Old Man Dad Club trying to figure out $$ needed

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hilltide

Recycles dryer sheets
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Sep 19, 2017
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I joined the old man dad club at 44 and now have a beautiful one year old daughter at 45. My fire goal is 55. Having a kid this late in the game is going to require extra consideration. At FIRE, hoping to have between 3mil & 4 mill with no bills or mortgage and a few free and clear rentals

I was thinking that I would need 100k for 529 & if we decide private school another 100k to get her through high school. My monthly withdraw income should take care of the rest. Am I underthinking this completely?
 
A LOT can change in the time it takes for her to get to HS.
Certainly no harm in funding the 529.

My relative joined the club at close to 60 !!
Now that he is 70, he is finding it hard to keep up with her energy levels :D
 
Not by much, if at all.

I retired at age 46 when my youngest was 14. At that point I still had 4 years of child support, college, and, although I didn't know it at the time, three years of private high school. Plus various other things, such as musical instruments and various other music-related fees.

I did it pretty much as you describe - I figured out the future amounts and future times and made sure I had current assets that would take care of those future amounts at those future times.

So far it has turned out fine. Not much has turned out to be exactly according to plan (the private high school was not planned for), but I had surprises on the income side of things as well which balanced out the unexpected expenses.

I think the main thing would be to make sure you have all the "big rocks" covered. College and private school are two big ones. I'd suggest sitting down with your wife and seeing what other things that are expensive that she and/or you would want to make sure to cover. The other "big rocks" are weddings and down payments on first homes; there might be others. I'm agnostic about whether and/or to what extent these items should be covered, but you and your wife should think about them and decide together.
 
I'm not keen on 529s. You never know what will happen. In our case, DS decided to forgo college so I'm glad that I didn't have a boatload of money locked into a 529. A couple nephews got full-boat scholarships so only a portion of the 529 money would have been used.

Fund your Roth instead... you'll have more flexibility.
 
Yes, don't forget the wedding (way in the future, hopefully). My daughter got married in 2018 @ 39 years old and I was 74 at the time. I could afford it and it was a great time, although costly. :D
 
Great points everyone. Yes, need to figure out all the rocks, including wedding. NO!!! I told her it was ok to be a nun if she wants.. lol.


Mentally,the 529 allows me to not include in our retirement assets. May rethink this though. Have 10k in there as a starting point. It can be used for a lot of things not just college from what I read.


Yes, its a make believe club and I only know a few people in it right now. Thanks everyone.
 
SecondCor521 said:
Not by much, if at all.

I retired at age 46 when my youngest was 14. At that point I still had 4 years of child support, college, and, although I didn't know it at the time, three years of private high school. Plus various other things, such as musical instruments and various other music-related fees.

I did it pretty much as you describe - I figured out the future amounts and future times and made sure I had current assets that would take care of those future amounts at those future times.

So far it has turned out fine. Not much has turned out to be exactly according to plan (the private high school was not planned for), but I had surprises on the income side of things as well which balanced out the unexpected expenses.

I think the main thing would be to make sure you have all the "big rocks" covered. College and private school are two big ones. I'd suggest sitting down with your wife and seeing what other things that are expensive that she and/or you would want to make sure to cover. The other "big rocks" are weddings and down payments on first homes; there might be others. I'm agnostic about whether and/or to what extent these items should be covered, but you and your wife should think about them and decide together.
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Good idea. Curious to see what she sees us paying for. Definitely the wedding as her Dad gave us a very generous gift. Now that I know how frugal he is, I am amazed it happened. Great guy for many reasons.
 
pb4uski said:
I'm not keen on 529s. You never know what will happen. In our case, DS decided to forgo college so I'm glad that I didn't have a boatload of money locked into a 529. A couple nephews got full-boat scholarships so only a portion of the 529 money would have been used.

Fund your Roth instead... you'll have more flexibility.
Click to expand...

Note that there is a "scholarship" exception that permits withdrawal of 529 funds while avoiding the 10% penalty, and income tax is only owed on the earnings portion.

