We saved nothing for college...BUT...

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er999
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Re: We saved nothing for college...BUT...

Post by er999 »

The key to costs is household income with assets secondary (at about 5% with retirement accounts excluded). Go to a net price calculator for a particular school and you will get an estimate. Also sometimes expensive private schools don’t always cost more. There is a difference between the list and actual price.

As to how to pay for it, either spend less, get a side job, reduce or eliminate retirement contributions, or borrow.
Parkinglotracer
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Re: We saved nothing for college...BUT...

Post by Parkinglotracer »

maestro1868 wrote: Thu May 09, 2024 9:45 pm
Parkinglotracer wrote: Thu May 09, 2024 8:45 pm Consider paying for part of kids college, having kids work and pay for some, and having kids borrow some. Have them attend a local community college and live at home to save money.

Look into kids joining state air guard to pay for school. Or ROTC. Or a service academy. I went to AF Academy and was paid 6K a year to go to school. The AF paid for an MBA at Rensselaer Poly Tech. The Air Force paid for basic flight school and years of flight training.

If you don’t want to drop bombs, coast guard academy might be a consideration. A buddy had three of his kids graduate from there.
Daughter is interested in medicine. My son wants to follow in our footsteps in teaching. However, he did mention joining the Air Force and then becoming a teacher. Both are hardworking and kind kids.
Great to have nice kids. I taught flying for most of my years in the AF. After you get a few years experience you become an instructor and your time is spent teaching the younger folks how to fly your plane, refuel, or employ its weapons. The AF also sends people to medical school each year from its service academies.
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dogagility
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Re: We saved nothing for college...BUT...

Post by dogagility »

maestro1868 wrote: Thu May 09, 2024 9:20 pm We definitely had this in mind when we decided to not contribute to a 529. Not sure if this is completely accurate, but I think I read that having a 529 can, in some situations, reduce a student's aid by 5 to 6%.
To understand college costs, I suggest your use the Net Price Calculators for some colleges your kids may attend. This is the best way to see the effect of various parameters.

As for your question about how to fund college, there are several levers to consider for both you and your kids. Attend a cheaper college. Reduce retirement contributions. Spend less on other life needs. Get a better-paying job. Take out loans (last resort, in my opinion).
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maestro1868
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Re: We saved nothing for college...BUT...

Post by maestro1868 »

My apologies in advance if my original post lead folks to believe that we were not paying for the education of our children.

Would it make sense to leverage low interest loans to fund college, while continuing to build retirement fund? Current Parent Plus loans range from 4% to 6%.

Stopping retirement contributions means missing out of potential growth and compounding over time. Also, stopping contributions means missing out on some tax advantages - lowering taxable income with a TSA.

We can pay for student loans after the kids experience some character building pain and suffering. :happy
rule of law guy
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Re: We saved nothing for college...BUT...

Post by rule of law guy »

by failing to save for college for your kids, you made a choice and you will have to live with it. choices have consequences.

seems to me that cost will be their first consideration in choosing college, not quality or fit
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teen persuasion
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Re: We saved nothing for college...BUT...

Post by teen persuasion »

I’m guessing the grad dates are HS, not college (as I’d first read it). So the 2026 child will do the FAFSA in 2025 using 2024 income numbers. That’s this year.

Where are the kids thinking of going? SUNY runs roughly $25k/yr including housing and meals. Any chance you can qualify for the Excelsior scholarship since you are in NY? I think it only covers tuition, but that’s still a help. What about SAT scores, etc - I seem to remember UB (which has a med school) had merit scholarships if stats were high enough (DD1 preferred UofR instead, but was offered some UB scholarships).


Your existing retirement savings will still grow even if you slow additions for a few years. With both your pensions and SS for both, you don’t need nearly as much in retirement accounts as we do (DH was a teacher but no NYS retirement for him).
calwatch
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Re: We saved nothing for college...BUT...

Post by calwatch »

maestro1868 wrote: Fri May 10, 2024 4:50 pm My apologies in advance if my original post lead folks to believe that we were not paying for the education of our children.

Would it make sense to leverage low interest loans to fund college, while continuing to build retirement fund? Current Parent Plus loans range from 4% to 6%.

Stopping retirement contributions means missing out of potential growth and compounding over time. Also, stopping contributions means missing out on some tax advantages - lowering taxable income with a TSA.

We can pay for student loans after the kids experience some character building pain and suffering. :happy
I don’t see anything wrong with making them take out some loans, the public service loan forgiveness program is pretty generous. If you think you can get higher returns elsewhere and the rate is fixed I wouldn’t hesitate to take a 4-6% interest rate loan either. I would not take any private loans or unsubsidized loans.
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Re: We saved nothing for college...BUT...

Post by YeahBuddy »

toomanysidehustles wrote: Fri May 10, 2024 7:28 am
YeahBuddy wrote: Fri May 10, 2024 5:08 am There's no rule that parents must fund their children's college education. A lot of college students pay their way through college or take out loans and pay them back. You stated you do not want to stop your retirement contributions and you don't have to. It looks like you have the ability to help them, so if you so desire, do that. Budget for it. I'd recommend starting with community college if they guarantee transfer credits will be accepted at the next school, or 4 years of state schools. We have nothing saved for college but I will probably help with expenses then help them pay off their loans later on, as gifts.
This. Or maybe some kids decide they don't want to go to college. We saved in 529's for college and both of our kids will not go to college. :oops:

I'm interested to know what you did with the 529s after. Was it easy to withdraw, and then did you invest it all?

