Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Re: Saving for education
Old 05-20-2006, 11:58 AM   #41
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Saving for education

I guess a little penalty and tax doesnt bug you too much when you're in your 20's...
__________________

__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Saving for education
Old 05-20-2006, 11:56 PM   #42
Thinks s/he gets paid by the post
SteveR's Avatar
 
Join Date: Jul 2005
Posts: 2,803
Re: Saving for education

I funded my kids education out of my income. My grandkids will have a good start in their education fund no matter what their parents may end up saving (or not saving). DW and I feel strongly about providing some of their education...the rest they will have to figure out which is a good thing since it will add value to the experience. I worked and went to school, so did both my kids.

I expect to take some tax credits for each of the accounts for several years to come. The state tax is not kind to retirees so any tax credit is a good one. If one or more of the grandkids decide to not go to college then we can transfer the funds without tax or penalty to another grand kid. I am not worried about getting hit with a tax problem because one of them wants to dig ditches instead of go to college. I still have two unmarried sons that may someday marry and have kids...I can always transfer the money to their kids if I have to. I believe the risk is worth the reward.
__________________

__________________
Work? I don't have time to work....I'm retired.
SteveR is offline   Reply With Quote
Re: Saving for education
Old 05-22-2006, 09:50 PM   #43
Recycles dryer sheets
 
Join Date: Apr 2006
Posts: 147
Re: Saving for education

I am not bothering with any of the tax savings gimmicks for college education. This is how I am financing my kids college education:

First 2 years is community college (no need to play the SAT game and relatively inexpensive way for an 18 year old kid to figure out what he/she wants to major in).
State School after that (If they want to go to some fancy private college they better qualify for a scholarship to make up the difference from state school)
Grade point average 3.7-4.0 = 100% funding by Mom and Dad
Grade Point Average 3.0-3.6 = 75% funding
Grade Point Average 2.0-2.9= 50% funding
Less then 2.0= better find a good job or join the military

All of above to be calculated on a semester/quarterly basis as tuition is paid.

My son is graduating from High School in 3 weeks and will start college this Fall. First test of the above system. I will report back on how it works out.
__________________
Hydroman is offline   Reply With Quote
Re: Saving for education
Old 05-22-2006, 10:03 PM   #44
Full time employment: Posting here.
shiny's Avatar
 
Join Date: Jun 2005
Posts: 673
Re: Saving for education

Quote:
Originally Posted by Hydroman
First 2 years is community college (no need to play the SAT game and relatively inexpensive way for an 18 year old kid to figure out what he/she wants to major in).
State School after that (If they want to go to some fancy private college they better qualify for a scholarship to make up the difference from state school)
Grade point average 3.7-4.0 = 100% funding by Mom and Dad
Grade Point Average 3.0-3.6 = 75% funding
Grade Point Average 2.0-2.9= 50% funding
Less then 2.0= better find a good job or join the military

All of above to be calculated on a semester/quarterly basis as tuition is paid.
First of all, of course it is great that you are paying for your kids education. I had to rely on myself, but just something to think about:

When I was in school I had a couple of friends (and myself to a certain extent) who avoided classes that were too hard for fear of not making GPA to keep their scholarships. Who knows what they could have been...chemists, etc? Instead they majored in education (to teach science) and business. Give you kid a chance to take some harder classes without too much penalty. As for myself, I dropped Spanish after the first semester because it took so much time and I was worried about maintaining my GPA - wish I had stuck with it.
__________________
I'm made of atoms, you're made of atoms, and we're all in this together. Ben Lee
shiny is offline   Reply With Quote
Re: Saving for education
Old 05-22-2006, 11:18 PM   #45
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,616
Re: Saving for education

Quote:
Originally Posted by Hydroman
Grade point average 3.7-4.0 = 100% funding by Mom and Dad
Grade Point Average 3.0-3.6 = 75% funding
Grade Point Average 2.0-2.9= 50% funding
Less then 2.0= better find a good job or join the military
Quote:
Originally Posted by shiny
When I was in school I had a couple of friends (and myself to a certain extent) who avoided classes that were too hard for fear of not making GPA to keep their scholarships.* Who knows what they could have been...chemists, etc? Instead they majored in education (to teach science) and business.* Give you kid a chance to take some harder classes without too much penalty.
The kid loses all incentive to take risk, and adds in a powerful incentive to cheat or, at best, to cut corners...
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Re: Saving for education
Old 05-22-2006, 11:47 PM   #46
Dryer sheet wannabe
 
Join Date: Mar 2006
Posts: 23
Re: Saving for education

Hi --

First post here.*

We're using a combination of a Coverdell account and zero coupon muni bonds to fund our daughter's future (hopefully!) college education.*

