How much do you contribute for 529

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
FB01
Posts: 525
Joined: Fri May 20, 2011 12:36 am

How much do you contribute for 529

Post by FB01 » Wed Nov 30, 2011 1:53 pm

Hi,

I have a 2 year old have been contributing 50 dollars a month (600 a year) into Ohio 529 plan. My priority is for more retirment fund first. In future, kid can also get student loan.

So how much you guys contribute?

User avatar
Majormajor78
Posts: 910
Joined: Mon Jan 31, 2011 9:13 pm
Location: Chicagoish

Re: How much do you contribute for 529

Post by Majormajor78 » Wed Nov 30, 2011 2:27 pm

I started at $75 and after a year went up to $100 then $125 and currently $150. Probably won't be another increase for a while unless the wife's employer suprises us and actually gives a raise this year. Oldest is currently 4 and the youngest is almost 2.
"Oh, M. le Comte, it is only a loss of money which I have sustained... nothing worth mentioning, I assure you."

Jamieson22
Posts: 143
Joined: Tue Feb 12, 2008 4:42 pm

Re: How much do you contribute for 529

Post by Jamieson22 » Wed Nov 30, 2011 2:34 pm

We have been putting $600 a month into State of IL 529 for my 11 month old daughter.

hsv_climber
Posts: 3969
Joined: Tue Sep 22, 2009 7:56 pm

Re: How much do you contribute for 529

Post by hsv_climber » Wed Nov 30, 2011 2:35 pm

$5K / kid to 529 + $2K/kid to Edu IRA.
Kids are 8 & 4.

User avatar
schnoodlemom
Posts: 456
Joined: Mon Oct 20, 2008 3:06 am

Re: How much do you contribute for 529

Post by schnoodlemom » Wed Nov 30, 2011 2:48 pm

We have 2 children (11&14) and contribute $5k/each or $10k total/year, our state's maximum tax deduction. Enjoy your little ones!

User avatar
Snikda
Posts: 8
Joined: Fri Apr 24, 2009 12:12 pm
Location: Orlando, FL

Re: How much do you contribute for 529

Post by Snikda » Wed Nov 30, 2011 3:00 pm

we have a 10 mth old and contribute $200/mth

vtalyan
Posts: 14
Joined: Wed Jan 23, 2008 4:47 pm
Location: St. Louis, MO

Re: How much do you contribute for 529

Post by vtalyan » Wed Nov 30, 2011 3:03 pm

$300/kid/month.

2 Kids - 6 and 4 years old.

Steve K
Posts: 48
Joined: Fri Sep 03, 2010 2:55 pm

Re: How much do you contribute for 529

Post by Steve K » Wed Nov 30, 2011 3:11 pm

One child, 5k a year.

bungalow10
Posts: 2218
Joined: Sat Apr 09, 2011 6:28 am
Location: Chicago North Shore

Re: How much do you contribute for 529

Post by bungalow10 » Wed Nov 30, 2011 3:30 pm

Nothing right now. Kids are 2 and 4 and share about $9000 in a 529 between them.

I'm not sure if we would be better off paying off our mortgage, or maxing out the amount we get in state tax deduction for the 529. Our state taxes are 6% and we can put up to $3k/year/kid in ($500 month for the two).

Thoughts?
An elephant for a dime is only a good deal if you need an elephant and have a dime.

expat
Posts: 738
Joined: Mon Mar 10, 2008 9:07 pm

Re: How much do you contribute for 529

Post by expat » Wed Nov 30, 2011 3:33 pm

10 percent of gross income.

manuvns
Posts: 665
Joined: Wed Jan 02, 2008 2:30 pm

Re: How much do you contribute for 529

Post by manuvns » Wed Nov 30, 2011 3:51 pm

$200 per month . I re-balance with additional contribution once a year on the kids birthday .

jlg
Posts: 70
Joined: Fri Apr 22, 2011 7:45 am

Re: How much do you contribute for 529

Post by jlg » Wed Nov 30, 2011 4:52 pm

One child, almost three months old!

