 6:46 am

Am assuming since child hit a deer, that he lives in an area where people rely more on autos for transportation and there may not necessarily be Uber/Lyft readily available? Here's what I would consider doing:

Stimulus check - $2400 (If you haven't received it yet, draw from money market and then replace when received.)
Insurance Proceeds - ??? (What do you think you will receive from the insurance?)
Tax refund from 2019 taxes - ??? (I'm assuming you will receive, at the very least, the $2,500 education tax credit? Again, if he needs a car right away, draw from money market, and then replace after receiving tax return money.)
The remainder from either taxable - ???

You may have close to or enough money from the first three items above to barely have to touch your taxable accounts.

I don't think some of the posters here understand that many college kids don't make enough/have enough money to buy their own vehicle, let alone take out a loan which just drags them deeper into debt. Ours certainly doesn't. We would have to buy a car for them if this happened to us also. Considering your overall financial picture, $8k-$10k is very little.

bloom2708
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Re: College age kid wrecked his car...

Post by bloom2708 » Sat May 09, 2020 7:00 am

Many used cars in the $1,500 to $5k range.

Good life lessons. OP can afford different options. I would find an acceptable beater.
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead

Gooch1226
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Re: College age kid wrecked his car...

Post by Gooch1226 » Sat May 09, 2020 7:37 am

bloom2708 wrote:
Sat May 09, 2020 7:00 am
Many used cars in the $1,500 to $5k range.

Good life lessons. OP can afford different options. I would find an acceptable beater.
+1 why 8-10 k? Why not 1-2k? I have a very nice car and a beater I only drive to work . I tell my kids all the time , “this 1996 Saturn will be your first car “

OnTrack2020
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Re: College age kid wrecked his car...

Post by OnTrack2020 » Sat May 09, 2020 7:47 am

Gooch1226 wrote:
Sat May 09, 2020 7:37 am
bloom2708 wrote:
Sat May 09, 2020 7:00 am
Many used cars in the $1,500 to $5k range.

Good life lessons. OP can afford different options. I would find an acceptable beater.
+1 why 8-10 k? Why not 1-2k? I have a very nice car and a beater I only drive to work . I tell my kids all the time , “this 1996 Saturn will be your first car “
Because many people don't have the time to sit around in a repair shop all day. And most college kids don't have the money that it takes to pay the repair bills.

FishTaco
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Re: College age kid wrecked his car...

Post by FishTaco » Sat May 09, 2020 7:55 am

I'm not sure about all this money stuff, but I feel very strongly that whatever car you end up buying for him should have a manual transmission. Nothing teaches humility and responsibility like rowing your own in some econobox and having to downshift to 3rd gear to make it up the smallest of hills. First thing he'll do is go out and upgrade his ride on his own dime once he starts working. I'm particularly fond of the Honda Fit. Those things are indestructible, but no one in their right mind would ever willingly drive one.

Besides, driving an MT is dying skillset.

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Nicolas Perrault
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Re: College age kid wrecked his car...

Post by Nicolas Perrault » Sat May 09, 2020 8:24 am

Dontridetheindexdown wrote:
Fri May 08, 2020 9:39 pm
Here is another option:

College-age kid buys whatever he can afford to drive, using money he earns or borrows.

You and your wife get on with your lives, as best you can.

Everybody lives happily ever after.
Good option. You can be his lender if you’re so inclined. Just let him spend some time without a car first so he’s extra grateful for the loan.

260chrisb
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Re: College age kid wrecked his car...

Post by 260chrisb » Sat May 09, 2020 8:26 am

Was it "your" his car of his car? Seems to me a college age kid could figure out how to buy his next car. Assuming you get an insurance claim, take a few grand from your cash fund add the insurance money, buy a 10K car, and move on.

fourkids
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Re: College age kid wrecked his car...

Post by fourkids » Sat May 09, 2020 8:30 am

I’d make your adult son(age 20?), figure it out himself.

Or perhaps a used moped or motorcycle? Bumming rides off friends? Uber for farther trips?
First lesson in real adulthood

getthatmarshmallow
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Re: College age kid wrecked his car...

Post by getthatmarshmallow » Sat May 09, 2020 8:47 am

No one's yet suggested that the kid should drop out of college so he can work extra to afford a car. You all disappoint me. :wink:

OP, you might consider where your son is likely to end up after graduating. Lots of young people in the city don't bother with cars, and don't really use them, especially with Uber/Lyft becoming more popular. In that case a less expensive vehicle just to get him through the year would be the more frugal option.

billfromct
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Re: College age kid wrecked his car...

Post by billfromct » Sat May 09, 2020 8:48 am

Collision insurance doesn't cover damages if you hit a deer. Comprehensive insurance covers you if you hit a deer as well as broken glass for your car, if you have it.

I hit a deer about 6 years ago & was surprised that collision didn't cover it, but comprehensive did cover. The deductible was the same.

So if you don't have collision insurance but do have comprehensive insurance, you should be OK if you hit a deer. Of course it won't be of much value if the value of the car is low & the car is "totaled".

Someone else may have mentioned this as I didn't read every post in detail.

bill

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Kenkat
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Re: College age kid wrecked his car...

Post by Kenkat » Sat May 09, 2020 8:50 am

supalong52 wrote:
Sat May 09, 2020 12:06 am
So I assume no collision insurance on the totaled car? Are you going to get that for the next car? The lack of insurance seems to have put you in a bind so it may be worth it.
When my son struck a deer and totaled his car (I was in the passenger seat, quite the experience), it was covered under our comprehensive coverage, not collision. You may have coverage if you haven’t already looked into this.

Given your circumstances, I’d look for a car in the $3000-4000 range. My two kids are driving an 04 Monte Carlo and an 05 Toyota Camry and they are both fine cars to drive for them.

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Re: College age kid wrecked his car...

Post by Yooper » Sat May 09, 2020 8:52 am

Unless it was a VERY unusual accident, and he intentionally sought out a deer to hit - NO, the deer wrecked his car, not him. So no need to blame the son. I'm not privy to the details of the accident, but perhaps he did the right thing by hitting it, "don't veer for deer" was an advertising theme some years back in Michigan. I just don't get the piling on the boy when we don't know whether he was actually at fault or not. And with deer, it's rarely the driver's fault.

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Kenkat
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Re: College age kid wrecked his car...

Post by Kenkat » Sat May 09, 2020 9:06 am

Yooper wrote:
Sat May 09, 2020 8:52 am
Unless it was a VERY unusual accident, and he intentionally sought out a deer to hit - NO, the deer wrecked his car, not him. So no need to blame the son. I'm not privy to the details of the accident, but perhaps he did the right thing by hitting it, "don't veer for deer" was an advertising theme some years back in Michigan. I just don't get the piling on the boy when we don't know whether he was actually at fault or not. And with deer, it's rarely the driver's fault.
Having been in a deer strike accident, this is very true. It happens so quickly. In our case, I remember it almost as snapshots: deer crossing in front of left headlight, deer on hood, glass crystals floating down as windshield shattered (it remained mostly intact luckily). Since my son was driving and was a relatively new driver, I spent a few days thinking “if I had been driving, could I have avoided it”? I finally settled on no. It was absolutely unavoidable.

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