Right after she was born, we bought 20k worth of CA Zeros that are staggered in maturity -- i.e. four different issues, each maturing one year after the other ( i.e. the four years that she will be in college ----2020-2024).* Yields range from 5% to 5.3% -- and are equivalent to about 7% to 7.5% taxable yields.* This, combined with 2k annual coverdell purchases will hopefully cover most of her (State) college education.* And, if she decides *not* to go to college, the Zeros go directly into our travel fund!

cheers
Theronware
__________________
theronware is offline   Reply With Quote
Re: Saving for education
Old 05-23-2006, 12:31 AM   #47
Recycles dryer sheets
Papi's Avatar
 
Join Date: Jan 2006
Posts: 90
Re: Saving for education

Hi theronware,

Here's to hoping your daughter enjoys her first year of college and you DON'T get to enjoy Hawaii!!* Education is the best thing for us as individuals and as a nation.* Take that long awaited vacation when she graduates!
__________________
Here's to FIRE http://www.bloodydecks.com/forums/im...s/beerchug.gif
Papi is offline   Reply With Quote
Re: Saving for education
Old 05-23-2006, 09:28 AM   #48
Thinks s/he gets paid by the post
 
Join Date: Jun 2005
Posts: 4,005
Re: Saving for education

I've wavered in my stance on saving for education. I'm starting to think the education savings account (ESA) may be a good deal for a small portion of expected college expenses. I never realized how broad the scope of "qualified education expenses" was. It sounds like under current law pretty much anything is covered under "qualified education expense" except beer and spring break trips to florida/mexico.

Question for the more experienced forum members: can I switch beneficiaries for the ESA when the original beneficiary hits age 22 or so? Or do I have to wait until the original beneficiary hits age 30?

I'm thinking it wouldn't be so bad if after the first kid finishes college/grad school, I can switch the beneficiary over to kid #2, 3, etc. But by the time kid #1 hits 30, the last of the kids will probably be out of school as well (one hopes!!!).

Correct me if I'm wrong, but one other disadvantage that I see to all of these college savings programs is the potential loss of the hope/lifetime learning tax credits or tuition expense deduction. I'm pretty sure you have to use "regular" money (not from an ESA/529, etc) to pay for tuition in order to qualify for the tax credit or tax deduction.

This leads me to my "plan": save a small portion in an ESA through Vanguard and then save the rest in a regular taxable account in my name. Something like $2000 the first year, then $250/yr thereafter. With a 6% real rate of return, that would amount to a lump sum of ~$11,000 (in 2006 dollars) or $2,750 per year of schooling for 4 years. That can go towards expenses (room/board/transportation/study "vacations"/study abroad) that aren't covered by financial aid or scholarships. And then there's grad school...

With this plan, I get the benefits of diversifying my education funding sources and I can spend them down year to year to maximize tax efficiency and financial aid efficiency.

I'm still not sure the tax savings are worth the hassle all the hoop-jumping though.
__________________
justin is offline   Reply With Quote
Re: Saving for education
Old 05-23-2006, 11:00 AM   #49
Thinks s/he gets paid by the post
 
Join Date: Mar 2006
Location: Houston
Posts: 2,155
Re: Saving for education

Quote:
Originally Posted by justin
can I switch beneficiaries for the ESA when the original beneficiary hits age 22 or so?* Or do I have to wait until the original beneficiary hits age 30?
I don't know about ESA.* My plan, the Texas Tomorrow Fund, allows switching during the 10 years period (age 18 to 28).
__________________
Sam is offline   Reply With Quote
Re: Saving for education
Old 05-23-2006, 11:02 AM   #50
Thinks s/he gets paid by the post
 
Join Date: Aug 2005
Posts: 1,375
Re: Saving for education

My proposition (which was acceptable to all) to my ex and my kids was for ech to pay 1/3 of college costs with any merit scholarship coming only out of the kid's share. Choice of school, grades, etc. was entirely up to each kid. My daughter went to a cheaper school, had several scholarships, and worked during the school year as well as at decent jobs in the summer. She owed $3k when she graduated and paid it off quickly. My son had no scholarships, didn't work during the school year, and worked at very low-paid jobs in the summer (camp counselor). He owed $20k when he got out and is paying it off slowly at a low rate of interest. Whenever I think about paying a chunk off for him, I think better of it. With the market as it is now, I ain't gonna think about it again for a long, long time :

I saved up only a year or so worth of expenses apiece before they went to college (feeble excuses: SAHM for 10 years, then expensive divorce). I paid my share of their college expenses via ESPP adn bonus shares that I cashed out every semester. I don't know if education accounts were available back in the 70s/80s, but I didn't know about them, and my instinct would've been to save more for retirement in any case.
__________________
You can't always get what you want, but if you try sometimes, you might find you get what you need.
astromeria is offline   Reply With Quote
Re: Saving for education
Old 05-23-2006, 11:37 AM   #51
Thinks s/he gets paid by the post
Bimmerbill's Avatar
 
Join Date: Jan 2006
Posts: 1,631
Re: Saving for education

I'm still undecided what I will do...