I also wondered if we saved huge 529s and then say one kid decided on $10k beauty school and the other quits after 1 year of community college, what happens to the money. I know it's still ours (yours) but just wondering. Thanks.
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YeahBuddy
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Re: We saved nothing for college...BUT...

Post by YeahBuddy »

rogue_economist wrote: Fri May 10, 2024 9:54 am
YeahBuddy wrote: Fri May 10, 2024 5:08 am There's no rule that parents must fund their children's college education. A lot of college students pay their way through college or take out loans and pay them back. You stated you do not want to stop your retirement contributions and you don't have to. It looks like you have the ability to help them, so if you so desire, do that. Budget for it. I'd recommend starting with community college if they guarantee transfer credits will be accepted at the next school, or 4 years of state schools. We have nothing saved for college but I will probably help with expenses then help them pay off their loans later on, as gifts.
Is it the law that you help pay for your kids college? No. But should you? Yes you should. Assuming college is right for them it dramatically improves their lifetime earnings potential, quality of life, etc.
Hardly any college students are paying their way through these days, that is more of a mythology than a reality. Those without any help that cannot get aid have to borrow and try to pay off the debt, and that has become a well known issue.
If someone's parents contributed nothing to their college education or pushed them into community college when they were capable of better things I would hardly blame them if they did the bare minimum for their parents in their old age. What goes around comes around.

OP has prioritized retirement and kudos to them. Luckily OP found this site and that's helped them immensely it sounds. As we know, we can always finance education but we can't finance retirement. If OP was like some here sitting on piles of cash, with NW > $5M, I'd agree with you but that is not the case. And it's not the case for many.

We have nothing saved for college. It's not something a lot of blue collar people can easily do.

The part about those without any help that cannot get aid have to borrow and pay off the debt sounds like a good life lesson to me, if the parents are unable to help. But that's turned into a whole different news story now.

My parents couldn't help and I refused to have them give me their hard earned money. I worked my way through CC and state school, and helped them immensely afterwards. (I ended up going back to school for healthcare and advocated for my ailing mom, but that's another story)
It builds character to work through school, pay your own way as much as possible. It also eliminates entitlement, IMO. OP is doing a great job and sounds like they might help if they can.

Hope this has helped OP!
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Jack FFR1846
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Re: We saved nothing for college...BUT...

Post by Jack FFR1846 »

ClevrChico wrote: Fri May 10, 2024 6:04 am Living at home and attending community college is a great option. Direct student loans will likely cover school expenses. A part-time job can cover living expenses. Some community colleges have partnerships with universities to obtain bachelor's and master's degrees onsite.
This MIGHT be a good option. Or it could be 2 years of community college followed by 4 years of Bachelors work. How could that be? Let me explain. In my own case, I got my electrical engineering Associates. I later decided to go for my 4 year degree and found that out of all my courses, only one course (English 101) was accepted to transfer. So fast forward and one of my sons was interested in Community College. By the way, CC in my state is $10k a year. Find out what it is. Anyways, he was interested in possibly going on to a 4 year degree afterwards so we researched. The State college very connected to the community college had clear information on transfers and here's how it goes. For a specific major, only specific courses can be transferred. You think Physics is Physics? Nope. At CC, he could take Physics or he could take Calculus based Physics. Physics transferred to nothing and Calc based Physics transferred to *SOME* majors. Not engineering. Not Physics. The good thing is that the community college had a transfer office that could help choose courses that could transfer. But this is not just a matter of taking a course with the same name between CC and state college.

Something else to consider is a trade. Finding qualified trades people has been the recent problem for employers. Plumbing, electrical wiring, HVAC, welding are all in demand. My son crashed and burned during his year of community college. He took a welding program for a year ($16k) and then HVAC ($5000). He ended up in a job for a contractor who supports equipment in an Amazon warehouse at over $30 an hour with promotions and raises realistically available.

How to pay? I can't help. I paid all but Stafford loans for my older son at private college and everything for my younger son. College isn't like it was to afford back before Reagan removed student loan limits. I know because I was in college, paying my own way at a private college and graduated in the nick of time. 4 years of college cost was right about what I made in my first year working. For my son, graduating from the same college, he'd have to work 4 years to pay for college. Oh, another thing, both my older son and I went to a mediocre college for Freshman year then transferred. The better college offers no merit aid to transfers and posts that clearly on their web pages. So be careful about thinking community college will save money.
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FoolMeOnce
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Re: We saved nothing for college...BUT...

Post by FoolMeOnce »

jcchen wrote: Thu May 09, 2024 8:37 pm consider putting 10k each year into NYS 529. NYS residents can deduct 10k from their state income.
+1

Don't overlook this when crunching the numbers. I didn't think there is a holding period requirement, so you could cash flow $10k a year through a 529 and deduct from your state taxes.
toddthebod
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Re: We saved nothing for college...BUT...

Post by toddthebod »

maestro1868 wrote: Fri May 10, 2024 4:50 pm Stopping retirement contributions means missing out of potential growth and compounding over time.
But to what end? Why do you feel the need to save over and above what you need to live on?

Unless I misunderstand what a "full pension" is, you are on track to literally have an extra $100,000/year over and above your expenses without saving another penny!
Harmanic
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Re: We saved nothing for college...BUT...