Started my Vanguard 529 (Nevada) with the $3000 opening balance and have been contributing $500 per month plus any cash gifts. People have been asking what she "wants" for Christmas. I sent all of them a UGift invite!

My goal for 2012 is to contribute the $6000 minimum and a stretch goal to contribute $20,000 total.

Manbaerpig
Posts: 1368
Joined: Wed Mar 09, 2011 2:32 am
Location: San Jose

Re: How much do you contribute for 529

Post by Manbaerpig » Wed Nov 30, 2011 5:07 pm

zero (no kids)

User avatar
bilperk
Posts: 540
Joined: Tue Feb 20, 2007 7:00 am
Location: Florida

Re: How much do you contribute for 529

Post by bilperk » Wed Nov 30, 2011 6:24 pm

I put in $300 per month for each of my 5 year old twin grand daughters in the Ohio college Advantage 529. I live in Fl as do the children.
Bill

livesoft
Posts: 62857
Joined: Thu Mar 01, 2007 8:00 pm

Re: How much do you contribute for 529

Post by livesoft » Wed Nov 30, 2011 6:24 pm

A 6-figure amount which is enough to pay for 1.5 years of college.
Wiki This signature message sponsored by sscritic: Learn to fish.

catch22
Posts: 58
Joined: Wed Jul 27, 2011 1:11 pm

Re: How much do you contribute for 529

Post by catch22 » Wed Nov 30, 2011 6:56 pm

Aiming 100% for a 4-year public in-state. Started with 500$ per month from birth for my soon to be 1-year old.

hsv_climber
Posts: 3969
Joined: Tue Sep 22, 2009 7:56 pm

Re: How much do you contribute for 529

Post by hsv_climber » Wed Nov 30, 2011 7:05 pm

livesoft wrote:A 6-figure amount which is enough to pay for 1.5 years of college.
Why would you do that if you are not getting state tax deduction anyway?

livesoft
Posts: 62857
Joined: Thu Mar 01, 2007 8:00 pm

Re: How much do you contribute for 529

Post by livesoft » Wed Nov 30, 2011 7:05 pm

Gains are tax-free. Don't forget we borrowed from a high-expense ratio 401(k) to fund some of the 529 plans. That saves a few thousand dollars in expenses.
Wiki This signature message sponsored by sscritic: Learn to fish.

mikep
Posts: 3698
Joined: Wed Apr 22, 2009 9:27 pm

Re: How much do you contribute for 529

Post by mikep » Wed Nov 30, 2011 7:07 pm

jlg wrote:One child, almost three months old!

Started my Vanguard 529 (Nevada) with the $3000 opening balance and have been contributing $500 per month plus any cash gifts. People have been asking what she "wants" for Christmas. I sent all of them a UGift invite!

My goal for 2012 is to contribute the $6000 minimum and a stretch goal to contribute $20,000 total.
How is that received by the relatives? Some of mine always overload the kids with toys and stuff that breaks or get lost in a year. Frustrating, but I guess they are allowed to spend their money on what they want to give. I have others that write "for 529" on the check so I'm happier with that :)

SimonJester
Posts: 1673
Joined: Tue Aug 16, 2011 12:39 pm

Re: How much do you contribute for 529

Post by SimonJester » Wed Nov 30, 2011 7:11 pm

$150 to the 529 and $150 to the ESA for each Kid. 2 Kids 10 & 12.
Plan to double that next year with more going to the 529 due to the ESA limit.
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin

User avatar
fundtalker123
Posts: 884
Joined: Tue Feb 27, 2007 4:18 am

Re: How much do you contribute for 529

Post by fundtalker123 » Wed Nov 30, 2011 7:32 pm

$26,000 per year. Child is a few months old and my wife says he's going to go to an expensive private university :D

bungalow10
Posts: 2218
Joined: Sat Apr 09, 2011 6:28 am
Location: Chicago North Shore

Re: How much do you contribute for 529

Post by bungalow10 » Wed Nov 30, 2011 7:35 pm

fundtalker123 wrote:$26,000 per year. Child is a few months old and my wife says he's going to go to an expensive private university :D
My MBA cost less (in its entirety) than $26,000... come to think of it, I didn't pay a dime of it, but still...
An elephant for a dime is only a good deal if you need an elephant and have a dime.

am
Posts: 2794
Joined: Sun Sep 30, 2007 9:55 am

Re: How much do you contribute for 529

Post by am » Wed Nov 30, 2011 8:18 pm

My MBA cost less (in its entirety) than $26,000... come to think of it, I didn't pay a dime of it, but still...


