Anyone Retire when your kids are in college?

[SecondCor521]

My main thrust for this post was to find out how parents who retired when kids are in school deal with the large uncertainty of the cost of school. [...] Thoughts?

I would suspect you would find quite a variety of answers on this, just as there is quite a variety on how families handle college expenses in general, irrespective of FIRE.

Personally, I decided to FIRE when I had a FIRE stash that was 25x my actual expenses and a college stash that covered 4 years of tuition/room/board/books/transportation/fees for each of my three kids. My FIRE date coincided with my oldest having finished basically a year of college, and having a high school sophomore and freshman.

I have two detailed documents. The first is my college deal that I have made with my kids, saying what the "contract" is - I'll only pay if they get decent grades, etc. The second is a list of ways to pay for college; this is prioritized by how I plan to pay for stuff.

Maybe I'll have enough, maybe I won't. If there is extra, I have a plan for how to distribute the extra once all three have finished their degrees. If I come up short, I have contingency plans for that, which involved dipping into my FIRE stash and going back to work if needed.

I think other people solve the problem by saying there is $X in your college fund, when it runs out I guess you're on your own. That's a reasonable approach, I think. But in my case since I retired pretty early (age 46) and my parents put me through college, I would rather go back to work, having accepted the fact that I rolled the dice a little and it simply didn't work out.

In the meantime, I am monitoring as they go along, making sure that we spend what we have prudently, adjusting as things happen, and keeping them up to date on how well things are funded. Currently things are on a good glide slope, but it will depend a lot on how the current senior's college offers come in. If I do come up short, it should only be a semester or two.

 

[Doribe]

My youngest started college in 2015. DH retired in 2015 and I retired in 2016. DS went to a state school and we paid for it. The tuition and fees are covered 100% by a state college pre-pay that I converted from another child that went into the trades. The room, board, books, etc are basically covered by a Vanguard 529 that I set up. I knew I wanted to retire before all kids finished college, so I planned accordingly. If DS had chosen out of state I would have made him take loans for any difference.

 

[Cayman]

We ER'd last year, and DD will finish her undergrad studies 5/2020. No financial aid nor scholarships. Started saving early and we saved often. We planned and saved for DD's expected college expenses, just as we did for our retirement. We wanted to be sure the $ were there when needed.


Financial aid would've been very welcome, but we did not qualify due to assets and income. The college fund we built is not used in any of our retirement calculations. We pay almost all costs at an excellent state school, and she pays for books (her books were $2k last year), clothes, gas, and entertainment. She's worked since age 14.

 

[AprM]

We're aiming for GI Bill to cover half for each kid. The other half is being paid for with 529s and if that's not enough then loans will be taken out. But I suspect that by the time the kids are in college (14 years from now) the 529s will actually be overfunded. I don't think we'll fill out FAFSAs. Seems like a futile exercise since we'll have accumulated quite a bit in assets by that time.

 

[Cayman]

..... I don't think we'll fill out FAFSAs. Seems like a futile exercise since we'll have accumulated quite a bit in assets by that time.

It's good to keep in mind that many schools and private funders award non-need based aid based on the FAFSA. So, to be considered for many scholarships and other financial aid requires FAFSA submission.

For example, we found several scholarships that were awarded locally required FAFSA submission, although the scholarships were not need-based. The public U DD attends also requires FAFSA to be considered for any financial aid --- this includes non-need based scholarships.

Some FI parents elect not to file a FAFSA because they don't want to share their full financial picture. We're in that camp. Not excited about giving all of that info out to more institutions and having it stored in more databases. You have to weigh your situation, and do what's best for your family.

 

[gatored]

I would suspect you would find quite a variety of answers on this, just as there is quite a variety on how families handle college expenses in general, irrespective of FIRE.

Personally, I decided to FIRE when I had a FIRE stash that was 25x my actual expenses and a college stash that covered 4 years of tuition/room/board/books/transportation/fees for each of my three kids. My FIRE date coincided with my oldest having finished basically a year of college, and having a high school sophomore and freshman.

I have two detailed documents. The first is my college deal that I have made with my kids, saying what the "contract" is - I'll only pay if they get decent grades, etc. The second is a list of ways to pay for college; this is prioritized by how I plan to pay for stuff.

Maybe I'll have enough, maybe I won't. If there is extra, I have a plan for how to distribute the extra once all three have finished their degrees. If I come up short, I have contingency plans for that, which involved dipping into my FIRE stash and going back to work if needed.

I think other people solve the problem by saying there is $X in your college fund, when it runs out I guess you're on your own. That's a reasonable approach, I think. But in my case since I retired pretty early (age 46) and my parents put me through college, I would rather go back to work, having accepted the fact that I rolled the dice a little and it simply didn't work out.

In the meantime, I am monitoring as they go along, making sure that we spend what we have prudently, adjusting as things happen, and keeping them up to date on how well things are funded. Currently things are on a good glide slope, but it will depend a lot on how the current senior's college offers come in. If I do come up short, it should only be a semester or two.

