Quit jobs to gain lower EFC [Expected Family Contribution]

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
ThatGuy
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Re: Quit jobs to gain lower EFC

Post by ThatGuy » Sat Jan 27, 2018 11:23 am

livesoft wrote:
Fri Dec 08, 2017 1:59 pm
Since both US and International total market index funds are up more than 20% so far this year, the OP's portfolio has probably made more than $100,000 and possibly more than $200,000 this year.
I know Vanguard and Yahoo Finance say that these funds are up ~20% YTD, but if you look at how that's calculated on Vanguard it's referring to the year of 2017, closing out in December.

https://personal.vanguard.com/us/funds/ ... true#tab=1

If you use YTD the way most people use it, looking at the current year, then the increase is about ~6%.

As a proxy, VTI was $137.99 on Jan 2, and closed yesterday at $146.86 according to the Yahoo Finance chart. That's certainly not a 20% increase despite what it says next to the chart.

https://finance.yahoo.com/quote/vti?p=vti
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livesoft
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Re: Quit jobs to gain lower EFC [Expected Family Contribution]

Post by livesoft » Sat Jan 27, 2018 11:26 am

^Are you confused by the date of my comment?
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NYC_Guy
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Re: Quit jobs to gain lower EFC [Expected Family Contribution]

Post by NYC_Guy » Sat Jan 27, 2018 2:50 pm

jrbdmb wrote:
Sat Jan 27, 2018 7:02 am
NYC_Guy wrote:
Fri Jan 26, 2018 9:25 pm
My sister-in-law had/has three kids going to U Penn, Amherst and Northwestern. Roughly $65k per year x 12 years for full cost (less per year 5 years ago, more when the last is done in a few years). She and her husband were each making about $85k. I advised her, based on PSAT test scores and grades and some intuition, to leave her job on Dec 31 of the year her oldest was a junior in high school. I advised them to move as many assets to retirement accounts as possible starting about four years before that. This included a cash-out mortgage to wipe out home equity. I guaranteed the mortgage. The goal was to get all assets out of the household that would count for EFC. We found some creative ways to do that. Ultimately, her kids got almost complete need-based packages. My advice probably will save them $500k in exchange for about a like amount of post-tax income. And she got to spend more time at home when her kids were teenagers.

YMMV
1. What did they do with the cash? Money in savings also counts for FAFSA / CSS.
2. How much were they able to "hide" in retirement accounts? The schools you mention all use CSS, which does look at retirement assets.
3. Wonder how much of that $500K was based on their children's academic achievement vs. all of this financial maneuvering.
Retirement accounts may be taken into account by some (but not all) CSS schools. And those retirement accounts are not dinged as hard as other assets. One of the things we did, as an extended family, was shift responsibility for supporting my wife’s (and sister-in-law’s) parents from my wife and me to my sister-in-law...she and her husband created a irrevocable trust fund for their care and maintenance that funded many years of care. My grandchildren (my current one and any future ones) are the residual beneficiaries of that trust. My sister-in-law knows that we’ll be generous in the future, although not legally obligated in any way. The trust level in a family better be very high to do this stuff, though.

None of them received academic scholarahips. It was all need-based grant. And that $500k was probably closer to $400k (I pondered on this for a bit after my original post).

roflwaffle
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Re: Quit jobs to gain lower EFC [Expected Family Contribution]

Post by roflwaffle » Wed Jan 31, 2018 11:56 pm

chipperd wrote:
Sat Jan 27, 2018 5:57 am
roflwaffle wrote:
Fri Jan 26, 2018 3:51 pm
OP, what's net your net per hour, including time spent getting ready for work/commuting? That IMO is a clearer metric than gross.
Combined, my wife and I work about 2,325 hours/year and will gross about 150k this past year. Net about $52/hour before commuting and getting ready. If you add in that time for both of us, the net per hour, using last year's income (pretty steady year to year) then our net drops to about $44.75/hour.
Interested to see your take on these numbers.
The only thing I can think of adding is commuting costs, but I'm guessing it won't change things much. On the face of it, I think you're obtaining more free time by avoiding net pay of *about $23/hour. Having said that, it's probably lower because income tax is progressive. If you apportioned the taxes paid for the top 60% of your income based on the dollar amounts per bracket and corresponding rates for those amounts/brackets, I'm fairly certain your net would be lower as would the dollar/hour trade off. My guesstimate is about $15-$20/hour, but I'm assuming your average rate for the top $90k of income tax is 25% and the average rate for the bottom $60k is 15%, which is just a random guess.