Yes, and the MBA is worth a little bit these days if it is from a good place. The college degree is pretty worthless with some exceptions.

User avatar
Mister Whale
Posts: 484
Joined: Sat Jan 02, 2010 10:39 am

Re: How much do you contribute for 529

Post by Mister Whale » Wed Nov 30, 2011 9:51 pm

fundtalker123 wrote:$26,000 per year. Child is a few months old and my wife says he's going to go to an expensive private university :D
bungalow10 wrote:My MBA cost less (in its entirety) than $26,000... come to think of it, I didn't pay a dime of it, but still...
am wrote:Yes, and the MBA is worth a little bit these days if it is from a good place. The college degree is pretty worthless with some exceptions.
And off we go ... :roll:

To the OP: I contribute $2000/month, will probably drop back to $1500/month in 2012. I plan on retiring before my son attends college (he's 2 now), and hope to have his tuition mostly covered at retirement time.
" ... advice is most useful and at its best, not when it is telling you what to do, but when it is illuminating aspects of the situation you hadn't thought about." --nisiprius

User avatar
OnFire
Posts: 353
Joined: Sat Feb 16, 2008 11:48 pm

Re: How much do you contribute for 529

Post by OnFire » Thu Dec 01, 2011 1:23 am

$50 a month for Son #1 (21 months) and so far, $0 for Son #2 (3 months). On the positive side, we have just paid off both cars in the last six months, my wife pays off one of her student loans this month, and between those three things we will free up close to $1600 a month. She will also pay off her dental practice loan in May and that will free up another $500 a month. We are also expecting a $10-12K tax return due to an injury I suffered at work. On the negative, my wife still owes about $140K in student loans. I'm still conflicted about saving for our kids educations when we will be paying off her educational loans for decades. And we still have a ways to go before we can max out our own tax-advantaged retirement accounts.
Where are all the customers yachts? | | “The most powerful force in the Universe is compound interest.” -Albert Einstein

letsgobobby
Posts: 11669
Joined: Fri Sep 18, 2009 1:10 am

Re: How much do you contribute for 529

Post by letsgobobby » Fri Dec 02, 2011 2:30 am

We bought 5 years of prepaid tuition at/before birth for each child. We also save $10,000 each per year.

User avatar
leonidas
Posts: 415
Joined: Sun Jul 10, 2011 8:58 am
Location: Mansfield Township, NJ

Re: How much do you contribute for 529

Post by leonidas » Fri Dec 02, 2011 7:08 am

100 a month per child. One is 11 and the other is 4. Since we started late with the first ones contributions there may not be enough in the account to cover more that a years worth of tuition at a state school. There is always ROTC.

User avatar
tdirgins
Posts: 59
Joined: Wed Sep 12, 2007 3:33 pm

Re: How much do you contribute for 529

Post by tdirgins » Fri Dec 02, 2011 10:07 am

started small, 50$ then 100$ per month for each of my two kids. I've been maintaining 1k/month each for the past few years. Shooting for 100% for 4 year ( 1 private, 1 public) by the time the oldest is ready to go (6 years).

