Kids' college or retirement -- your advice wanted

[kumquat]

now FI is at age 45.98,

2Cor521

Perhaps you should try to refine your plan so that you know exactly when you will be FI. 45.98 is somewhat approximate, can't you get to five decimal places?

 

[MichaelB]

Thanks again to all who replied. I have read all of them, as well as the article that someone linked, and considered all of your suggestions and input.

I have decided what I am going to do for the time being. I have modestly increased the amount of savings towards retirement; now FI is at age 45.98, not considering today's market carnage. Any extra I am able to save above and beyond that will go towards child #2's accounts until his is funded to the same level as child #1. Then I'll work on child #3's accounts further until hers are funded to the same level as children #1 and #2. That will keep me busy for a while.

2Cor521

Good luck. Does this 153 day improvement in FIRE readiness include the two days between original and closing post?

You sound like you're at the top of your game, but it always helps to remember Burns:

The best laid schemes o' mice an' men/Gang aft agley

 

[deserat]

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.

Not so much anymore!!!!! Everyone is in some form of the Army now with the deployments.

To answer the OP - sounds like you have done awesomely well - it also sounds like you've managed your childrens' and your expectations regarding future money flows for college/retirement. To me the key is will you truly retire early at that age? Based on your responses to the thread, I'd say no and so therefore, you could do both.

Now, for a philosophical discussion, you will (as you can see) get many different answers. I have stepchildren - my husband and I have college funds for them - enough to have them go to their local community college for two years and then transfer to a state college (to me the most economical way to go to college without a scholarship of some sort). The older son has pi$$ed it away and the younger son needs to graduate HS first.

My husband's story is he enlisted in the Air Force and got his degrees at night using grants, extra cash and credit cards - he's now been an officer for over ten years and will be retiring soon. He very much values his education and the opportunities he's had.

My story - my parents told me I was going to college from about age 2 on and said they didn't have the money, I could get a scholarship as I had demonstrated I was intelligent or go to a military academy like Dad. I ended up with a ROTC scholarship - Dad gave me some living money monthly and I worked 15-20 hours a week as well (summers full-time as well). For graduate school I entered another work-study program - so my education has been funded by others HOWEVER due to my willingness to work hard to demonstrate I was worthy of their gift. For ROTC I did 4 years active duty and 4 years Reserve (stayed on but that's another story). For the graduate degree my master's thesis had to be something of value to the hospital I worked for - I rummaged through projects they had or needed to be accomplished and then chose from those.

The decisions I made on my own and those accomplishments I earned are the ones I value the most - I don't mind helping someone a bit, but a full-ride without some expectation of return can lead to inappropriate expectations from both sides involved in the transaction.

As to fairness amongst the children - I had a man tell me once that the only societal unit in which communism works is the family (to each according to his needs). Every child is different and has different desires and aspirations - giving the skills and tools to reach those aspirations is important, not necessarily ensuring you were always 'fair.' Fair is too much of a subjective term.

Off soapbox!

 

[haha]

I think it is good to provide some or most of the funding for kids' college costs. It removes the requirement that they HAVE to work. They may be able to handle a full courseload and put in 20 hours a week at a job, but then again they may not.

I don't see why it is necessary for students to carry a full course load. My kids took forever to finish University, but all along they were working professional type jobs in their field. Both were working at full time professional jobs before they finished. Neither was ever tempted to assume that college was mainly for drinking or orgies, and neither ever had any conflict with me about any of it. My contribution was what they took within them when they went out on their own, and an occasional few hundred bucks to allow a treat when they had just made a big push toward some goal.

Ha

 

[FUEGO]

I don't see why it is necessary for students to carry a full course load. My kids took forever to finish University, but all along they were working professional type jobs in their field. Both were working at full time professional jobs before they finished. Neither was ever tempted to assume that college was mainly for drinking or orgies, and neither ever had any conflict with me about any of it. My contribution was what they took within them when they went out on their own, and an occasional few hundred bucks to allow a treat when they had just made a big push toward some goal.

I suppose it isn't necessary to carry a full course load. And as far as working during college, I can't encourage it enough as long as it is beneficial in some way other than paying $7 per hour. In hindsight, I wish I would have pursued more work experience during college instead of rushing through it. I did, however, work my way through increasingly professional positions to help pay for college (like your kids) ie intern -> research assistant -> course instructor -> research associate -> research engineer.