Post by Harmanic »

FoolMeOnce wrote: Sat May 11, 2024 6:47 am
jcchen wrote: Thu May 09, 2024 8:37 pm consider putting 10k each year into NYS 529. NYS residents can deduct 10k from their state income.
+1

Don't overlook this when crunching the numbers. I didn't think there is a holding period requirement, so you could cash flow $10k a year through a 529 and deduct from your state taxes.
For some people in some states, these plans are much more valuable. We put our three kids through private college without any 529 plans. They are an optional vehicle for saving especially in states with stingy deductions and credits.
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bmcgin
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Re: We saved nothing for college...BUT...

Post by bmcgin »

maestro1868 wrote: Fri May 10, 2024 4:50 pm My apologies in advance if my original post lead folks to believe that we were not paying for the education of our children.

Would it make sense to leverage low interest loans to fund college, while continuing to build retirement fund? Current Parent Plus loans range from 4% to 6%.

Stopping retirement contributions means missing out of potential growth and compounding over time. Also, stopping contributions means missing out on some tax advantages - lowering taxable income with a TSA.

We can pay for student loans after the kids experience some character building pain and suffering. :happy
I would do everything to avoid borrowing money. If the decision is to pay for their college, then start putting money into a 529, Coverdell, a Pre-paid program or something. If this means reducing retirement contributions, that's what it means.
smwisc
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Re: We saved nothing for college...BUT...

Post by smwisc »

maestro1868 wrote: Fri May 10, 2024 4:50 pm My apologies in advance if my original post lead folks to believe that we were not paying for the education of our children.

Would it make sense to leverage low interest loans to fund college, while continuing to build retirement fund? Current Parent Plus loans range from 4% to 6%.

Stopping retirement contributions means missing out of potential growth and compounding over time. Also, stopping contributions means missing out on some tax advantages - lowering taxable income with a TSA.

We can pay for student loans after the kids experience some character building pain and suffering. :happy
Parent Plus loan rates are currently closer to 8%. There's no way I would borrow at anything close to that rate on the chance that I'd outearn it through investments. Compounding will continue to work it's magic *on the money you have already saved*. Reduce your retirement contributions, start 529s for the tax deduction, and use that plus cash flow to pay for college. If you really want your kids to have skin in the game, make them contribute a certain amount through earnings from a job - not loans. Maybe the federal direct loans, at most, if you insist. Between your in-state public options and possible merit scholarships for private or OOS, you appear to have the ability to fund college without loans [unless you actually need to continue saving for retirement in order to fund retirement].
SchruteB&B
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Re: We saved nothing for college...BUT...

Post by SchruteB&B »

maestro1868 wrote: Fri May 10, 2024 4:50 pm
We can pay for student loans after the kids experience some character building pain and suffering. :happy
Yes, so long as you realize that Parent Plus loans are your loans too, and if your kids (worst case scenario!) drop out and do not to pay them off, you will personally be on the hook for them.

If you want to give your kids the ever popular trope of “skin in the game” then maybe consider having them just get the Federal loans that are their loans alone. The limits on those are low (I think around $5500 for the first year of college https://www.businessinsider.com/persona ... ed%20loans.)

My parents paid for college and it was my responsibility to secure as many scholarships and AP credits as I could. I also worked during the summer for spending money. A desire to do well and get a good job were my “skin in the game” and it worked well for us. You know your kids best.
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Re: We saved nothing for college...BUT...

Post by toomanysidehustles »

YeahBuddy wrote: Sat May 11, 2024 5:16 am
toomanysidehustles wrote: Fri May 10, 2024 7:28 am
YeahBuddy wrote: Fri May 10, 2024 5:08 am There's no rule that parents must fund their children's college education.
This. Or maybe some kids decide they don't want to go to college. We saved in 529's for college and both of our kids will not go to college. :oops:

I'm interested to know what you did with the 529s after. Was it easy to withdraw, and then did you invest it all?

I also wondered if we saved huge 529s and then say one kid decided on $10k beauty school and the other quits after 1 year of community college, what happens to the money. I know it's still ours (yours) but just wondering. Thanks.
It's still sitting there....our son (20) started a landscaping company, our daughter is 17 (junior) and graduating early in December. Her plan is to go to school to be an esthetician, but her schooling is looking like it will be $20K or less. She can use the 529 possibly for her schooling. We may just leave it in for future grandchildren, but that is a long way away. Or we take it out with the 10% penalty. Not sure yet.
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Re: We saved nothing for college...BUT...

Post by SchruteB&B »

toomanysidehustles wrote: Sat May 11, 2024 11:37 am
YeahBuddy wrote: Sat May 11, 2024 5:16 am
toomanysidehustles wrote: Fri May 10, 2024 7:28 am
YeahBuddy wrote: Fri May 10, 2024 5:08 am There's no rule that parents must fund their children's college education.
This. Or maybe some kids decide they don't want to go to college. We saved in 529's for college and both of our kids will not go to college. :oops:

I'm interested to know what you did with the 529s after. Was it easy to withdraw, and then did you invest it all?

I also wondered if we saved huge 529s and then say one kid decided on $10k beauty school and the other quits after 1 year of community college, what happens to the money. I know it's still ours (yours) but just wondering. Thanks.
It's still sitting there....our son (20) started a landscaping company, our daughter is 17 (junior) and graduating early in December. Her plan is to go to school to be an esthetician, but her schooling is looking like it will be $20K or less. She can use the 529 possibly for her schooling. We may just leave it in for future grandchildren, but that is a long way away. Or we take it out with the 10% penalty. Not sure yet.
If you take it out, it is 10% penalty and ordinary income tax on all the gains.

You can also consider rolling up to $35,000 per beneficiary into the beneficiary’s Roth IRA if they have earned income. See: https://www.savingforcollege.com/articl ... %20account.
DPEMD
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Re: We saved nothing for college...BUT...