Grt2bOutdoors
Posts: 19484
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: How much do you contribute for 529

Post by Grt2bOutdoors » Fri Dec 02, 2011 10:55 am

$1K per month since the beginning. I had my kid late, just in case I become unemployed (the black swan event) before the bill comes due, I'd like to think I could pay for at least 1/2 of the cost.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

User avatar
White Coat Investor
Posts: 13586
Joined: Fri Mar 02, 2007 9:11 pm
Location: Greatest Snow On Earth

Re: How much do you contribute for 529

Post by White Coat Investor » Fri Dec 02, 2011 12:29 pm

FB01 wrote:Hi,

I have a 2 year old have been contributing 50 dollars a month (600 a year) into Ohio 529 plan. My priority is for more retirment fund first. In future, kid can also get student loan.

So how much you guys contribute?
I get a 5% credit up to $3470 per kid. So I contribute $3470 X 3 kids per year. If they need more than that they'll be taking out loans.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

Grt2bOutdoors
Posts: 19484
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: How much do you contribute for 529

Post by Grt2bOutdoors » Fri Dec 02, 2011 12:33 pm

EmergDoc wrote:
FB01 wrote:Hi,

I have a 2 year old have been contributing 50 dollars a month (600 a year) into Ohio 529 plan. My priority is for more retirment fund first. In future, kid can also get student loan.

So how much you guys contribute?
I get a 5% credit up to $3470 per kid. So I contribute $3470 X 3 kids per year. If they need more than that they'll be taking out loans.
A credit? - dollar for dollar, or a deduction? That's incredible if you do receive a credit.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

minneapples
Posts: 43
Joined: Fri Jun 10, 2011 10:51 am

Re: How much do you contribute for 529

Post by minneapples » Fri Dec 02, 2011 12:39 pm

We have two 529s and 0 children, and put $100/month into each plan. :roll:

I don't think it's the best plan. We don't get any immediate tax benefit in our state, and I'd rather invest that money in a taxable account for the time being. But my husband felt strongly that he wanted to get a jump on college savings, and he is in every other way very accommodating of my preferences when it comes to financial planning for the family, so I go with it.

User avatar
White Coat Investor
Posts: 13586
Joined: Fri Mar 02, 2007 9:11 pm
Location: Greatest Snow On Earth

Re: How much do you contribute for 529

Post by White Coat Investor » Fri Dec 02, 2011 12:54 pm

GRT2BOUTDOORS wrote:
EmergDoc wrote:
FB01 wrote:Hi,

I have a 2 year old have been contributing 50 dollars a month (600 a year) into Ohio 529 plan. My priority is for more retirment fund first. In future, kid can also get student loan.

So how much you guys contribute?
I get a 5% credit up to $3470 per kid. So I contribute $3470 X 3 kids per year. If they need more than that they'll be taking out loans.
A credit? - dollar for dollar, or a deduction? That's incredible if you do receive a credit.
No, it's a credit for 5% of $3470, or $174 per kid. I get $522 off my taxes, I put away $10470 for the kids.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

User avatar
White Coat Investor
Posts: 13586
Joined: Fri Mar 02, 2007 9:11 pm
Location: Greatest Snow On Earth

Re: How much do you contribute for 529

Post by White Coat Investor » Fri Dec 02, 2011 12:56 pm

letsgobobby wrote:We bought 5 years of prepaid tuition at/before birth for each child. We also save $10,000 each per year.
Where exactly are you planning to send them to school that you expect to need $180K per child (plus gains) in addition to 5 years of tuition? Seems like way too much. Why not put some of that savings into an UGMA so you still get a tax break, but at least they can use the money for something else without penalty?
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

TheEternalVortex
Posts: 2548
Joined: Tue Feb 27, 2007 9:17 pm
Location: San Jose, CA

Re: How much do you contribute for 529

Post by TheEternalVortex » Fri Dec 02, 2011 1:08 pm

I was thinking about contributing, but it seems like the benefit (if you don't get a tax deduction) is pretty small, and the costs (guessing the amount of an expense 15+ years in advance is hard) could be high. For example if you hold a TSM-type fund in taxable, that cost of taxes is ~0.4%/yr. Once you take into account the higher fees of a 529 plan it narrows to virtually 0. Of course if you want to hold bonds it's probably a better deal.