Anyhow, I think your income tax bracket adjusted net earnings, less commuting expenses, over the total time you spend for work (work plus commuting), less the avoid costs, over the time you don't have to work, gives you a good idea of the avoided earnings per hour. With your hourly being so high, if you keep your net down, your net hourly for working less should be much greater than the net avoided hourly for working more, which to me seems nice.

Above all else, I think it's a good idea to double check the order of my operations and assumptions too, since it's a big choice to make. :beer

*$150000 per year over 2325 hours is $64.50/hour. The ratio of after tax earnings is $44.75/$64.50 = .69, and the after tax equivalent to $90000 is $62400, and then net is $35400, which is $23/hour over 1560h (30h*52w).

Topic Author
chipperd
Posts: 466
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Re: Quit jobs to gain lower EFC [Expected Family Contribution]

Post by chipperd » Thu Feb 01, 2018 3:46 am

roflwaffle wrote:
Wed Jan 31, 2018 11:56 pm
chipperd wrote:
Sat Jan 27, 2018 5:57 am
roflwaffle wrote:
Fri Jan 26, 2018 3:51 pm
OP, what's net your net per hour, including time spent getting ready for work/commuting? That IMO is a clearer metric than gross.
Combined, my wife and I work about 2,325 hours/year and will gross about 150k this past year. Net about $52/hour before commuting and getting ready. If you add in that time for both of us, the net per hour, using last year's income (pretty steady year to year) then our net drops to about $44.75/hour.
Interested to see your take on these numbers.
The only thing I can think of adding is commuting costs, but I'm guessing it won't change things much. On the face of it, I think you're obtaining more free time by avoiding net pay of *about $23/hour. Having said that, it's probably lower because income tax is progressive. If you apportioned the taxes paid for the top 60% of your income based on the dollar amounts per bracket and corresponding rates for those amounts/brackets, I'm fairly certain your net would be lower as would the dollar/hour trade off. My guesstimate is about $15-$20/hour, but I'm assuming your average rate for the top $90k of income tax is 25% and the average rate for the bottom $60k is 15%, which is just a random guess.

Anyhow, I think your income tax bracket adjusted net earnings, less commuting expenses, over the total time you spend for work (work plus commuting), less the avoid costs, over the time you don't have to work, gives you a good idea of the avoided earnings per hour. With your hourly being so high, if you keep your net down, your net hourly for working less should be much greater than the net avoided hourly for working more, which to me seems nice.

Above all else, I think it's a good idea to double check the order of my operations and assumptions too, since it's a big choice to make. :beer

*$150000 per year over 2325 hours is $64.50/hour. The ratio of after tax earnings is $44.75/$64.50 = .69, and the after tax equivalent to $90000 is $62400, and then net is $35400, which is $23/hour over 1560h (30h*52w).
Thanks for walking me through that; I'll have to go through it several times to really get it.
The only hangup I see in the math so far is that we don't work 52 weeks/year, but rather about 40 week for most jobs (there are 4 jobs in play between the two of us with differing hourly rates. :( ) , so I'll need to figure the math on that, but that seems simple to do.
Thanks again
Chipperd

Topic Author
chipperd
Posts: 466
Joined: Sat Sep 24, 2011 5:58 am

Re: Quit jobs to gain lower EFC [Expected Family Contribution]

Post by chipperd » Thu Feb 01, 2018 3:47 am

chipperd wrote:
Thu Feb 01, 2018 3:46 am
roflwaffle wrote:
Wed Jan 31, 2018 11:56 pm
chipperd wrote:
Sat Jan 27, 2018 5:57 am
roflwaffle wrote:
Fri Jan 26, 2018 3:51 pm
OP, what's net your net per hour, including time spent getting ready for work/commuting? That IMO is a clearer metric than gross.
Combined, my wife and I work about 2,325 hours/year and will gross about 150k this past year. Net about $52/hour before commuting and getting ready. If you add in that time for both of us, the net per hour, using last year's income (pretty steady year to year) then our net drops to about $44.75/hour.
Interested to see your take on these numbers.
The only thing I can think of adding is commuting costs, but I'm guessing it won't change things much. On the face of it, I think you're obtaining more free time by avoiding net pay of *about $23/hour. Having said that, it's probably lower because income tax is progressive. If you apportioned the taxes paid for the top 60% of your income based on the dollar amounts per bracket and corresponding rates for those amounts/brackets, I'm fairly certain your net would be lower as would the dollar/hour trade off. My guesstimate is about $15-$20/hour, but I'm assuming your average rate for the top $90k of income tax is 25% and the average rate for the bottom $60k is 15%, which is just a random guess.