Post by DPEMD »

Having recently gone through the college application process, I would suggest being upfront about how much you will contribute and don't apply to schools that aren't a financial fit for your family. Turning down a dream school is much harder than never applying in the first place.
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AllMostThere
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Re: We saved nothing for college...BUT...

Post by AllMostThere »

Loans can be had for college, but not for retirement. IMHO, DO NOT stop your retirement contributions. College loans, while available, will cripple your children for years to come. There are other more creative ways of paying for college but will require hard work and commitment from your children. After going through process with two kids (one in Sr Yr @ College; one in Sr Yr @ HS), I have a few lessons learned that I wish I had known.

1) Have them start volunteering now for various charities to build their community involvement resume. After applying for many scholarships there is a common theme we have noticed. Almost all ask for community involvement and how their actions have contributed to the community and/or high school. Also, extra-curricular activities are a factor.
2) Have them study, study, study for the PSAT/SAT/ACT. Many colleges provide nice merit scholarship bumps with high SAT score (+1300).
3) Good High School grades are also a must.
4) Take AP classes in High School.
5) If they have an idea on target colleges, investigate the college CLEP Policy. CLEP (College-Level Examination Program) Exams are proficiency tests that cover intro-level college course materials. Subjects include business, composition and literature, history and social sciences, science and mathematics, and world languages. Students who receive a passing score on the exams can earn 3 or more college credits at more than 2,900 U.S. colleges and universities. Don't assume your target university accepts CLEP results (most do), so it's up to you to contact the university regarding their CLEP Policy. For example, some schools don’t allow you to use CLEP courses to earn credits in your selected major. Regardless, it's great for banging out some required 1st & 2nd year intro classes.

Modern States is a 100% free on-line learning source that is geared towards taking a CLEP Exam. Take the Modern States course and you should pass the CLEP Exam. There are no prerequisites for the 32 courses that are available, and all of them are self-paced. Additionally, it looks like Modern States will actually pay for your CLEP exam fee and scheduling fee (via a voucher) for students who enroll in their courses and take the exams. No better way to get some FREE College Credit!!
6) Investigate if your school offers dual enrollment. Kids can take college classes at local community college for college credit that will also count towards high school requirements. Our local High School offers a program where kids go to community college for 1/2 day junior and senior year, then full time after high school for one year (i.e. 13th grade) and come out with an associate degree that can transfer to target college. All for free!!!!

There are creative ways to help fund college, (at least the first two years) but most of it requires them to bust their tails off. It can be done. Hope this helps.
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maestro1868
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Re: We saved nothing for college...BUT...

Post by maestro1868 »

To each and every person who took the time to respond, I want to thank you for your perspective.

I'm reading and processing very carefully each post.

I'm learning and I'm gaining clarity. :happy
ncbill
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Re: We saved nothing for college...BUT...

Post by ncbill »

maestro1868 wrote: Fri May 10, 2024 4:50 pm My apologies in advance if my original post lead folks to believe that we were not paying for the education of our children.

Would it make sense to leverage low interest loans to fund college, while continuing to build retirement fund? Current Parent Plus loans range from 4% to 6%.

Stopping retirement contributions means missing out of potential growth and compounding over time. Also, stopping contributions means missing out on some tax advantages - lowering taxable income with a TSA.

We can pay for student loans after the kids experience some character building pain and suffering. :happy
Were I able to save as much for retirement I'd continue to save.

Kids can use the military to pay for college...all mine did (ROTC scholarships & a service academy)

But enlistment then using GI Bill benefits works as well.
herennow
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Re: We saved nothing for college...BUT...

Post by herennow »

You are about to realize what a great idea it was to save in retirement accounts first. College apps these days wont touch primary home and retirement accounts while evaluating for scholarships and tuition waivers. If your kids have above average applications, and you being teachers, chances are they will get full ride to a college of their choice.
smwisc
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Re: We saved nothing for college...BUT...

Post by smwisc »

herennow wrote: Sat May 11, 2024 11:26 pm You are about to realize what a great idea it was to save in retirement accounts first. College apps these days wont touch primary home and retirement accounts while evaluating for scholarships and tuition waivers. If your kids have above average applications, and you being teachers, chances are they will get full ride to a college of their choice.
Right now the "paying for college" corner of the internet is full of people who thought this would be the case . . . and usually, it's not. The OP didn't say what their income is, but my guess is that while two mid-late career teachers in New York may qualify for some need-based aid at the most selective (and generous) private colleges, it won't be near a full ride. And those colleges generally give little or no merit aid, and you need to be way more than "above average" to get in. Meanwhile, many other schools do give generous merit aid, but full rides (even full tuition) are still rare, and you have to really search out which colleges are that generous.
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CyclingDuo
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Re: We saved nothing for college...BUT...

Post by CyclingDuo »

maestro1868 wrote: Thu May 09, 2024 7:20 pm Yes, we have saved absolutely nothing for college. No 529 account of any kind.