Grt2bOutdoors
Posts: 19484
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: How much do you contribute for 529

Post by Grt2bOutdoors » Fri Dec 02, 2011 1:10 pm

EmergDoc wrote:
letsgobobby wrote:We bought 5 years of prepaid tuition at/before birth for each child. We also save $10,000 each per year.
Where exactly are you planning to send them to school that you expect to need $180K per child (plus gains) in addition to 5 years of tuition? Seems like way too much. Why not put some of that savings into an UGMA so you still get a tax break, but at least they can use the money for something else without penalty?
I would think he believes his kids are going to graduate school or for a PHD after grad school. You would be surprised how much it costs for state school today in the Northeast - close to 26K per year (room and board included) or $104K today!! Imagine what that bill will look like in 15 or 20 years for public! Nuts, I tell you!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

User avatar
White Coat Investor
Posts: 13586
Joined: Fri Mar 02, 2007 9:11 pm
Location: Greatest Snow On Earth

Re: How much do you contribute for 529

Post by White Coat Investor » Fri Dec 02, 2011 1:17 pm

TheEternalVortex wrote:I was thinking about contributing, but it seems like the benefit (if you don't get a tax deduction) is pretty small, and the costs (guessing the amount of an expense 15+ years in advance is hard) could be high. For example if you hold a TSM-type fund in taxable, that cost of taxes is ~0.4%/yr. Once you take into account the higher fees of a 529 plan it narrows to virtually 0. Of course if you want to hold bonds it's probably a better deal.
529 fees are pretty darn low if you pick a decent plan. The Utah one I use gives me TSM at 0.02% and TISM at 0.12%, so 0.06% + their 20% fee for a total of 0.26%. I figure the tax cost on the yield (15% of 2%) is 0.3% a year. Add that on to the fees I'd be paying for investor shares of 0.18% and 0.26% or 0.22% average and I see the 529 gaining the slight edge at 0.26% versus 0.52%. Compound that over 18 years and it'll likely mean the difference of about $9500 in fees assuming 8% returns. I also get to rebalance (or change allocation) without any costs and I get a 5% credit on contributions. All I'm giving up for all that is the ability to tax loss harvest. Seems worth it to me.

As far as the risk of overcontributing, I don't think that's a concern for me at this point because I'm just not putting that much away (about $10K a year total for 3 kids).
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

User avatar
White Coat Investor
Posts: 13586
Joined: Fri Mar 02, 2007 9:11 pm
Location: Greatest Snow On Earth

Re: How much do you contribute for 529

Post by White Coat Investor » Fri Dec 02, 2011 1:20 pm

GRT2BOUTDOORS wrote:
EmergDoc wrote:
letsgobobby wrote:We bought 5 years of prepaid tuition at/before birth for each child. We also save $10,000 each per year.
Where exactly are you planning to send them to school that you expect to need $180K per child (plus gains) in addition to 5 years of tuition? Seems like way too much. Why not put some of that savings into an UGMA so you still get a tax break, but at least they can use the money for something else without penalty?
I would think he believes his kids are going to graduate school or for a PHD after grad school. You would be surprised how much it costs for state school today in the Northeast - close to 26K per year (room and board included) or $104K today!! Imagine what that bill will look like in 15 or 20 years for public! Nuts, I tell you!
The bill won't look like that because it can't look like that. Who will pay it? That's like predicting housing will continue to go up at 8 or 10% a year. If something can't go on indefinitely, it won't.

The cost of education is also one of the most inefficient markets out there. It makes housing look like it comes straight out of Malkiel's lair by comparison. You can get the same medical education for $10K a year versus $70K a year. A community college might be $3K a year versus a liberal arts college at $50K a year. Sure, one education might be a little better, BUT 10 TIMES BETTER? No way. It's inefficient. They charge as much as the market will bear, and some fools will keep paying it. It's a luxury item, just like buying an Audi when an Accord will do. But at some point, the average cost of a college education will cease to rise at a rate so much higher than wage growth. It has to.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

Hector
Posts: 832
Joined: Fri Dec 24, 2010 2:21 pm
Contact:

Re: How much do you contribute for 529

Post by Hector » Fri Dec 02, 2011 2:22 pm

GRT2BOUTDOORS wrote:
EmergDoc wrote:
letsgobobby wrote:We bought 5 years of prepaid tuition at/before birth for each child. We also save $10,000 each per year.
Where exactly are you planning to send them to school that you expect to need $180K per child (plus gains) in addition to 5 years of tuition? Seems like way too much. Why not put some of that savings into an UGMA so you still get a tax break, but at least they can use the money for something else without penalty?
I would think he believes his kids are going to graduate school or for a PHD after grad school. You would be surprised how much it costs for state school today in the Northeast - close to 26K per year (room and board included) or $104K today!! Imagine what that bill will look like in 15 or 20 years for public! Nuts, I tell you!
expenses other than tuition fees are subjective. One can survive with few hundreds a month which could easily be covered by part time job, thousands might not be enough for other. I am sure that most of us would have seen both kind of students in our school days.

letsgobobby
Posts: 11669
Joined: Fri Sep 18, 2009 1:10 am

Re: How much do you contribute for 529

Post by letsgobobby » Fri Dec 02, 2011 3:59 pm

my alma mater currently charges $41,000 per year, tuition alone. At 5% annual inflation, in 18 years that will be $395,000 for 4 years, per child. That excludes living expenses, books, Taco Bell.

I really don't think it's possible to oversave this early. As we approach liftoff, if it seems we are overshooting, we can always dial down.

HopeToGolf
Posts: 328
Joined: Fri Dec 24, 2010 4:04 pm

Re: How much do you contribute for 529

Post by HopeToGolf » Sat Dec 03, 2011 5:50 am

EmergDoc wrote:
GRT2BOUTDOORS wrote:
EmergDoc wrote:
letsgobobby wrote:We bought 5 years of prepaid tuition at/before birth for each child. We also save $10,000 each per year.
Where exactly are you planning to send them to school that you expect to need $180K per child (plus gains) in addition to 5 years of tuition? Seems like way too much. Why not put some of that savings into an UGMA so you still get a tax break, but at least they can use the money for something else without penalty?
I would think he believes his kids are going to graduate school or for a PHD after grad school. You would be surprised how much it costs for state school today in the Northeast - close to 26K per year (room and board included) or $104K today!! Imagine what that bill will look like in 15 or 20 years for public! Nuts, I tell you!
The bill won't look like that because it can't look like that. Who will pay it? That's like predicting housing will continue to go up at 8 or 10% a year. If something can't go on indefinitely, it won't.

The cost of education is also one of the most inefficient markets out there. It makes housing look like it comes straight out of Malkiel's lair by comparison. You can get the same medical education for $10K a year versus $70K a year. A community college might be $3K a year versus a liberal arts college at $50K a year. Sure, one education might be a little better, BUT 10 TIMES BETTER? No way. It's inefficient. They charge as much as the market will bear, and some fools will keep paying it. It's a luxury item, just like buying an Audi when an Accord will do. But at some point, the average cost of a college education will cease to rise at a rate so much higher than wage growth. It has to.
I used to think this way and I hope you are correct. However, I read what I can on the topic and I am afraid there are mechanisms in place that will allow the tuition hikes to continue with the following among them; 1) there is a population of people who are going to plan and save to pay the rates, 2) there are policies being considered to forgive loans after a certain period if time. Those two reasons alone will give universities comfort that they can raise prices because they will have enough students who will pay full freight to offset those who pay a discount.

To OP...$600 a month for my 6 year old with a hope that I have income to cover the gap if the family decides that he needs to attend that $400k private school (projected cost).

TRC
Posts: 1896
Joined: Sat Dec 20, 2008 5:38 pm

Re: How much do you contribute for 529

Post by TRC » Sat Dec 03, 2011 6:46 am

$250 a month per kid. An extra grand here and there when I receive bonus checks.