I like funding Roths. I think there was a period of time where I was maxxing out 401(k), Roth, and 529 contributions, so it could be "Roth and 529" instead of "Roth or 529".

hilltide said:
Mentally, the 529 allows me to not include in our retirement assets. May rethink this though. Have 10k in there as a starting point. It can be used for a lot of things not just college from what I read.
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Regarding the last sentence, not really. It can be used for qualified higher education expenses, including tuition, fees, books, supplies, equipment, room/board as long as at least half time, and some computer stuff. Additionally, it can be used for up to $10K per year of elementary or secondary *tuition*.

If you use it for anything else, then there is ordinary income taxes on the earnings portion, plus a 10% penalty. The 10% penalty can be waived under a number of different circumstances, including scholarships as noted above.

529s can be pretty easily shifted to other family members, though, which is a nice benefit. I've been balancing the balances in my three kids' accounts as their plans shift. It can also be transferred to cousins, grandchildren, and I think even parents (ie, you, the Old Man Dad, or your wife).
 
Congratulations! We were older than you and now have a 5 and an almost 3 yr old. It’s exhausting, but there are also a lot of upsides to being an older parent.

It does impact retirement planning though. The unknowns are the biggest issues. We’ve tried to overcompensate by including line items for summer camps, music and other extracurriculars, additional cars/insurance increases, braces and on and on and on. We’ve already had an extra year of private school expenses due to covid.

We are funding 529s for both kids, but at a reduced rate vs many of our peers. I don’t think the increases in college costs we’ve seen are sustainable and DH and I have zero desire to pay for an expensive private college for our kids unless it’s a top tier school. If that happens, we’ll make cuts in other areas to make it happen.

The good news is that in most long term retirements, the potential for upside is pretty high. If we hit a negative sequence of return cycle, we’ll be belt tightening and our kids won’t have some of the extras. Hopefully we’ll raise responsible kids who understand that! We might change our minds, but as of right now our attitude is you get help with a down payment OR wedding help, not both. But those are very personal decisions and reflective of how DH and I were raised and how we think about finances and family help.
 
As far as 529 goes:

1) In 2020, the tuition for many in state public universities is $10-$12K plus $10-$15k for room and board for a rough total of $25k/year and $100k for 4 years. Out of state and private schools typically run $50k to $70k/year (tuition+room) for a grand total of up to $280k. Decide what you are willing to pay and aim for that in *today's* dollars.

2) There is some thinking that you should not worry about overfunding 529 plans. Even if your child does not go to college or use all the funds, you might still come out ahead (or even)
 
My dad was 46 when little sis was born. By the time she went to university, she was eligible for some SS associated with Dad. Back in that day, it went pretty far since tuition was mostly for an education rather than to pay for diamond-plated buildings and 6 levels of bureaucracy between the University president and the poor (abused and underpaid) grad students who actually taught (and STILL teach most) university classes.

By the time my little sis' youngest was in (the same) university, tuition and fees were about 50 times higher than little sis paid. YMMV

But, I'm not bitter!:angel:

Now returning you to tonight's symposium on Old Man Dads. I think the SS still works for kids of "old" Dads. Again, YMMV.
 
Congrats on the new arrival.

Here may be a contrarian thought: I would make sure that you prioritized funding your FIRE/retirement over paying future college expenses. That may sound harsh, but it is prudent.

I am much older than you. My parents were both 40 when I was born. I always had the “old parents” growing up. It was wonderful, but also carried financial risk for Mom and Dad. Mom was a SAHM, and Dad was forced into early retirement in his 50’s. That event was so scarring for me that I lived my life the complete opposite way — i.e., we had our children well before age 30, and we had all debt, etc. well in the rear view mirror by age 50. I always assumed that my ability to earn an income could be impaired in my 50’s for a variety of reasons (health, job loss, etc.)

Your costs just went up to get the child to age 18 (see https://smartasset.com/retirement/the-average-cost-of-raising-a-child), let alone college, and you are entering what I deem to be a period of time when income may either end, or be diminished. So I would knuckle down on making sure your personal financial situation is set instead of worrying about funding college expenses 20 years down the road.