Child #1 – graduates in 2026
Child #2 - graduates in 2028

Current retirement savings (his and hers): $668,000.00
Annual Contributions to both 403b(tsa) and 457b Roth: $62,000.00

Retirement Dates:
Him (NYS teacher pension – age 55 – early penalty (2028): $70k.
Him (NYS teacher pension - age 59 – full pension (2031): $96k
Her (NYS teacher pension – age 55 – full pension (2031): $100k

Current Mortgage: $270k (2.99% - final payment in 2035)
House Appraisal: $750k

Instead of saving money in a 529 account, we decided years ago to save ourselves first. We have automated our retirement savings and increase our contributions each year. We don’t want to interrupt our retirement contributions. If we cash flow the college expenses, then we would need to stop our retirement contributions.
Not necessarily a total stop. I see potential that the college years (total of six from start to finish) would be a two year phase in, ending with a two year phase out, and only two years where they are both attending at the same time. The first child will have a two year jump on the youngest. In those two years, you could cash flow the older child's tuition/room/board provided a very cost efficient school is chosen, and still be able to contribute something to your 403b or 457b. The two years they are both in school - older's junior and senior years while younger's freshman and sophomore years - you may have to stop all 403b/457b contributions. Then once the eldest graduates, the final two years of the younger child's cash flowed education would allow you to contribute some to the 403b/457b. All in all, a six year phase with a total of four years of the six only being one child in school, and two of the years with both in school. Those two years would probably be the only two where you would have to pull way back on the 403b/457b to cash flow two tuitions at the same time.

If you are currently age 51, and the six year phase starts in the fall of 2026 and ends in the spring of 2032 when you are age 59 you will have reached the earliest year that you qualify for your full pension. Looks like, based on your current portfolio and expected pensions, you would easily bring in $225K at that time in today's dollars. If, at the time, you feel that your retirement savings are not enough, you could work another year or two - or even more to fill the gap on retirement savings known as the empty nest red zone as depicted in the graphic below from Michael Kitces...

Image
https://www.kitces.com/blog/empty-nest- ... etirement/

As an example, we just finished our seven year stretch of the empty nest red zone after our children finished their graduate degrees utilizing our dual income to fill any gaps. Ours was similar to yours with two years between their ages, so there was a phase-in and phase-out period of two years on both ends. We did not stop contributing to our retirement accounts (pensions are a mandatory contribution - so that's not stopping), but we did pull back on the amount as a percentage of income going into 403b/457b accounts to make sure everything was covered without the kids taking on any debt for the studies.
maestro1868 wrote: Thu May 09, 2024 7:20 pmWe would like to get some feedback on different approaches to prepare for this financial challenge (paying for college for two kids).

Could compounding at our savings rate outperform the interest rate of a Parent Plus loan, Heloc loan, etc.? Would it make sense to interrupt the compounding machine at this time?

P.S. Thanks to all the members in this forum for helping us achieve our small retirement savings. We are incredibly grateful for all the advice we received from the members in this community years ago.
As illustrated above, you do have some flexibility with your human capital to fill any retirement savings gaps if you would consider working beyond 59 for yourself, and 55 for your spouse if you chose to pull back on your retirement savings and help cash flow the six years of tuition/room/board. The state universities with in-state tuition, maybe even utilizing community college for a year or two to get the general education requirements out of the way, scholarships, grants, part-time work from the kids, paid internship opportunities + the cash flow you can contribute could all lead to debt free degrees if that is important to you. The kids don't know anything about debt or servicing debt, so would error on the side of the adults making the best decision for all interested parties.

CyclingDuo
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maestro1868
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Re: We saved nothing for college...BUT...

Post by maestro1868 »

Not necessarily a total stop. I see potential that the college years (total of six from start to finish) would be a two year phase in, ending with a two year phase out, and only two years where they are both attending at the same time. The first child will have a two year jump on the youngest. In those two years, you could cash flow the older child's tuition/room/board provided a very cost efficient school is chosen, and still be able to contribute something to your 403b or 457b. The two years they are both in school - older's junior and senior years while younger's freshman and sophomore years - you may have to stop all 403b/457b contributions. Then once the eldest graduates, the final two years of the younger child's cash flowed education would allow you to contribute some to the 403b/457b. All in all, a six year phase with a total of four years of the six only being one child in school, and two of the years with both in school. Those two years would probably be the only two where you would have to pull way back on the 403b/457b to cash flow two tuitions at the same time.

If you are currently age 51, and the six year phase starts in the fall of 2026 and ends in the spring of 2032 when you are age 59 you will have reached the earliest year that you qualify for your full pension. Looks like, based on your current portfolio and expected pensions, you would easily bring in $225K at that time in today's dollars. If, at the time, you feel that your retirement savings are not enough, you could work another year or two - or even more to fill the gap on retirement savings known as the empty nest red zone as depicted in the graphic below from Michael Kitces...

Image
https://www.kitces.com/blog/empty-nest- ... etirement/

As an example, we just finished our seven year stretch of the empty nest red zone after our children finished their graduate degrees utilizing our dual income to fill any gaps. Ours was similar to yours with two years between their ages, so there was a phase-in and phase-out period of two years on both ends. We did not stop contributing to our retirement accounts (pensions are a mandatory contribution - so that's not stopping), but we did pull back on the amount as a percentage of income going into 403b/457b accounts to make sure everything was covered without the kids taking on any debt for the studies.
maestro1868 wrote: Thu May 09, 2024 7:20 pmWe would like to get some feedback on different approaches to prepare for this financial challenge (paying for college for two kids).

Could compounding at our savings rate outperform the interest rate of a Parent Plus loan, Heloc loan, etc.? Would it make sense to interrupt the compounding machine at this time?