My daughter is 3 months old today!
__________________
Bimmerbill is offline   Reply With Quote
Re: Saving for education
Old 05-23-2006, 11:51 AM   #52
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,616
Re: Saving for education

Quote:
Originally Posted by Bimmerbill
I'm still undecided what I will do... My daughter is 3 months old today!
Well, it doesn't matter much what you do as long as you stop stumbling around from your sleep deprivation and do something. A dollar compounding for the next 18 years at 6% will nearly triple in value. A dollar compounding for six years at 6% will only gain about 40%.

In rough terms, you could start with $100/week or $4800/year in a low-expense low-turnover equity mutual fund. Sort a list on Morningstar and get out your darts. And in your case, next week you could catch up by starting an account with $1600 and a $400/month automatic deposit.

There's plenty of time down the road to set up UTMAs, contribute to 529s, evaluate the impact of 2010's expiry of 529 withdrawal tax benefits, compare ESAs with Coverdells, look for loose change in the sofa cushions, and all the other arcana. Once you kick-start the program and let compounding work its magic, you can also tweak asset allocations or stop saving entirely when the kid is a teenager.

But one thing you can't do is make up for lost time...

__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Re: Saving for education
Old 05-23-2006, 12:37 PM   #53
Thinks s/he gets paid by the post
Bimmerbill's Avatar
 
Join Date: Jan 2006
Posts: 1,631
Re: Saving for education

Anyone use Upromise with their 529 plan? USAA is partnered with them and the customer service person I spoke to mentioned it a few times...

Yeah, I gotta start. I was hoping she would do the same as me: work thru high school (saving 75%), go to a state college, and join the national guard to pay for school.

Tho I did split the cost with my mom and dad, but it was $6-8K total per year back then.
__________________
Bimmerbill is offline   Reply With Quote
Re: Saving for education
Old 05-23-2006, 12:54 PM   #54
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,616
Re: Saving for education

Quote:
Originally Posted by Bimmerbill
Yeah, I gotta start.* I was hoping she would do the same as me: work thru high school (saving 75%), go to a state college, and join the national guard to pay for school.
Well, there's no moral or ethical requirement to subsidize your kid's college education, but it sure encourages them to leave the nest!

I'm not sure that combat duty is a good way to save for college. A powerful motivator, yes-- if you're one of the survivors. But not a financially sound long-term method of accumulating assets now for application later...
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Re: Saving for education
Old 05-23-2006, 01:29 PM   #55
Recycles dryer sheets
 
Join Date: May 2004
Posts: 495
Send a message via AIM to yelnad Send a message via Yahoo to yelnad
Re: Saving for education

I have my Upromise account connected to my own student loans and know several people using it to save for their nieces and nephews.

My college savings plan is this: I work at a college and receive a 75% tuition discount. I want my kids to pay the other 25% (through scholarships or sweat equity). Also, we own rental properties, so my kids can live in one of our units with friends, and the friends will pay the rent (although I would really like them to live on campus for the first year for the experience).

My husband and I each paid about 90% of our own way through college (hard work, loans, and scholarships) and I think we valued our education a bit more than our friends who had parents who paid for it.

Oh, my kids aren't born yet
__________________
Yelnad --"What you're paying for is an education, not a room at the Sheraton,and sometimes that education is uncomfortable."- Jim Terhune, Dean of Student Affairs, Colgate University
yelnad is offline   Reply With Quote
Re: Saving for education
Old 05-23-2006, 04:57 PM   #56
Recycles dryer sheets
newellcr's Avatar
 
Join Date: Aug 2003
Posts: 187
Re: Saving for education

Wow, a lot of negative thoughts about 529 plans.* Tax law is subject to change.* Capital gains, tax treatment of 529 plans, ESAs, and everything else is subject to change.* We're building castles in sand...* It's a college savings plan, expect a penalty if you don't use it for a college expense.* Some of these same arguments are were used against the IRA when it was introduced.*

Every plan has a wart of some kind.* I like the idea that the 529 plan money is mine and can't be used for a European vacation (with our without penalty) unless I say so.* In my minds eye, 529 plans are certainly worth a serious look.*