While good life experiences can be obtained by working for minimum wage washing dishes, selling books at the bookstore, or busing tables, I wouldn't want to force this on my kids as a means of survival during college. I would rather they have a little leeway to develop personally, intellectually and professionally. This may involve keg parties and boys... Maybe they can get professional jobs in their field, maybe not. I suppose it depends on their field, where they are located geographically, and their personality.

 

[haha]

While good life experiences can be obtained by working for minimum wage washing dishes, selling books at the bookstore, or busing tables, I wouldn't want to force this on my kids as a means of survival during college.

Agree with this. "Just a job" is usually a mistake for an ambitious university student. You want to be learning something important, meeting people and making connections, etc

Ha

 

[Grep]

Preface:

I put myself through my undergraduate and graduate degree programs with essentially no help from anyone, including from financial aid. By working hard, I took on very little debt, and paid that off immediately.

This was VERY hard on me as an undergraduate, when it's hard for a kid to obtain a job paying more than minimum wage. It hurt me academically as well as extending the duration of my undergraduate degree. In retrospect, I would have been better off taking on more debt and finishing sooner. On the other hand, it sure did toughen me up. I've been independent and financially disciplined ever since.

Here are my opinions, including from seeing these issues come up as a Professor:

First of all, I see no problem with a student taking on debt. The student has their entire working lives in front of them, while their parents are often nearing retirement with paltry savings.

I'm appalled when I see parents, often late in their working lives, spend all of their savings sending their children to college, when these days financial aid, including string-free aid, subsidized student work and loans, will take care of that for them. I understand the pride the parents might feel in doing this, but they are severely hurting themselves at just the wrong time, while their children have a lifetime of human capital to draw upon. My advice to these good folks, which is rarely heeded, is to fund and protect their retirements first, and help their sons and daughters second.

(I'm not at all swayed by arguments that children are unfairly burdened with debt just by being born into our admittedly profligate country. This debt also represents vast investments in supportive and protective infrastructure that we, and future generations, benefit from. But this is really a different discussion.)

Now, on to your situation:

Anyone approaching a 4% SWR by mid to late 40's is in very good shape. As well, you have the larger portion of your children's education funded already. It appears that a rather modest additional investment, which I might speculate would not exceed half of a years labor, would fully fund their educations.* Whether they would fully appreciate it or not, this is a tremendous gift to them, and is something that would likely be a source of pride to you. And let's face it, try as you might to live forever and spend your last dime, they would probably get that money, and more, in inheritances one day anyway. Perhaps it's best to give it to them up-front when it means the most.

The down-side to supporting them, given your relatively good situation, is that the children may not learn financial discipline as well. Only you can judge the importance of this. As a Professor, however, I know that college-age kids are not quite mature adults. They can be forgiven for not taking on all the responsibilities of adults for a few more years.

Best of luck.

*My math may not be right, but I think you have that under control. I see your request for advice as perhaps more philosophic in direction.

 

[haha]

First of all, I see no problem with a student taking on debt. The student has their entire working lives in front of them, while their parents are often nearing retirement with paltry savings.

So true. If the added money value of the education will not support the loans and then some, don't bother with that particular education. It's just like a young person who has been to trade school taking on debt to buy a set of tools. He doesn't think he is becoming well rounded, he thinks he is setting up an enterprise for himself and perhaps his future family. If this doesn't look like a high expectation bet, he doesn't take it.

Americans have been sold an absurd bill of goods by the educational establishment. They pay big$$ for an education that they should have achieved before leaving k-12, but because we all know that the real purpose of K-12 is social engineering they did not learn anything helpful in this long boring waste of young energy.

And if you want to study 19th century Russian poetry, do it on your own dime, but better understand that it will take a lot of luck for you to avoid a long period of penury.

Ha

 

[FUEGO]

And if you want to study 19th century Russian poetry, do it on your own dime, but better understand that it will take a lot of luck for you to avoid a long period of penury.

I agree wholeheartedly that there should be a purpose to higher education beyond mere intellectual enlightenment. Maybe that is my middle class background talking and it would be different were I from the aristocratic classes. If one seeks merely erudition and culture, a library card and a plane ticket for a summer in Europe seem to be the cheapest and best option for that.

I think I will address the "desire to study 19th century Russian poetry" by saying, sure you can study that, but get a real degree while you are at it. Take a Russian poetry class every semester if you want, even if it adds a semester or year to your curriculum. Just make sure you get a degree that is worth a dang when you graduate!

