Miguel and Michele Suarez

[azanon]

What do you guys think about this family and the Money Makover recommendations they got? I'm not too crazy about the recommendations.

http://money.cnn.com/magazines/moneymag/moneymag_archive/2006/12/01/8395189/index.htm?postversion=2006112709

>First of all, poo-poo on the reducing the retirement contributions. 12% combined (what they do now) is a nice start, but I definitely wouldn't reduce that on account of a college fund!

> Michele needs to sell the condo and perhaps use those proceeds to help pay for college. They both have a job already. Sometimes people get confused over just a meer investment and a job. Renting a condo you own to someone else and being a landlord is a job that has income, not just an investment.

> I'd drop the $350/month in the prepaid tuition, to just $100 each in a 529 plan instead. Prepaid tuition plans lack flexibility (such as not using it for school at all) and you never know how circumstances could change. That frees up $150/month. A little bit is better than nothing.

> IMO, they need to just reevaluate their overall cost of living. Is their house too expensive? Are they driving too expensive of cars? They need to adjust their standard of living to where they can save 15-20% of their income to retirement, not drop it from 12%!

>I agree with the other suggestions by Money. (life insurance, will, emergency fund account change)

 

[azanon]

dang, 87 views so far and no one else is interested in this family?

 

[brewer12345]

Eh, screw them. If they are dumb enough to open the kimono to squadzillions of Money readers, let them roast in their own juices.

 

[MooreBonds]

dang, 87 views so far and no one else is interested in this family?

I guess I'm just desensitized by the occasional stupidity that rears its ugly head by the Money mag "financial planners" that they have evaluate the family in each issue.

I remember one young (early-mid 30s) couple in California that had a house worth $1MM, with maybe $500k-$700k in equity. The 'professional' recommendation? Take out a home equity line of credit/2nd mortgage and invest the money in the stock market.

The home equity made up about 80-90% of the couple's net worth!

And people sometimes pay money for advice like that??!?! If I saw it scribbled on the public restroom stall wall, I'd take the time to scratch it out!

 

[mathjak107]

glad i didnt put as much into commodities as they wanted us to do when we were profiled in last march's issue. they also wanted us to increase our small cap holdings by alot. i by design had drawn them down and went big cap just a few months prior.

 

[mathjak107]

i just read that article and i agree poor advice.

when it comes to college theres dozens of ways the kids can finance college and have 30 years to pay it off. i dont know of 1 loan your getting to finance your retirement. never skimp on retirement savings for college savings if you cant afford both.

 

[azanon]

i dont know of 1 loan your getting to finance your retirement. never skimp on retirement savings for college savings if you cant afford both.

I agree with this in theory, but not necessarily in practice. I think there is a way to afford doing something for both in almost all cases provided someone in the family has a job. Granted, sometimes people spend too much on their house, cars, vacations, etc, but the retirement fund and the college fund shouldnt be blamed for these things.

I'd require my son to get a loan/scholarship to pay for all of it, if i could just think of some way to ethically justify not saving at all for him now; while he's growing up. Believe me, if i can justify not paying for something, i'll be the first to do it!

 

[mathjak107]

well that advice is really for when its to late. its really for those that have spent to much on everything and now are passed that point of no return. they are forced now to scramble for their retirement.

 

[azanon]

Yeah, i agree with that. I wouldn't do anything drastic either. I'm just glad i learned about financial management in my 20s and wont be caught by surprise by these sorts of things.

 

[FinanceDude]

dang, 87 views so far and no one else is interested in this family?

Perhaps it's because a lot of us ignore the "Money Magazine Makeovers"...........

Wonder how many people want to open their finances up to a million folks or so??

 

[Alex]

I think the advice is crappy. IMHO, Money magazine (and pretty much all the others) are just "financial porn". The best advice I could give these two is to read books like 'the bogleheads guide to investing", "Work less, Live more", et.al., and educate yourself so you don't fall victim to this kind of bullsh*t advice.

 

[mathjak107]

Perhaps it's because a lot of us ignore the "Money Magazine Makeovers"...........

Wonder how many people want to open their finances up to a million folks or so??

we had no problem doing it. at first we were opposed to doing the article in money magazine but then we said what the heck.

most of the time its those that pretend to have more than they do that dont want their info published.

its funny how people will be more willing to talk about their affairs than their money

now we have no reservations about doing it,in fact its fun being treated like stars for a day.

 

[HFWR]

Maybe it's time for a new tv series: Pimp My Portfolio...

 

[azanon]

Perhaps it's because a lot of us ignore the "Money Magazine Makeovers"...........

Wonder how many people want to open their finances up to a million folks or so??

I think we probably have some young dreamers here though that could learn from a discussion about these makeovers. The point of this thread was to point out where they're going wrong so people can learn from it.

I know you charge for your expertise in the real world FD, but here we give guidance for free.