WorkToLive
Posts: 617
Joined: Thu Nov 12, 2009 2:19 pm

Re: How much do you contribute for 529

Post by WorkToLive » Sat Dec 03, 2011 9:40 am

We put in $100,000 when she turned one. Unfortunately, the timing was not so great (Jan 2007). Anyway, we are now contributing $650/month. We are also going to pay off the mortgage by the time she enters high school. Since my husband is in a profession that he can't continue until normal retirement age, we want to have college expenses and the mortgage done and done. We will re-evaluate our savings when she is 10 or so and see if we have enough.

learn2invest
Posts: 12
Joined: Wed Jul 13, 2011 11:05 am

Re: How much do you contribute for 529

Post by learn2invest » Sat Dec 03, 2011 12:14 pm

One kid at 6. Saved 140k. plan to have 2k/yr into ESA.
Goal is to cover full public school, which is now 32k/yr in our state (can you believe it?)

User avatar
White Coat Investor
Posts: 13586
Joined: Fri Mar 02, 2007 9:11 pm
Location: Greatest Snow On Earth

Re: How much do you contribute for 529

Post by White Coat Investor » Sat Dec 03, 2011 5:33 pm

letsgobobby wrote:my alma mater currently charges $41,000 per year, tuition alone. At 5% annual inflation, in 18 years that will be $395,000 for 4 years, per child. That excludes living expenses, books, Taco Bell.

I really don't think it's possible to oversave this early. As we approach liftoff, if it seems we are overshooting, we can always dial down.
Yes, better add on a bit more for Taco Bell. :roll: My alma mater currently charges about 10% of yours, or ~$4300 a year. If it seems you are undershooting by an order of magnitude you could send the kid there. :)

Seriously, $40K a year is ridiculous. I mean, if that's how you want to spend your money and you can afford it, no problem. We all have our favored luxuries. But the idea that any reasonable percentage of college students and their families will ever be able to afford that is ridiculous. In Your Money Ratios, the author suggests that one shouldn't take on more student loan debt than 75% of what he anticipates to earn per year after getting the degree. If the average college graduate is making something like $60-80K (and that might be generous), that suggests no more than $45-60K in loans. You can rack that up in one year at an expensive school.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

letsgobobby
Posts: 11669
Joined: Fri Sep 18, 2009 1:10 am

Re: How much do you contribute for 529

Post by letsgobobby » Sat Dec 03, 2011 6:02 pm

EmergDoc,

Our state university costs $10,500 per year but is slated to increase at 16% in 2012-13. That is $12,180 next year. After that, assume inflation continues at the 20 year historical rate of 7%.

Living expenses are estimated at $13,500 (includes books, etc). Say that increases at 3.5% per year (rate of inflation), so that is $14,000 next year.

My kids are 2 and almost 5. The oldest will start school in 13 years. The youngest will finish in 19 years. Taking the average of 13 and 19 gives me 16. Start the clock a year from now since we already know what 2012-13 costs will be. 15 years of inflation

$12,180* (1.07)^15 + $14,000*(1.035)^15 = $57,060. That is the cost of a single year of school, for a single child, at a state school. That is not Harvard or Stanford. That is not spoiled parents and spoiled kids. That is the University of Washington and there is no reason to think it will be qualitatively different in any other state.

By the way, $57,060 x 4 years x 2 kids = $456,480.

If your kids go to traditional 4 year schools, and you don't expect to receive financial aid, it is my opinion that it is very hard to oversave.

User avatar
White Coat Investor
Posts: 13586
Joined: Fri Mar 02, 2007 9:11 pm
Location: Greatest Snow On Earth

Re: How much do you contribute for 529

Post by White Coat Investor » Sat Dec 03, 2011 7:12 pm

letsgobobby wrote:EmergDoc,

Our state university costs $10,500 per year but is slated to increase at 16% in 2012-13. That is $12,180 next year. After that, assume inflation continues at the 20 year historical rate of 7%.

Living expenses are estimated at $13,500 (includes books, etc). Say that increases at 3.5% per year (rate of inflation), so that is $14,000 next year.