(this from a guy with a BA in Spanish Literature among others )

 

[Grep]

As a Professor at a prominent research University, I'm bound to defend those who wish to study what society deems impractical from a monetary standpoint. There's a place for artists, musicians, poets and dreamers, and the world would be a poorer place without them and institutions that will allow them to flower.

In contrast, students in "practical" fields may often find that a dreary, repetitive, soulless life awaits them. That's what we are all here on this web-site to escape, after all!

In my students, I see the ones who "wanna good job" as putting in the minimum effort. The dreamers are the ones with fire in their bellies, and who will save the world if anyone does.

Cheers.

 

[Rustic23]

In the paper here recently there was an article about attending the 'Right' college. It stated the purpose of college was to improve the value of human capital. In short it said that when someone goes to say an Ivy League school with massive debt to become an elementary school teacher, then there is a portion of that money that is wasted. That the same improvement could be made by going to a cheaper public school with an equal economic result. It does not really fit this op's question, but I thought it was an interesting look at a college education.

 

[Grep]

Speaking as someone who went to top-three public and private (Ivy League) schools, I can say that the public school was far more concerned about maximizing the value to society delivered per student than the private one was.

At the latter, collecting fees and not interfering with the Professor's golf practice or outside consulting gigs sometimes seemed to be the larger priorities. I'm glad I went to both, though.

 

[FUEGO]

As a Professor at a prominent research University, I'm bound to defend those who wish to study what society deems impractical from a monetary standpoint. There's a place for artists, musicians, poets and dreamers, and the world would be a poorer place without them and institutions that will allow them to flower.

In contrast, students in "practical" fields may often find that a dreary, repetitive, soulless life awaits them. That's what we are all here on this web-site to escape, after all!

In my students, I see the ones who "wanna good job" as putting in the minimum effort. The dreamers are the ones with fire in their bellies, and who will save the world if anyone does.

Cheers.

There is certainly no problem with the pursuit of art, music, poetry or dreams. The question is whether it is proper to spend four years doing solely that at a potentially very expensive institute of higher learning where the likely outcome of that effort will be a "dreary, repetitive, soulless" job as an insurance salesman, financial "planner", or administrative assistant. Or if you go back to school maybe you can get a teaching license and get a good solid job that pays enough to get by.

Art, music, poetry, literature, history, etc - all intrinsically valuable pursuits, no question from this Phi Beta Kappa key holder. But faced with the economic reality of needing a job that pays bills at some point, it doesn't necessarily pencil out to get a four year degree solely in one of these subjects. But to each their own I suppose!

 

[haha]

There is certainly no problem with the pursuit of art, music, poetry or dreams. The question is whether it is proper to spend four years doing solely that at a potentially very expensive institute of higher learning where the likely outcome of that effort will be a "dreary, repetitive, soulless" job as an insurance salesman, financial "planner", or administrative assistant. Or if you go back to school maybe you can get a teaching license and get a good solid job that pays enough to get by.

Or you can spend your youth trying to stay on the good side of some tyrannical professor to eventually get your own PhD- and then get a nice dreary repetitive soulless job teaching and "doing research" in philosophy or whatever. For the story from the horse's mouth:

My past is somewhat similar to yours. I have a Ph.D., worked in R&D for many years, and decided that being a Professor would be a "down-shifting" move. My thoughts on that life were similar to yours: work with bright students, teach a little, write a few papers, attend conferences, all in a relaxed and genial atmosphere.

WRONG! My life as a Professor has been far, far more stressful than ever before. The ticking tenure clock, much lower salary, working with surly, unprepared and entitled students, "publish or perish" pressures that lead to the temptations of quantity over quality, no time for relaxed travel, *unbelievable* political games...

Maybe it would be different in India, I don't know, but maybe not. I don't want to spoil your dream, but it's just something to think about.

-Grep




ha

 

[FUEGO]

Or you can spend your youth trying to stay on the good side of some tyrannical professor to eventually get your own PhD- and then get a nice dreary repetitive soulless job teaching and "doing research" in philosophy or whatever. For the story from the horse's mouth:

Interesting you mention that. I'm at an age where most of my old friends from high school (that I found through facebook!) are either in the middle of their residencies or finishing up writing their dissertations. Most of the latter at Ivy league level schools. Finishing up that dissertation sounds more grueling than sawing your own leg off over the course of two years.

It is obvious that obtaining a PhD is difficult difficult stuff, and the job prospects aren't that great afterwards in non-technical fields. Luckily most of my friends are in the sciences, so needless to say they will be getting a job paying six figures or close to it straight away either in industry or as a professor somewhere. But where does the Yale PhD sociologist go if not academia? Good thing she has a rich husband and family!