Cheers,

Chris
__________________
newellcr is offline   Reply With Quote
Re: Saving for education
Old 05-23-2006, 05:26 PM   #57
Thinks s/he gets paid by the post
SteveR's Avatar
 
Join Date: Jul 2005
Posts: 2,803
Re: Saving for education

Quote:
Originally Posted by newellcr
Wow, a lot of negative thoughts about 529 plans.* Tax law is subject to change.* Capital gains, tax treatment of 529 plans, ESAs, and everything else is subject to change.* We're building castles in sand...* It's a college savings plan, expect a penalty if you don't use it for a college expense.* Some of these same arguments are were used against the IRA when it was introduced.*

Every plan has a wart of some kind.* I like the idea that the 529 plan money is mine and can't be used for a European vacation (with our without penalty) unless I say so.* In my minds eye, 529 plans are certainly worth a serious look.*

Cheers,

Chris
With a 7% income tax rate with no exemptions for early retirement income and darn little for after 65 retirement income in the state I will take all the help I can get. The state 529 does that for me. It also gives my wife's grown kids some incentive to stick some money in the account too since they live and pay taxes here too. I will continue to believe that even if the tax advantage is discontinued in 2010, there will be a phase out provision so those of us that have a bunch of deferred gains won't get hit with a huge tax bill. But but guts tells me that the benefit will stay past 2010.
__________________
Work? I don't have time to work....I'm retired.
SteveR is offline   Reply With Quote
Re: Saving for education
Old 05-23-2006, 05:38 PM   #58
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Saving for education

Quote:
Originally Posted by justin
I've wavered in my stance on saving for education. I'm starting to think the education savings account (ESA) may be a good deal for a small portion of expected college expenses. I never realized how broad the scope of "qualified education expenses" was. It sounds like under current law pretty much anything is covered under "qualified education expense" except beer and spring break trips to florida/mexico.
I keep thinking about an ESA for small expenses or early/primary school stuff.

But then the amounts are so small that they'll neither help much nor hurt much, and i'm sure the tracking/paperwork will overwhelm any tax benefits, at least for me.

My wife read a delightful "dear abby" to me yesterday. IIRC a grandma was putting money into some of her grandkids college trusts (how she did this, what kind of trust, etc...no recollection or idea). Bottom line is the parents were taking the money out and spending it without telling her, and when she found out, they said they "fully intended to pay the money back someday but needed the money right now for other stuff". Like cars and a vacation.

I'm surprised more people dont shoot other people...
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Saving for education
Old 05-23-2006, 10:46 PM   #59
Recycles dryer sheets
 
Join Date: Apr 2006
Posts: 147
Re: Saving for education

Quote:
Originally Posted by Nords
Well, there's no moral or ethical requirement to subsidize your kid's college education, but it sure encourages them to leave the nest!
Actually it worked the opposite in my situation. My Dad gave us kids a choice when we turned 18. Four more years of subsidized living if we went to college. Only 4 years though. Other choice was get a job and move out. I went to college. My sister went to college. My brother got a job and could not move out fast enough.
__________________
Hydroman is offline   Reply With Quote
Re: Saving for education
Old 05-23-2006, 10:54 PM   #60
Thinks s/he gets paid by the post
SteveR's Avatar
 
Join Date: Jul 2005
Posts: 2,803
Re: Saving for education

Quote:
Originally Posted by Cute Fuzzy Bunny
I keep thinking about an ESA for small expenses or early/primary school stuff.

But then the amounts are so small that they'll neither help much nor hurt much, and i'm sure the tracking/paperwork will overwhelm any tax benefits, at least for me.

My wife read a delightful "dear abby" to me yesterday.* IIRC a grandma was putting money into some of her grandkids college trusts (how she did this, what kind of trust, etc...no recollection or idea).* Bottom line is the parents were taking the money out and spending it without telling her, and when she found out, they said they "fully intended to pay the money back someday but needed the money right now for other stuff".* Like cars and a vacation.

I'm surprised more people dont shoot other people...
We're not taking any chances. The accounts are in my name and I have control. That way I know where and when the funds are used.

__________________

__________________
Work? I don't have time to work....I'm retired.
SteveR is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
When did you start seriously saving. rw86347 Young Dreamers 75 07-02-2007 11:52 AM
Saving too much? Eagle43 FIRE and Money 62 01-29-2007 11:15 AM
Anyone else fed up of saving money for ER/FI? claire FIRE and Money 63 06-08-2006 11:31 AM
Saving for early retirement: the point of diminishing returns Silhan FIRE and Money 17 05-15-2006 12:49 PM
"What are you saving for?" redux Nords Life after FIRE 60 05-17-2005 07:14 PM

 

 
All times are GMT -6. The time now is 03:16 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.