P.S. Thanks to all the members in this forum for helping us achieve our small retirement savings. We are incredibly grateful for all the advice we received from the members in this community years ago.
As illustrated above, you do have some flexibility with your human capital to fill any retirement savings gaps if you would consider working beyond 59 for yourself, and 55 for your spouse if you chose to pull back on your retirement savings and help cash flow the six years of tuition/room/board. The state universities with in-state tuition, maybe even utilizing community college for a year or two to get the general education requirements out of the way, scholarships, grants, part-time work from the kids, paid internship opportunities + the cash flow you can contribute could all lead to debt free degrees if that is important to you. The kids don't know anything about debt or servicing debt, so would error on the side of the adults making the best decision for all interested parties.

CyclingDuo
[/quote]

Your perspective was a helpful strategy for my situation. Thank you for taking the time respond.
Wash.Invest
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Re: We saved nothing for college...BUT...

Post by Wash.Invest »

We saved nothing for college...BUT...

Reality check...

"pay-your-own-way, Millions do it"
What age are the students? (Pre-HS I hope when you spring this 'news' on them. :o )

Give them time to plan for paying their own way.

Not impossible (or difficult) with PT wages nearing $20 / hr. :moneybag

1) Pick a low cost state
https://www.fastweb.com/financial-aid/a ... ge-tuition
https://www.cnbc.com/2023/02/08/the-top ... ition.html
2) Move there and establish residency the day HS is over. Get the highest paid job available (Usually night / weekend shift with skilled trades).
3) Take a gap yr. Have a great time, make big bucks, and explore a few careers. Learn to live cheap and pay 100% for everything to keep you alive and housed, insured, and fed.
4) Yr 2 - Do college by day and work FT by night and weekends, for an employer* who pays for college. (From Dollywood to Taco Bell... relevant employment to career path is a wise choice
* https://www.bestcolleges.com/news/analy ... bursement/
https://www.investopedia.com/companies- ... ge-6829220


students / kids, O Hear Ye...
Grow up
Get a j-o-b
Support yourself



Set your parents, grandparents FREE!


or do this (quote below).... (You can easily afford it, when time to pay). I am in full agreement with stay 100% invested and pay for college later (with additive investment returns and depreciated dollars. ) Interest free / deferred loans direct to student works fine with 'Pay-Later' plan. No 529 offered in our Income Tax free state, but... college tuition is FREE instead of wasting 4 yrs sitting in High School with thousands of clones who don't want to be there, and are probably not learning much of career value.

Hopefully your kids are tranined and experienced Boglehead investors pre HS.
toddthebod wrote: Thu May 09, 2024 7:24 pm Send them somewhere cheap and/or that offers good financial aid. Stop annual retirement contributions. With a full pension and the ability to save $60,000/year, you don't need to save for retirement. You will clearly have more than enough income.
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MrBobcat
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Re: We saved nothing for college...BUT...

Post by MrBobcat »

CyclingDuo wrote: Sun May 12, 2024 8:21 am
Image
https://www.kitces.com/blog/empty-nest- ... etirement/

As an example, we just finished our seven year stretch of the empty nest red zone after our children finished their graduate degrees utilizing our dual income to fill any gaps. Ours was similar to yours with two years between their ages, so there was a phase-in and phase-out period of two years on both ends. We did not stop contributing to our retirement accounts (pensions are a mandatory contribution - so that's not stopping), but we did pull back on the amount as a percentage of income going into 403b/457b accounts to make sure everything was covered without the kids taking on any debt for the studies.
maestro1868 wrote: Thu May 09, 2024 7:20 pmWe would like to get some feedback on different approaches to prepare for this financial challenge (paying for college for two kids).

Could compounding at our savings rate outperform the interest rate of a Parent Plus loan, Heloc loan, etc.? Would it make sense to interrupt the compounding machine at this time?

P.S. Thanks to all the members in this forum for helping us achieve our small retirement savings. We are incredibly grateful for all the advice we received from the members in this community years ago.
As illustrated above, you do have some flexibility with your human capital to fill any retirement savings gaps if you would consider working beyond 59 for yourself, and 55 for your spouse if you chose to pull back on your retirement savings and help cash flow the six years of tuition/room/board. The state universities with in-state tuition, maybe even utilizing community college for a year or two to get the general education requirements out of the way, scholarships, grants, part-time work from the kids, paid internship opportunities + the cash flow you can contribute could all lead to debt free degrees if that is important to you. The kids don't know anything about debt or servicing debt, so would error on the side of the adults making the best decision for all interested parties.

CyclingDuo
That graph is pretty close to how we filled our retirement gap, except we didn't have a young adult phase, right into kids, but our empty nest zone has been much longer, nine years now and we have socked a lot away since then, starting to weird me out a bit just how much ground we made up.
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CyclingDuo
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Re: We saved nothing for college...BUT...

Post by CyclingDuo »

MrBobcat wrote: Sun May 12, 2024 2:32 pm
That graph is pretty close to how we filled our retirement gap, except we didn't have a young adult phase, right into kids, but our empty nest zone has been much longer, nine years now and we have socked a lot away since then, starting to weird me out a bit just how much ground we made up.
Congrats! :arrow: :arrow:

Yes, when the shovel is suddenly big again due to the teenagers no longer raiding the fridge every night to eat whatever isn't nailed down inside of it, it is amazing how the starve and stack years - once the nest is empty - works out during a secular bull market. :beer

Others usually post all of the concerned caveats regarding the strategy, so I'll do it for them. Layoffs, health issues, having to take care of an aging parent, losing a job in your 50's, etc. can all implode one's plans to use the empty nest red zone years to fill any gaps. Fortunately, that doesn't hit every household in the same way or manner - at least not enough to overlook the strategy as a possibility. However, it is worth mentioning.