This is close to what we have planned

Currently: I'm 49, my wife is 45, we have 10 and 7 year old girls

Plan: Both of us retire in 2026 (57/53) as the oldest finishes her Senior year of high school and the youngest her Freshman year, both at Private Schools.

To retire:
-house paid off (still owe $260K)
-$2.5MM investable assets (estimating $300K each to cover College)
-No 529's, will be counting on the "Leave your job at 55" rule for penalty free withdrawls of 401K. Have debated starting 529's to pay for Private High School years before retiring or the few years after retirement
-Wife's $1500/month pension kicks in late 2026. My $1300/mo pension kicks in early $2029
-Tentative plan to get SS at 62 (2031), while have my wife wait until 70 (2043)
-5% withdrawl rate of non-college funds is around $8,000/mo (before taxes), combined with wife's pension should meet all our needs including medical. Withdrawl rate will dip after my pension kicks in and then again after SS kicks in and then close to nothing after wife's SS kicks in
-Likely to get subsidized (but not free) Medical Care for all 4 of us as part of Wife's retirement plan

 

[albireo13]

I had been planning to retire in Q1 of 2020. My youngest son will graduate college June of 2020. However, my 26yo has gone back for his bachelors, after languishing in odd jobs. He should graduate 2021 or 2022.


I am considering putting off retirement until everyone graduates, to help them out.
The numbers say I can still retire in 2020 but, my wife is very adamant that wee both need to keep working until kids are all out of school.

 

[rodi]

I retired in 2014, as did DH. Our kids are currently HS sophomore and senior. We are knee deep in FAFSA for older son.

CSS includes ALL assets - including your primary home - which in California is a HUGE deal. Our old, tract home is worth an obscene amount of money because of our zipcode... (not because of the house, trust me.) Our kids will not qualify for anything with the CSS algorithm. FAFSA excludes retirement accounts and primary home, but includes all the other assets. We will not qualify for any aid under FAFSA until the younger son enters college... 2 kids in college will help.

Fortunately, we have 529's that were started when they were born and can pay for state schools or WUE schools. And the UC and CSU state schools are excellent. No need to deal with the CSS profile.

 

[tulak]

Fortunately, we have 529's that were started when they were born and can pay for state schools or WUE schools. And the UC and CSU state schools are excellent. No need to deal with the CSS profile.

I’m curious: have you found any WUE schools that look interesting?

We’re going through the college process for DD and when I looked through the WUE list it looks like they are either second tier schools or limited by major. I’m wondering if I missed anything?

 

[ncbill]

Thanks to all for the replies and input. I should have mentioned that I was looking for those who have had experience(s) retiring when kids are in a CSS profile school, as that is where kid number 1 is a frosh and kid number 2 is told she will be going by coach/admissions office and kid number 3 is looking. My mistake on that request for info.
Almost all of our assets are in retirement plans that we contributed to more than 2 years ago and we do have a fairly large percentage of our home equity tied up in the mortgage (75%?), so from a FAFSA and CSS profile perspective, we are doing well. (Our EFC is actually just over 14k, not that CSS schools use that info much). Because child #2, a current h.s. senior, was recruited for track, we have the benefit of an early financial read and know that her cost after work study and subsidized loan to be about 17k. We also have the kids contribute to their own costs (10% of total cost of attendance plus the amount of their subsidized loans are their costs. They can choose when they pay that off, or not take at all and give mom and dad the cash. In child number 2's situation that's $3,500 plus $1,700 out of $17k or $5,200/30%). My main thrust for this post was to find out how parents who retired when kids are in school deal with the large uncertainty of the cost of school.While one is in and one will be in, a third is looming in the wings in high school and so we are looking at a total of 8 more years of college costs as parents. While most of the uncertainty has been removed, as an older parent, I have been reducing my income/working less this year and next with an eye towards a retirement glide path and a way to see how reduced income impacts our lives on a step down basis. Thoughts?

Military service.

Both our kids received ROTC scholarships to fund their private school educations since we only committed to paying for in-state public school. One left after a year for a service academy.

National Guard is another option (pays 100% tuition/fees in many states)

Or enlisting straight out of high school and using the GI Bill afterward.

 

[Al in Ohio]

In the year your child gets scholarship money, you can withdraw from your 529 up to the amount of the scholarship without having to pay the 10% penalty, BUT you will have to pay taxes on the earnings. If you do end up with surplus 529 funds, you could use it for yourself, other family members, or perhaps grad school for your children

You can simply move any leftover 539 money into your retirement funds. You just have to pay the tax on the amount leftover that you originally avoided.

 

[retiredunder50]

You can simply move any leftover 539 money into your retirement funds. You just have to pay the tax on the amount leftover that you originally avoided.

I was under the impression that if you decide to use the excess 529 money for something other than qualified education expenses, in addition to paying tax on earnings, you will have to pay a 10% penalty unless there is an exception - I never noticed anything about transfer to retirement funds as an exception to the penalty. Would you please send a link? Also, how does one shift 529 money to retirement funds? Thanks.