Another factor to consider: the higher education model in the United States remains under significant economic stress for a variety of valid reasons. The pandemic has exacerbated the situation. So I don’t really know what “paying for college” will look like in 20 years. Maybe increasing numbers will cobble together certificates in lieu of college. Maybe costs will go down. Maybe online learning will have staying power. So while it is kind and noble of you to worry about such matters, I would be selfish if I were you — make sure you were financially set first — before worrying about such matters.
 
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clobber said:
As far as 529 goes:

1) In 2020, the tuition for many in state public universities is $10-$12K plus $10-$15k for room and board for a rough total of $25k/year and $100k for 4 years. Out of state and private schools typically run $50k to $70k/year (tuition+room) for a grand total of up to $280k. Decide what you are willing to pay and aim for that in *today's* dollars.

2) There is some thinking that you should not worry about overfunding 529 plans. Even if your child does not go to college or use all the funds, you might still come out ahead (or even)
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1) Don't forget the cost of books. The books in the A&P classes I taught were $150 plus a lab manual of maybe $40. That was 10 years ago. Then there are the book costs for the other 3 or 4 courses/semester. Now multiply by 8 semesters. It won't matter if the student goes to a public, private, or out of state school.


Cheers!
 
I joined the club nearly nine years ago at the ripe "old" age of 49. Our philosophy has been to stay with our plan of minimizing debt, maintaining a significant emergency fund, and maximizing our retirement fund contributions (401k, IRA, HSA). We haven't started a 529 and don't plan to, for reasons I'll outline below.

Both my wife and I are employed - we have great jobs, both have always worked from home and have minimal overnight business travel. But it is corporate America, and we know that could change overnight. My current plan is to retire when I'm 62, with my wife following three years later.

Both my wife and I plan to be retired by the time our daughter enters college. Because our expenses are low, our income will be low during those college years (and can easily be manipulated, much in the same way people do to qualify for ACA subsidies). This will mean our daughter may qualify for significant financial aid due to our low income levels. Parent's retirement accounts are not factored in to any Federal financial aid (individual school aid may differ). And, if our daughter works during high school or college, we will put 100% of her wages into a Roth IRA, and then simply gift her the equivalent funds. So she will show $0 income with $0 savings, and have an asset (Roth IRA) that isn't calculated for financial aid.

However, a 529 account *is* considered to be a financial asset for the child, and would be used in Federal financial aid calculations.

In addition, about half of our current retirement account balance is in taxable (non Roth) 401ks/IRAs, so we'll be facing RMDs right about when she's finishing up college. So, funding her college costs, less any financial aid, via withdrawals from those taxable retirement accounts would be the most prudent course of action for us.

So, if you're not fully funding all available retirement accounts (including HSAs, which we never withdraw from), I'd start there. I'd only create and fund a 529 after that if I didn't think I could fund college expenses from our retirement accounts.
 
I felt comfortable pulling the trigger, while they are in high school, and it has been great.

I'm conservative and we are planning to save $150k per child for college in a 529. I told them that they can either go to a good state public school or a top 10 private university. If they make it into a top 10 university, I'll need to spend an extra $150k and we'll be fine with that.

They are in a good local high school, so no private tuition required.
 
hilltide said:
I joined the old man dad club at 44 and now have a beautiful one year old daughter at 45. My fire goal is 55. Having a kid this late in the game is going to require extra consideration.
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My brother-in-law is 53 and now has three year old twin girls. I don't think I could start raising a kid at that age, let alone twins. I don't have the energy or patience I had in my late 20's when we had our daughter. I would have a hard time now sitting in those little kiddie chairs at the 1st grade parent teacher meetings. :)

On the other hand, if you retire early you'll have time to attend your daughters school events and whatnot. And you probably won't be balancing other life goals (work advancement, buying a new home, etc.) with raising a child. So you do have an advantage there.
 
WyomingLife said:
Congrats on the new arrival.

Here may be a contrarian thought: I would make sure that you prioritized funding your FIRE/retirement over paying future college expenses. That may sound harsh, but it is prudent.
Click to expand...
Seconding both parts. As Michelle Singletary says, you can borrow for college, you can't borrow for retirement. We prioritized maxing out our retirement savings over college savings, and wound up with only about $50K in the 529 (we put in the maximum our state allowed us to deduct). But while our kid chose a small private college with high tuition, they are also getting about half of their tuition in merit aid. Since you are here, you are obviously quite smart, and so while I wouldn't recommend you rely on it, there's a good chance your kid will get scholarships or merit-based aid.