 

[Maurice]

I'm a contrarian, I guess, I'd fund the kids school.


But I must say its hard to advise that because we don't know the impact of that decision based on the data you provided. Is the 31k you'd need to plop into the college funds one weeks income or 3 years?

Either way I'd plop away and take the retirement hit.

 

[SecondCor521]

Perhaps you should try to refine your plan so that you know exactly when you will be FI. 45.98 is somewhat approximate, can't you get to five decimal places?

45.98494. However, don't mistake precision for accuracy!

Good luck. Does this 153 day improvement in FIRE readiness include the two days between original and closing post?

You sound like you're at the top of your game, but it always helps to remember Burns:

Thank you. Yes it would. The number is continually updated, but it's just a target that I [-]obsess over[/-]focus on over time. I'll get there when I get there, and I fully expect that number to change over time with the vagaries of life, but it's helpful for me to have a ballpark estimate of when that might be.

2Cor521

 

[Moemg]

Second cor 521,
You are doing a great job taking care of your needs and your kids .Congratulations on a great job !

 

[charlie]

In my case, I felt compelled to start funding 529 plans for my 3 grandkids
after my mother passed last August. She and Dad were firm believers
in higher education and she would like helping her great grandkids. My
brother and I had the benefit of having most of our college paid for, and
I considered it my duty to fund my 2 kids. However, this is a very personal issue and I understand the counter argument that your kids
will appreciate their education if they have to work for it. To each his own.

Cheers,

charlie

 

[freebird5825]

I have something I feel really good about...my LH's sister and her DH have a 6 year old boy. The baby was born 2 years before my LH passed. The boy's parents are classic spendthrifts. Up to their eyeballs in debt.
For his 1st birthday, we decided to set up a "college fund" by opening a regular VG account in my name only, with the child as beneficiary. It is completely "family politics" proof.
The boy will never get to know his uncle, but my LH's legacy to his nephew is in my very capable hands. It is now invested in the VG Target retirement fund for the year he turns 18. My plan is to write checks to him for medium size college expenses. I have a provision in my trust to handle that money separately and with explicit instructions to keep it out of his parents' hands.

 

[Nords]

The boy will never get to know his uncle, but my LH's legacy to his nephew is in my very capable hands. It is now invested in the VG Target retirement fund for the year he turns 18. My plan is to write checks to him for medium size college expenses. I have a provision in my trust to handle that money separately and with explicit instructions to keep it out of his parents' hands.

We had a couple of close family relatives assure us more than once that our kid's college expenses were taken care of.

It's a good thing that we didn't take their word at face value.

 

[crazy connie]

I am a bit late to this party but will chime in. I paid for daughter 100% at State U's. Son dropped out for a couple of party years and will be a senior in tne the fall at State U 15 miles from home. He is doing the work, grant and loan thing since I am retired. There is no perfect fits all response.

If you save into an IRA, you can tap it without taxes for college bills. You might want to read up on that a bit.

 

[freebird5825]

We had a couple of close family relatives assure us more than once that our kid's college expenses were taken care of.

It's a good thing that we didn't take their word at face value.

I understand completely. That is exactly why I built a very specific clause into my revocable living trust. The parents know about the fund, of course.
I did a lot of research on 529 plans and any potential effects of gifts from aunts/uncles on financial aid. NY 529 plan expenses were too high for my taste. NY admins took an additional fee on top of the fund exp ratio back then. Ridiculous!
Gifts from me will have zero effect on aid as long as I keep the annual amounts under the IRS threshold and it is not used directly for tuition.
All of the provisions of the usual college savings vehicles were of no use for aunt/uncle contributions. No tax deduction allowed as it is for parents.
We chose the "rich aunt" path so that family politics and parents' financial habits were not an issue.
The only downfall is I have to pay the taxes on cap gains and divs. That seemed to be a better deal than the long term expenses drain with a 529 plan. And I have complete control over the AA, i.e. I can exchange to another fund easily if need be.
The plan has been greatly improved as of 2008 and is with Vanguard now. I may take another look. The boy is 6 years old now.
https://uii.nysaves.s.upromise.com/content/programfeatures.html

 

[freebird5825]

This is kinda spooky - lookee at what was in my M* Morning Digest mailbox this AM
The Best and Worst 529 College-Savings Plans - Morningstar - Fund Spy