I was laid off at age 56 just as we were employing the empty nest red zone years, so I had to quickly pivot, retool, and land a brand new career to make it all work out for our dual income shovel to remain large enough to be able to starve and stack (live on one salary/save the other). We also always had rough ideas of ages for retirement to target being in our mid 60's, so we were not a household with dreams of retiring in our 40's or 50's even if we had been FI and ready at the time.

I only brought it up as the OP's situation with the full pension retirement dates of 59 for him and 55 for her leaves the door open for using the strategy to work a few more years (unless there is some sort of mandatory retirement at those ages imposed by their respective school districts). Even then, there is nothing to stop them from working in another job at that time if any gaps need filling due to cash flowing some or all of the college educations.

CyclingDuo
"Save like a pessimist, invest like an optimist." - Morgan Housel | "Pick a bushel, save a peck!" - Grandpa
Wenonah
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Re: We saved nothing for college...BUT...

Post by Wenonah »

I agree with whoever said cash flow it and go to community college. After observing my own kids go to 4 year colleges and various nieces and nephews and kids friends, the kids who went to community college were almost better off: they don’t get that full college experience which is just too much alcohol and drug abuse and they end up going to college with older students and the maturity level skyrockets…. And partying is lessened. They pay way less, they have two years of general requirements in smaller classes.
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maestro1868
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Re: We saved nothing for college...BUT...

Post by maestro1868 »

Thank you all for the replies. I'm taking a lot of notes.

I'm feeling a little better about our initial decision to save for retirement first before saving for college.
chmcnm
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Re: We saved nothing for college...BUT...

Post by chmcnm »

Run the NPC for various schools. Start with the SUNY schools.

Start the conversation now with your oldest about what you’ll pay.

Having some skin in the game is good but the days of kids working summer jobs to cover costs are long gone. College expenses have gone up exponentially. It’s not like when we went to school.

Pre med and teaching degrees can be done almost anywhere and at a lower cost. Prestige doesn’t matter.

Please consider cash flowing their education. You’re on-track. The biggest gift you can give is no debt. Especially for a kid who is thinking med school.

I’ve seen parents not help with expenses at all. Had a cousin turn down MIT because the parents wouldn’t pay room and board. Went to a service academy instead. Please don’t do that.

Our offer was to cover expenses for our state flagship. Anything else was up to them. One just graduated from a top engineering school. The other will graduate next year. He received a significant scholarship that made an OOS school a steal.

You’re looking at the financial cost of college but there’s another cost to consider. Growth and maturity. Our oldest was an introvert. We worried sending him away but then he found his tribe and spread his wings. Night and day difference.
BogBod
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Re: We saved nothing for college...BUT...

Post by BogBod »

Am I reading this correctly, total household pension money will be just under $200K annually? And then there will be SS on top of that?
I live in NY, too, and know we have a HCOL here. But I would think you will be pretty solid in retirement, no matter what you do college-wise or 403b-wise. There are still some perks to being a teacher, even though they whittle the perks away with each new Tier!

I have the different opinion than some here that where the degree comes from does have value, especially if there is grad school or med school ahead. At least it seemed to matter for me and for one of my sons. As such, it was not a purely financial decision for us, but also a decision related to fit.

On a separate note, my graduate degree is from a SUNY and it did me well, but I am not impressed overall with the SUNY system.

I think others have mentioned that contributions to a NY 529 can get you up to a NYS tax deduction of $10K for couples married filing jointly. So if you cash flow part of college tuition, it may benefit you to fund a NY 529, even if you pull the money out right away (10K in and 10K out each year that your kids are in college, so you can get the state tax deduction).

I am still going to fund a 529 for partial grad school tuition contributions for my son. We heavily funded 529s. My son just graduated undergraduate this past weekend. We have $9K left in the NY 529 which will go towards grad school tuition and we will continue to fund 10K per year for the NYS tax deduction even though we (now) will not have time for that money to grow. Like you, our retirement is well funded and we want to give now when he really needs it rather than later in an inheritance when he likely will be established.
momopi
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Re: We saved nothing for college...BUT...

Post by momopi »

Have you asked the kids what they want to do?
Gubshu
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Re: We saved nothing for college...BUT...

Post by Gubshu »

Given the pension amounts and the ability to save $60,000/year, I assume that current income is too high for need based aid. While it might be low enough to qualify at a very generous school that meets need, those schools will add back the $60k retirement contributions to the annual income (probably making them ineligible for need based aid). Check the NPC for various colleges to see whether you would qualify for free money from them based on income. I’m guessing not, so you’ll most likely need to pay close to full price unless your kids get merit.

I would think that you could safely reduce your retirement contributions for a period of time & still be okay. We didn’t have college savings because I didn’t work after the kids were born. I got a job when the oldest went to college, and my pay was low … yet we were able to cash flow from current income for our kids. It involved a bit of belt tightening, but we did it. Between belt tightening, the savings that result from not paying for the things you paid for while your kids were in high school, and reducing retirement savings for a time, you should be able to make it work without taking on parental debt.
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maestro1868
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Re: We saved nothing for college...BUT...

Post by maestro1868 »

momopi wrote: Mon May 13, 2024 9:26 pm Have you asked the kids what they want to do?
My daughter wants to pursue a career in medicine. My son wants to be a teacher.
Topic Author
maestro1868
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Re: We saved nothing for college...BUT...