 

[jazz4cash]

I continue to be amazed that I never hear any of these professional FA's advise using an IRA to fund college. Dependent tuition expense is one of the exceptions for early withdrawal without penalty......normal income tax is due. The IRA can be funded from a 401k if employer permits rollovers. This way the 401k/IRA can support dual purposes. Please note I said "advise", not advocate.

 

[FinanceDude]

I know you charge for your expertise in the real world FD, but here we give guidance for free.

And I give a lot of free advice on here, as do others..........

It is interesting to note that one of the chief editors of Money Magazine USED to be editor at ROLLING STONE, making one wonder at times what they are reading and WHO edited it.........

 

[FinanceDude]

I continue to be amazed that I never hear any of these professional FA's advise using an IRA to fund college. Dependent tuition expense is one of the exceptions for early withdrawal without penalty......normal income tax is due. The IRA can be funded from a 401k if employer permits rollovers. This way the 401k/IRA can support dual purposes. Please note I said "advise", not advocate.

So, you think I should advise people to dramatically decrease their retirement portfolio, when $30 billion plus a year in financial aid is not applied for?? Interesting...........

Most people are lucky to even have an IRA....heck, I recently read that 30% of 20-somethings AREN'T EVEN contributing to a 401K.........and of those that do, 60% is in things like MMF and Stable Value...........

In theory, it is an option...........but if the average IRA in the US has under $25,000 in it, and that's a "nest egg" for somebody........how do you propose they replace those funds?? You're talking to late 30's-mid 40's folks who haven't planned enough for themselves, much less kids........

 

[mathjak107]

i have to agree finance dude, anyone who has to resort to hitting their ira's for college cant afford to do so. they need to sit down early in the game with their children and explain to them that they will need to get financial aid as you just cant afford to pay for school .

 

[HFWR]

And I give a lot of free advice on here, as do others..........

It is interesting to note that one of the chief editors of Money Magazine USED to be editor at ROLLING STONE, making one wonder at times what they are reading and WHO edited it.........

Or, for that matter, what they might be smoking...

 

[FinanceDude]

i have to agree finance dude, anyone who has to resort to hitting their ira's for college cant afford to do so. they need to sit down early in the game with their children and explain to them that they will need to get financial aid as you just cant afford to pay for school .

I am encouraging my sons to do well in school...........it would make me very proud if they got academic scholarships to go to college. My oldest son is a year ahead in school, so he probably is on that path. My younger son is far beyond his years athletically........the skills he has are staggering...........

That being said, I already told DW I will GLADLY pay 100% of the expenses for them to learn a trade if that is their passion. I know what I pay plumbers, electricians, and carpenters when I hire them...... And as far as the future goes, I don't see the demand of that going away, particularly if people start living in their homes longer..........

 

[mathjak107]

my son graduated law school in june and passed the new york state bar last week. my daughter graduates college in december and is going on to graduate school. we paid for college 100% but they are on their own for graduate school. we will help as much as we can but at this point its student loans for the bulk of it..

 

[jazz4cash]

So, you think I should advise people to dramatically decrease their retirement portfolio, when $30 billion plus a year in financial aid is not applied for?? Interesting...........

Most people are lucky to even have an IRA....heck, I recently read that 30% of 20-somethings AREN'T EVEN contributing to a 401K.........and of those that do, 60% is in things like MMF and Stable Value...........

In theory, it is an option...........but if the average IRA in the US has under $25,000 in it, and that's a "nest egg" for somebody........how do you propose they replace those funds?? You're talking to late 30's-mid 40's folks who haven't planned enough for themselves, much less kids........

WoW! It seems I've touched a nerve here. Not sure how the average IRA statistics figure into this or whether a kid gets a scholarship. The FA in the example was advocating a reduction in the 401k contributions to fund a 529 plan, so it seems some planning to fund both needs was the objective. I certainly did not mean to imply that anyone would wreck thier retirement to pay for college, so I will settle for your comment that "In theory it is an option." As a matter of fact, it's working extremely well for me (so far!,) but i agree, its not for everyone.

 

[mathjak107]

if you think about it , my sons law school was 115,00.00 bucks. thats on top of 4 years of college.

he knew from the start that he would have to finance that thru loans but as he realized you are in a way buying a business with that 115,000.00.

there was no business he could ever buy for that amount of money at least here in new york that would generate over 100,000 dollars a year from the first day. he really didnt feel bad about having the loans to pay off

 

[mathjak107]

im a big believer in that you shouldnt even think about setting up college funding unless you are able to fund your retirement or are are at least on track funding it. the last thing you need to do is saddle your kids helping support you later on.

like i said there is hundreds of ways for kids to finance college at low monthly costs even spreading it out over 30 years, but i dont know one loan for retirement financing .

 

[Jay_Gatsby]

I'm not sure if anyone has said so in quite this way, but my perspective on saving for retirement versus your kid's college education is:

"They don't give loans to finance your retirement."