Anyhow, I think your income tax bracket adjusted net earnings, less commuting expenses, over the total time you spend for work (work plus commuting), less the avoid costs, over the time you don't have to work, gives you a good idea of the avoided earnings per hour. With your hourly being so high, if you keep your net down, your net hourly for working less should be much greater than the net avoided hourly for working more, which to me seems nice.

Above all else, I think it's a good idea to double check the order of my operations and assumptions too, since it's a big choice to make. :beer

*$150000 per year over 2325 hours is $64.50/hour. The ratio of after tax earnings is $44.75/$64.50 = .69, and the after tax equivalent to $90000 is $62400, and then net is $35400, which is $23/hour over 1560h (30h*52w).
Thanks for walking me through that; I'll have to go through it several times to really get it.
The only hangup I see in the math so far is that we don't work 52 weeks/year, but rather about 40 week for most jobs (there are 4 jobs in play between the two of us with differing hourly rates, weeks worked/year and hours per week. :( ) , so I'll need to figure the math on that, but that seems doable.
Thanks again
Chipperd

roflwaffle
Posts: 440
Joined: Mon Mar 02, 2015 10:08 pm

Re: Quit jobs to gain lower EFC [Expected Family Contribution]

Post by roflwaffle » Thu Feb 01, 2018 11:12 am

chipperd wrote:
Thu Feb 01, 2018 3:46 am
roflwaffle wrote:
Wed Jan 31, 2018 11:56 pm
chipperd wrote:
Sat Jan 27, 2018 5:57 am
roflwaffle wrote:
Fri Jan 26, 2018 3:51 pm
OP, what's net your net per hour, including time spent getting ready for work/commuting? That IMO is a clearer metric than gross.
Combined, my wife and I work about 2,325 hours/year and will gross about 150k this past year. Net about $52/hour before commuting and getting ready. If you add in that time for both of us, the net per hour, using last year's income (pretty steady year to year) then our net drops to about $44.75/hour.
Interested to see your take on these numbers.
The only thing I can think of adding is commuting costs, but I'm guessing it won't change things much. On the face of it, I think you're obtaining more free time by avoiding net pay of *about $23/hour. Having said that, it's probably lower because income tax is progressive. If you apportioned the taxes paid for the top 60% of your income based on the dollar amounts per bracket and corresponding rates for those amounts/brackets, I'm fairly certain your net would be lower as would the dollar/hour trade off. My guesstimate is about $15-$20/hour, but I'm assuming your average rate for the top $90k of income tax is 25% and the average rate for the bottom $60k is 15%, which is just a random guess.

Anyhow, I think your income tax bracket adjusted net earnings, less commuting expenses, over the total time you spend for work (work plus commuting), less the avoid costs, over the time you don't have to work, gives you a good idea of the avoided earnings per hour. With your hourly being so high, if you keep your net down, your net hourly for working less should be much greater than the net avoided hourly for working more, which to me seems nice.

Above all else, I think it's a good idea to double check the order of my operations and assumptions too, since it's a big choice to make. :beer

*$150000 per year over 2325 hours is $64.50/hour. The ratio of after tax earnings is $44.75/$64.50 = .69, and the after tax equivalent to $90000 is $62400, and then net is $35400, which is $23/hour over 1560h (30h*52w).
Thanks for walking me through that; I'll have to go through it several times to really get it.
The only hangup I see in the math so far is that we don't work 52 weeks/year, but rather about 40 week for most jobs (there are 4 jobs in play between the two of us with differing hourly rates. :( ) , so I'll need to figure the math on that, but that seems simple to do.
Thanks again
Chipperd
You're welcome! I also noticed I assumed your commute time would scale linearly with the reduction in hours, but if it doesn't, that would be something to include too.

Jack FFR1846
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Re: Quit jobs to gain lower EFC [Expected Family Contribution]

Post by Jack FFR1846 » Thu Feb 01, 2018 11:34 am

Just as a heads up, always look at the rate and cost of "aid" aka Stafford and Plus loans. I just rejected the Stafford loans yesterday. Why? 6% (which starts from day one with un-subsidized) and the 1% origination fee that's subtracted before money is given to the school. I don't know the origination fee on Plus loans, but the rate is 7%.