My kids are 2 and almost 5. The oldest will start school in 13 years. The youngest will finish in 19 years. Taking the average of 13 and 19 gives me 16. Start the clock a year from now since we already know what 2012-13 costs will be. 15 years of inflation

$12,180* (1.07)^15 + $14,000*(1.035)^15 = $57,060. That is the cost of a single year of school, for a single child, at a state school. That is not Harvard or Stanford. That is not spoiled parents and spoiled kids. That is the University of Washington and there is no reason to think it will be qualitatively different in any other state.

By the way, $57,060 x 4 years x 2 kids = $456,480.

If your kids go to traditional 4 year schools, and you don't expect to receive financial aid, it is my opinion that it is very hard to oversave.
I understand the calculations. I just don't buy that the average cost of college can continue to increase at the rate it has. Could it do it for another 15 years? I suppose it could. But it can't last forever.

Some states are cheaper than U-dub. For example, I'll look up a few off the bat from different areas of the country:
MIssissippi $5800 a year
Utah $7K a year
Vermont 13K
North Dakota $7K
Alaska $5K
Nebraska $7600
And these are the flagship state universities. Others are cheaper. Such as Weber State here in Utah, at something like $3900 a year. Community colleges are even cheaper.

And all of those towns have a lower cost of living than Seattle. It's just a totally inefficient market. Too many kids are choosing schools based on something other than the ratio of quality education to expense to make it any where near efficient. Because of that, you can get a great deal if you shop around. U-dub might be the best choice on the quality/cost spectrum given your residency, but I'd definitely look around if I were footing the bill. For example, Eastern Washington is less than $5K in a much cheaper city. Spokane community college is only $2500.

$2500 at 7% for 15 years is still only $7K a year.

I'm not saying send your kids to community college (I probably wouldn't), but I wouldn't feel like you need hundreds of thousands per kid to send them to college unless you have an extra few hundred thousand sitting around. Also, it isn't like the only way to pay for college is in a 529 before they start. You can pay for some out of current earnings, they can get scholarships, they can get a part-time job and work during the summers, they can even take out a few loans. In fact, I think it might even be a BAD idea to have $200K waiting for them upon high school graduation. I don't think it would encourage them to make the right decisions (be thrifty, work hard etc.) I remember having some serious incentive to study and get out in 4 years because I was working 60 hours a week all summer and had a part-time job during the year. I can remember distinctly thinking I didn't want to be poor/live like this the rest of my life.

I agree that you cannot oversave...but for a different reason than you think. I think whatever you save will be spent, whether it is $400K or $20K.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

letsgobobby
Posts: 11669
Joined: Fri Sep 18, 2009 1:10 am

Re: How much do you contribute for 529

Post by letsgobobby » Sat Dec 03, 2011 7:30 pm

I agree with a lot of what you write. However, there is certainly a difference in educational opportunity between UW and EWU, or Spokane Community. If I'm lucky enough to have children interested in big things, UW would be a worthy investment over the others. Under those circumstances we might face a different choice, UW vs a private school. One note is that there isn't a plan to 'tell them' about money waiting to be spent; no different than our estate. I agree that would be a bad idea. We will have to have the value discussion with them, no matter how much we save.

We're lucky to have gotten into the WA prepaid plan at attractive prices. The future price of state tuition is covered for us.

hsv_climber
Posts: 3969
Joined: Tue Sep 22, 2009 7:56 pm

Re: How much do you contribute for 529

Post by hsv_climber » Sat Dec 03, 2011 7:42 pm

IMHO, if your kids are interested in big things and are good at it then they should be able to get a scholarship from the school of their choice.
529 can be used to cover housing / books / etc, in that case.

But if your kids would not get scholarship then it might be better to go to a State school where there are better opportunities to succeed vs. competing with superior students (i.e. those who got scholarships) and/or spending time with the rich.

letsgobobby
Posts: 11669
Joined: Fri Sep 18, 2009 1:10 am

Re: How much do you contribute for 529

Post by letsgobobby » Sat Dec 03, 2011 7:52 pm

Ivy leagues do not offer merit scholarships.

Post Reply