Post by maestro1868 »

Gubshu wrote: Mon May 13, 2024 9:44 pm Given the pension amounts and the ability to save $60,000/year, I assume that current income is too high for need based aid. While it might be low enough to qualify at a very generous school that meets need, those schools will add back the $60k retirement contributions to the annual income (probably making them ineligible for need based aid). Check the NPC for various colleges to see whether you would qualify for free money from them based on income. I’m guessing not, so you’ll most likely need to pay close to full price unless your kids get merit.

I would think that you could safely reduce your retirement contributions for a period of time & still be okay. We didn’t have college savings because I didn’t work after the kids were born. I got a job when the oldest went to college, and my pay was low … yet we were able to cash flow from current income for our kids. It involved a bit of belt tightening, but we did it. Between belt tightening, the savings that result from not paying for the things you paid for while your kids were in high school, and reducing retirement savings for a time, you should be able to make it work without taking on parental debt.
Someone did post in this thread that new Fafsa rules are excluding retirement contributions. I'm not sure if this is correct or incorrect.

I do think our income will be too high for needs based aid.
rule of law guy
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Re: We saved nothing for college...BUT...

Post by rule of law guy »

two teachers who have saved nothing for their two kids college, beginning in 2 and 4 years. you dont want to interrupt your retirement savings plan to use cash flow for college expenses. you ask for our advice.

do the right thing
Never wrong, unless my wife tells me that I am.
ThankYouJack
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Re: We saved nothing for college...BUT...

Post by ThankYouJack »

maestro1868 wrote: Mon May 13, 2024 9:59 pm
momopi wrote: Mon May 13, 2024 9:26 pm Have you asked the kids what they want to do?
My daughter wants to pursue a career in medicine. My son wants to be a teacher.
I think momopi meant in terms of college. Would they be happy with community college for a couple years while living at home? Would they prefer to go to the best school they can get into and live on campus for 4+ years?
ROIGuy
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Re: We saved nothing for college...BUT...

Post by ROIGuy »

My mom told me she couldn't afford to pay for my schooling. That was up to me. She co-signed thae student loan, but it was my responsibility to repay it.
thedaybeforetoday
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Re: We saved nothing for college...BUT...

Post by thedaybeforetoday »

maestro1868 wrote: Thu May 09, 2024 9:42 pm
Nohbdy wrote: Thu May 09, 2024 8:44 pm FAFSA no longer looks at retirement accounts nor contributions when evaluating aid. This might be the first year for that change. https://studentaid.gov/2324/help/students-investments

If your MAGI can be below $160k then you may qualify for the American Opportunity Tax Credit. We are hoping to cash flow the first $4k/yr/kid to get the $2,500 credit. In my opinion, this should be inflation adjusted but I don’t think it is.

https://www.irs.gov/credits-deductions/individuals/aotc

Even if you don’t qualify for free money type of aid, you may qualify for workstudy. My understanding is that workstudy jobs offer students great flexibility around school/work balance like studying at work when it’s slow.

I agree with what calwatch said.
FAFSA no longer looks at retirement accounts nor contributions when evaluating aid? Well, this seems like a good thing. I didn't know about this change. Thank you.
Parent of three kids, all recent college grads, (last one today, finally) ...

As a basic rule, philosophically, the higher ed service industry charges what each school believes you can afford, which is different than any other service industry I've ever hired. This way of doing business requires a different mindset when shopping for the best value and each school has a "secret sauce" when determining what the potential school charges each student.

During our funding of our kids' educations over the past 6 years, FAFSA never considered retirement accounts as available for college payments.

CSS profile schools, however (2 of our kids attended these types schools) did ask about retirement accounts, (one asked for the year/make/model and mileage of our cars; I'm looking at you Wellesley) but reportedly didn't consider as available for college payments.

There is a two year lookback on your finances as I believe I read upthread, so keep that in mind.

I would keep as little in taxable as possible and if you are looking to maximize financial aid that doesn't need to be paid back and to reduce your income to under somewhere around 80k/year. (There is an automatic "zero" for FAFSA, but it changes every year and schools don't have to use what FAFSA states is the "expected family contribution" number.).

I played around with the NPC (Net Price Calculators) for each school my kid(s) were likely to attend to find out the actual net cost for a variety of income/savings levels. This info dictated that it was actually more cost effective, after taxes, to reduce our income and work part time vs continue to have both of us work full time. (Note I'm not crazy about the work disincentive, but I don't make the rules, just play by them).

We wound up saving 10's of thousands of dollars and the CSS profile schools actually were much cheaper than the one FAFSA only school for our N of 3 in this experiment. One of our kids attended an 80k/year school for anywhere from 5k-11k/year (financial aid varies year to year). All schools asked for and were given our entire tax return every year.

YMMV so definitely do your research and know that the multi student discount that was available for our 3 kids, is no longer available and was probably a difference maker for our situation.
"When I was a kid my parents moved a lot, but I always found them." R. Dangerfield
chmcnm
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Re: We saved nothing for college...BUT...

Post by chmcnm »

If your child is considering med school you might want to take community college off the table. I think opinions are changing about CC but it still could be a negative. I've seen posts in other forums where CC credits aren't always accepted by medical schools. DYODD.

In 2014, Talamantes and several other researchers analyzed medical school applicant and admissions data and found that people who had attended a community college before graduating from a four-year university had a lower chance of being accepted to medical school compared to students who went straight to a four-year university. In a 2018 study, Talamantes and his colleagues found that students who attended a community college before medical school were more likely to pursue a family medicine specialty and to want to work in medically underserved communities.
Topic Author
maestro1868
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Re: We saved nothing for college...BUT...

Post by maestro1868 »

Thanks to all who provided positive and constructive feedback!
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