In my case, the Stafford was in place for my son to have skin in the game. With all A's and at a very rigorous engineering school, he's proven he's invested. I won't be telling him I've rejected the loans going forward, though.
Bogle: Smart Beta is stupid

ncbill
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Location: Western NC

Re: Quit jobs to gain lower EFC [Expected Family Contribution]

Post by ncbill » Thu Feb 01, 2018 3:36 pm

Or the OP could just have the kids enlist and then they could use the GI Bill.

IIRC the U.S. Army is still offering 2-year enlistments in several MOS which would be only about 15 months active after Basic & Advanced training. That option limits GI Bill benefits but veterans are independent for FAFSA.

boglewill34
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Re: Quit jobs to gain lower EFC

Post by boglewill34 » Thu Feb 01, 2018 3:58 pm

chipperd wrote:
Mon Dec 11, 2017 12:45 pm

Not sure if the questions are rhetorical but if not:
Senior: GPA: 4.79/5.0 and 3.98/4.0. Act score of 35. 1 AP soph year, 2 AP and 1 Uconn class junior year, 3 AP Aa nd 2 Uconn classes this year. Engineering 3 years as electives. Commended student for psat.
Applying to Uconn, Northeastern, Carnegie Mellon, U of Penn, Duke, U of Vt., Syracuse, U of Virginia, Lehigh, Bucknell.
Soccer (2 years) and Tennis( 4 years/captain this year). National Honor Society. Founded investing club at high school, participates in Mock trial and Model U.N x2 years. Habitat volunteer, and some other volunteer hours for various local orgs.
You can probably guess what state we live in :D
I went to Lehigh, but didn't graduate from there. Given what I think I know about it and some of the others, and guessing where you are from, why is he not applying to PSU? They will have elite/honors programs too, and it will afaik be cheaper for you. Fact is, when looking for jobs that may be outside of Eastern PA, a good/great GPA from PSU would trump a meh/good GPA from Lehigh or Bucknell, just on name recognition (IMHO).

Edit add: again, from maybe dated info and/or opinion, but PSU should equal UConn, UVT, maybe Syracuse as well. Depending on program.

Hulu
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Re: Quit jobs to gain lower EFC [Expected Family Contribution]

Post by Hulu » Thu Feb 01, 2018 6:14 pm

With the new tax laws could you form a corporation and have your wages paid through there? Seems like a possible way to keep income and lower EFC

Topic Author
chipperd
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Joined: Sat Sep 24, 2011 5:58 am

Re: Quit jobs to gain lower EFC [Expected Family Contribution]

Post by chipperd » Sat Mar 31, 2018 5:02 am

Updates re: acceptances and resulting financial info. Planned major or double major: finance/accounting/corporate finance with minor in econ or math
UNH: accepted honors program. scholarship $ and a bit of grant brings net cost to : $29k/yr
UVermont: accepted honors program. scholarship $ and a bit of grant brings net cost to: $26/yr
UCONN: accepted honors program.no grant. scholarship $ brings net instate cost to: $22,500/yr
Northeastern: accepted; no honors. scholarship and a bit of grant $ brings net cost to: $36k/yr
Lehigh: Waitlisted
Bucknell: accepted. lots of grant $ but no scholarship $ brings net cost to: $37/yr
Carnegie Mellon: decision not released
Duke: not accepted
UPenn: not accepted
Syracuse: accepted. not sure of the financials b/c not going so haven't looked
Bentley: accepted honors program. really big scholarship $, no grant. brings net cost to: $35/yr.
UVA: accepted. they need more financial info so not sure of the net cost.

My son and I had a long talk over a weekend a month or so ago, and distance had ruled out all but UCONN, Lehigh, Bucknell, Northeastern, UNH, UVermont and Bentley (he's a bit of a homebody). Applied to Duke and Upenn "for fun". Reputation/strength of programs ruled out UNH and UVermont. B/c no honors at Northeastern, that's out. Bucknell no honors so that's out. Lehigh wait listed so that's out. So it's Uconn honors vs Bentley honors. His grandmo stepped up and offered 10k each of first two years and 15k each of second two years for Bentley. Son willing to work to make up the cost difference between Bentley-grandma vs Uconn. Given the educational experience described at Bentley (big vs med, older student and full prof as mentors for honors kids, full profs only teach at Bentley, classes cap at 35 for regular and 18 avg for honors classes with socratic classrooms, internship strength at Bentley, focus on his interests), after recent tour and admitted student panel, 99% sure it will be Bentley.
Thanks all for the input and thought provoking discussions!
Chipperd

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