Now, rather than prioritizing leaving our kid an inheritance, we've decided that we will spend some of our taxable investments on tuition so they can graduate loan-free, and get their own jump start on saving for retirement. We already matched what they made at their summer job and put it in a Roth IRA for them, so over the next 5-10 years they'll see what compounding can do. Right now, it looks like we might have to kick in $70-90K after the 529 is depleted, and that's not going to change our retirement lifestyle much.
 
Ducati52 said:
Both my wife and I plan to be retired by the time our daughter enters college. Because our expenses are low, our income will be low during those college years (and can easily be manipulated, much in the same way people do to qualify for ACA subsidies). This will mean our daughter may qualify for significant financial aid due to our low income levels. Parent's retirement accounts are not factored in to any Federal financial aid (individual school aid may differ). And, if our daughter works during high school or college, we will put 100% of her wages into a Roth IRA, and then simply gift her the equivalent funds. So she will show $0 income with $0 savings, and have an asset (Roth IRA) that isn't calculated for financial aid.

However, a 529 account *is* considered to be a financial asset for the child, and would be used in Federal financial aid calculations.
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As a FIREd father of three college students, I'd like to point out a few issues with your plan.

Your daughter probably will qualify for significant aid. I've had my FAFSA EFC vary from $0 to maybe $1000 over the period of time that my kids have been in college. There are two problems with this. First, the college doesn't have to and probably can't fund the balance with grants and scholarships - they can and will very likely offer student loans that come with origination fees and must be paid back. Second, if the school is not needs blind, then the fact that your daughter doesn't come with much of her own funding could affect her admissions chances.

Even if she puts her money into a Roth IRA, her income would still need to be reported on her FAFSA and would be FAFSA EFC-taxed at 50% for that aid year. You are half-right in that the Roth IRA assets would not be required to be reported.

Parental gifts would be considered non-taxable income to the student, and reportable on the FAFSA. Although parents probably ignore this rule on a regular basis.

A 529 owned by the parent or the student is treated as a parental asset by the FAFSA and is FAFSA EFC-taxed at up to 5.64%, depending on the parent's age and income and possibly some other factors.

(The above only applies to FAFSA-based aid. CSS is different, and so are the Ivy Leagues and the military academies.)
 
JustCurious said:
I don't think 44 is old.
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That is all relative.

My dad was 46 when I was born, 48 when my sibling was born.

We spent a good part of our teenage lives explaining that he was not our grandfather. :confused: As adults we had to deal with teenage children and aging parents at the same time. :eek:

The good thing is that when you newborn is in her 60's she will be free of the responsibility to care for aging parents. She'll just visit put flowers on your grave a few times a year. :flowers:

However, you are an early bird compared to a friend of mine who married a much younger woman and at 68 has a newborn.
 
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hilltide said:
I joined the old man dad club at 44 and now have a beautiful one year old daughter at 45. My fire goal is 55. Having a kid this late in the game is going to require extra consideration. At FIRE, hoping to have between 3mil & 4 mill with no bills or mortgage and a few free and clear rentals

I was thinking that I would need 100k for 529 & if we decide private school another 100k to get her through high school. My monthly withdraw income should take care of the rest. Am I underthinking this completely?
Click to expand...

I don't think so, and I believe your targets are about right.

You've gotten good information and a range of useful perspectives. Put me down as an advocate for loading up the 529 early and stopping. That was my approach with my 2 kids, born when I was 41/44.

Our intent at the time was to lock up the money and ensure a high degree of certainty there would be money for them to go to college. I look at the 10% penalty on earnings of non-qualified withdrawals as insurance.

We stopped at about $50K each, and in the ensuing 15+ years, the accounts have more than doubled. I now have to figure out how to deal with the excess :).

The cautions about the uncertainty of a child's future abilities and interests shouldn't be ignored. Perhaps that's an argument for funding at a lower level if you're looking for certainty via a 529 like I was.
 
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