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Old 04-18-2009, 07:37 PM   #21
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IMO, if parents are able to put money in their children's college fund...I think it's wonderful. I applaud you.

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The question was how to allocate extra income towards two goals that are already partially funded and I expect will be fully funded at some point in the near future, not to what degree I should fund my children's college educations.

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Seems to me you are doing just fine now.
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Old 04-18-2009, 08:02 PM   #22
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. They also know that there are and will be reasonable conditions placed on those funds -- they can party on their own dime, for example (to borrow a phrase from Moemg).

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If you would like a copy of that speech send a stamped self addressed envelope and because you are a forum member I'll include rules for dating & my posted driving rules .
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Old 04-18-2009, 09:50 PM   #23
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http://www.nytimes.com/2009/04/19/ed...pappano-t.html

is a short article about inside a financial aid office which hints at some strategies that may work for your savings.
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Old 04-18-2009, 10:11 PM   #24
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Since you live in ID you may have relatives who live in WA. Have them set up an account for each of your children in WA "GET" college savings program where you buy college credit units on a current basis payable at the credit cost when they attend college. Ask all of your relatives to buy the kids college credits and a modest gift instead of expensive gifts for birthdays and the like, you do the same.

Use your own money to save for retirement.
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Old 04-18-2009, 11:39 PM   #25
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Why designate any funds for any purpose, just save. In today's markets you may be 'rich' or a pauper in a few years, who knows.

As for those who advocate an "I did it, why can't they" attitude, I agree to some extent. It took me 8 years to graduate from the local University because I also supported my widowed mother and younger siblings during this time. Before I martyr myself, I did this by running the family farm and getting an education on the side. My younger siblings were expected to (and did) help as far as they could.

My kids got tuition and room & board. They worked, paid for books and beer. As a side benefit, DW & I bought a condo for them to live in, in another city where they went to school. Even with (Cdn) prices falling, when we sell it, the net gain will cover the costs we've paid.

It's your money, your decision and the consequences of that decision are yours to live with. Enjoy.
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Old 04-19-2009, 02:17 AM   #26
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I agree that without some of their own input, kids don't fully valur their edumacation. As for myself, my folks paid one year of dorm (room and board). I took small student loans in my last two years and worked 25-30 hrs a week to pay for the rest. Loans were paid off one year from graduating.

I have told my kids that I would give them a full ride in their first year (since they had no opportunity to work PT during HS because of my overseas assignment), then I would pay tuition and books to the level of state college beyond that. They are then responsible for room, board, and any play money. I have also told them I would help with their first car and first year insurance on their own. They have to deal with car stuff beyond that.

Everyone's situation is different, but this seems to fit best with our situation and desire for our children's growth and development.

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Old 04-19-2009, 06:22 AM   #27
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Will educated children provide a better extra leg for retirement than extra retirement savings? The kids education may diversify your safety-net if they are successful. Extra savings puts the money in the same leg with your savings. Then too, investment in your children does not always pay off especially if you are unwilling to go to them for help even when you are starving. But, by making sure they can fund themselves, you don't end up supporting them past adulthood either.
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Old 04-19-2009, 08:06 AM   #28
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Why not try to do both? It is important to save for retirement -- otherwise you will end up in a mess, possibly dependent on your kids. But fancy cars, big houses and toys should come third after saving for the kids schooling. If you simply don't earn enough to cover your kids education, fine, you do the best you can. But if you make sufficient dough, help them out. College today is like high school when I was a kid. Without it, your kids are handicapped. If you don't care enough to give them a good foundation in life why did you bring them into this world?
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Old 04-19-2009, 08:14 AM   #29
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IMO, if parents are able to put money in their children's college fund...I think it's wonderful. I applaud you.

I applaud you, too! I'm almost exactly the same age, with 2 children. We are in the process of saving for 4 years at a public university for each child. If it means that I work a year or two longer, so be it - we're already on on track for retirement in our late 40s, which - if I may say so is quite fabulous. I am happy to give this gift of education to my children. We are very fortunate to be able to save for them and for ourselves.

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Old 04-19-2009, 09:48 AM   #30
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So lets see. You are saving to fund your own early retirement and a public school college education for each of your three children. You are on track to meet all this goals and you’re not even 40.

First and foremost, congratulations. You set a fine example for your children and others. You are clearly living beneath your means today and surely your sacrifice will pay off.

Regarding your question. I would prioritize funding retirement before college. The children have a potential additional source of funds to help them finance their education that might not be adequately explored if not needed, such as university assistance and borrowing. OTOH, you have no other options to achieve yours. This means your retirement goal is at greater risk, and this increased risk can only be offset by higher contributions.

An aspect you didn’t raise, but I will butt-in anyway, is you may also want to divert some additional funds to the mortgage – the 70% you don’t yet own. If not, this equates to you maximizing your contribution to education before examining other non-2Cor521 financing options.

As to your choice to fund your children’s college, 1) you sound like a great parent and 2) ain’t nothing easier that to tell someone else how to raise a child. You should do what you think is best, period. For the record, I paid for 100% of 4 college educations – my three kids and my own, and would do it all again exactly the same way.

Finally, a personal question. You are 39.9 years old, will reach FI probably at 46.6 but in some range between 46.5 and 47 (where’s the .0?) Are you an engineer by any chance?
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Old 04-19-2009, 11:09 AM   #31
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MichaelB wrote, You are 39.9 years old, will reach FI probably at 46.6 but in some range between 46.5 and 47 (where’s the .0?) Are you an engineer by any chance?
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hah hah...MichaelB, you took the words out of my brain
At any rate, our friend 2Cor is someone who calculates his age in weeks....how else can you tell when you're one-tenth of the way from being 40?
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Old 04-19-2009, 11:40 AM   #32
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Do what you think is best for you and your family.

IMHO parents need to be sure their kids understand very early what parental contributions will be provided for college, cars, weddings, whatever.
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Old 04-19-2009, 01:00 PM   #33
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Further clarifications, since some folks misread me yet again:

1. I may not RE when I reach FI. I will make that decision when I get closer.

2. I will not RE until I am FI and my children's college educations are fully funded.

A further question: My parents paid for my (and my two sisters') college educations. I didn't appreciate it as much at the time, but I sure as heck appreciate it now. Is there anyone on this thread who has (a) advised me to have my children pay for their own college education and (b) had their own college education paid for by their parents?

@Tadpole, I won't go to my kids for help even if I am starving. I consider them to be my responsibility, not the other way around.

@donheff, I will probably end up doing both. The question I have been asking is, should I divert extra income 80% to retirement, 20% to college, 100% to college and 0% to retirement, or some other ratio? And as I have been trying to make clear, I will be funding their college educations and I will retire early, it's just a question of which to fund more heavily for now.

@Charlotte, we seem to be in very similar situations. You said what I've been trying to say.

@MichaelB, thank you for your articulate reply. As far as the mortgage goes, I have 14 years left on a 15 year fixed mortgage at 4.625%, which equates to an after tax rate of 3.108%, so I will be prioritizing that pretty low. And yes, I'm a software engineer

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Old 04-19-2009, 01:24 PM   #34
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I did Air Force for college. Finished the first two years for free while serving, then get GI Bill for after. Work experience on the shiny new resume didn't hurt either.

Plus Air Force = slim chance of getting shot.
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Old 04-19-2009, 01:32 PM   #35
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The question I have been asking is, should I divert extra income 80% to retirement, 20% to college, 100% to college and 0% to retirement, or some other ratio? And as I have been trying to make clear, I will be funding their college educations and I will retire early, it's just a question of which to fund more heavily for now.
I don't see any details on the difference between the funds. Money is fungible, when the time comes, you can use it for either.

So, why do you have two funds? Is this basically a tax question, or an asset allocation question? or ... ?
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Old 04-19-2009, 02:07 PM   #36
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I don't see any details on the difference between the funds. Money is fungible, when the time comes, you can use it for either.

So, why do you have two funds? Is this basically a tax question, or an asset allocation question? or ... ?
I have a traditional IRA, a Roth IRA, and a 401(k), which collectively I intend to use for retirement funding.

My kids have a mix of 529s and ESAs, which collectively I intend to use for their college funding.

I have a taxable Vanguard account in my name, which can be used for either.

I have two different sets of funds because that helps me see how I am progressing towards each goal. Also, to your point, I can asset allocate those funds differently easily as well -- my oldest child's freshman year college funds require a more conservative allocation than my retirement funds.

You're right in one sense that money is fungible. However, the different types of accounts have different rules and tax consequences that I'd rather not mess with, as well as advantages if one uses the funds for their intended purposes. In other words, I think I'll be ahead if the money that I end up spending on their college educations gets routed through their 529s and ESAs rather than my IRA's and 401(k)'s; a similar argument applies to not routing my retirement funds through their college accounts.

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Old 04-19-2009, 02:37 PM   #37
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Rather than create separate accounts, I just invested for retirement and college in one portfolio. My retirement projections included college spending as part of the expenses. It also caused me to take out extra cash to cover a few years of college expenses in 2007, when the economy looked like it was going to weaken and I was spending pretty heavily for the next 8 years or so. Of course that's all back in equities now...

So I mingled the two, but tried to keep in mind the near-term spending requirements.

edit: my parents paid for my college, I'm paying for my kids.
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Old 04-19-2009, 03:37 PM   #38
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2Cor521,a lot can happen between now and college. Two in particular are
- a child opts for another path in life that does not involve college
- your children become eligible for some financial assistance

In either of these cases, excess funds in coverdells or 529s could be problematic. They can be used for other family members, so I would therefore limit total contributions in ESA/529 to the total cost of 2 children and keep the rest in a general taxable investment account. You already have 8 years funded, so I would hold it at the current level.

This also gives you more future flexibility for using your assets in different ways if you so choose.
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Old 04-19-2009, 03:42 PM   #39
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Is there anyone on this thread who has (a) advised me to have my children pay for their own college education and (b) had their own college education paid for by their parents?
As for who should pay, I think the most appropriate answer in this:

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Do what you think is best for you and your family.

IMHO parents need to be sure their kids understand very early what parental contributions will be provided for college, cars, weddings, whatever.
Everyone's circumstances are different. What really matters is that this be made very clear very early in life.
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Old 04-19-2009, 04:09 PM   #40
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I'm with MichaelB. I didn't use the special college funding vehicles because I wanted to keep my options open. I figured the tax savings weren't worth the restrictions. Looking at the number of kids going to college today and graduating without jobs, I'd be cautious about telling kids that a four-year college is the only possibility.

My thought was to fund most of college out of cash flow (I would simply reduce my retirement savings during the time they were in college). In fact, instead of putting money into college savings accounts, I paid off the mortgage early. Then I could use money that wasn't going into the mortgage for tuition.

I think it makes sense to look at your total cash needs and select assets to have total cash at the right times -- i.e. I agree with your comment about more conservative allocations if you're going to have to withdraw soon. However, it looks like you'll still be working for the first two years your oldest is in school. I'd plan to cover those two years out of earned income.

Given all the above, you can see that I wouldn't add anything to dedicated college accounts, but that's a pretty individual decision.
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