SERIOUS question for the financial savy peeps

[crb]

Wife and I are planning to start a family in 2013. We should be close debt free except our house before my wife quits. I am a planner and think long term. I have been thinking college funds or downpayment for a house if they choose not to go to college .

How much should I plan to put in a college fund. My thought is $20k per kid. I know 20k probably won't pay for college completely, but it will be a good starting place. This number assumes its in the budget. My plan is to contribute weekly to the fund.

Should I go less and invest it better than a money market account?

My wife and I's parents didn't have any kind of college fund for us and we went heavily into debt to attend college. Keeping my fingers crossed, but it will all be paid off in a year. I take that back my student loan probably won't be, but its at 1.2% or some crazy low rate.

Edited May 13, 2012 by crb

[C-bus]

Remember.... student loans are cheap. Financial advisors would tell you to invest in your own retirement and then help as you can at that point.

That being said, I've tried to get about $2000 per year, per kid in a tax-sheltered college savings. If I could maybe get them each through a couple semesters, that would be nice.

[crb]

Remember.... student loans are cheap. Financial advisors would tell you to invest in your own retirement and then help as you can at that point.

That being said, I've tried to get about $2000 per year, per kid in a tax-sheltered college savings. If I could maybe get them each through a couple semesters, that would be nice.

Subsidized student loans are cheap, but unsubsidized are not and usually require a cosigner. I'm not cosigning for student loans again.

I will fully fund our retirment also, and hope to have the house paid for within 5 years instead of 27. We should easily be able to do both especially once the house is paid for.

Edited May 13, 2012 by crb

[JStump]

Just make less money, then they will go for cheap! Thats how I am going to school, my parents never made much money so I only have about $15k in loans and have been in school for 4 years.

[crb]

Just make less money, then they will go for cheap! Thats how I am going to school, my parents never made much money so I only have about $15k in loans and have been in school for 4 years.

My wifes parents made around 50k with 3 kids so she got no state help! We got big student loans. My parents made like 35k with 4 kids I had a free ride, and screwed it up by choosing a different school. I got approx 10k in student loans.

Once the house is paid off, sold, and new house built and paid for, a large nest egg acquired I probably will make less money.

[ohdaho]

Consider a 529 plan for setting up a college fund for your kids. Various states have different plans and associated fees with these plans that are tax-deferred. The key is finding the right fund to minimize those fees. Also, you don't necessarily have to be a resident of a state to utilize their 529.

[Bubba]

I know a number of my friends who simply contributed to their IRA. Depending on your tax situation, the money may be tax-deferred, similar to a 529 plan. The biggest benefit is that you maintain absolute control of your funds. If your kid(s) decide to head to Colorado to become ski bums or decide to dedicate their life the monastic life, you're still stuck with an unused lump of money in a 529 plan. Plus, I don't think the 529 plans are quite as flexible as to where/how they can be used. However, funds can be withdrawn from your IRA PRIOR to 59 1/2 without penalty and be used for post-secondary education/college/vocational school for yourself, your children and your grandchildren. See below:

"When you take money out of an individual retirement account before you reach age 59 1/2, the Internal Revenue Service considers these premature distributions. In addition to owing any tax that might be due on the money, you'll face a 10 percent penalty charge on the amount.

But there are times when the IRS says it's OK to use your retirement savings early.

Two popular, penalty-free withdrawal circumstances are when you use IRA money to pay higher-education expenses or to help purchase your first home.

OK for school

When it comes to school costs, the IRS says no penalty will be assessed as long as your IRA money goes toward qualified schooling costs for yourself, your spouse or your children or grandkids.

You must make sure the eligible student attends an IRS-approved institution. This is any college, university, vocational school or other post-secondary facility that meets federal student aid program requirements. The school can be public, private or nonprofit as long as it is accredited.

Once enrolled, you can use retirement money to pay tuition and fees and buy books, supplies and other required equipment. Expenses for special-needs students also count. And if the student is enrolled at least half-time, room and board also meet IRS expense muster.

Read more: IRS rules for early IRA withdrawals http://www.bankrate.com/finance/money-guides/irs-rules-for-early-ira-withdrawals-1.aspx#ixzz1unmmZ6Hq

[crb]

I know a number of my friends who simply contributed to their IRA. Depending on your tax situation, the money may be tax-deferred, similar to a 529 plan. The biggest benefit is that you maintain absolute control of your funds. If your kid(s) decide to head to Colorado to become ski bums or decide to dedicate their life the monastic life, you're still stuck with an unused lump of money in a 529 plan. Plus, I don't think the 529 plans are quite as flexible as to where/how they can be used. However, funds can be withdrawn from your IRA PRIOR to 59 1/2 without penalty and be used for post-secondary education/college/vocational school foir yourself, your children and your grandchildren. See below:

"When you take money out of an individual retirement account before you reach age 59 1/2, the Internal Revenue Service considers these premature distributions. In addition to owing any tax that might be due on the money, you'll face a 10 percent penalty charge on the amount.

But there are times when the IRS says it's OK to use your retirement savings early.

Two popular, penalty-free withdrawal circumstances are when you use IRA money to pay higher-education expenses or to help purchase your first home.

OK for school

When it comes to school costs, the IRS says no penalty will be assessed as long as your IRA money goes toward qualified schooling costs for yourself, your spouse or your children or grandkids.

You must make sure the eligible student attends an IRS-approved institution. This is any college, university, vocational school or other post-secondary facility that meets federal student aid program requirements. The school can be public, private or nonprofit as long as it is accredited.

Once enrolled, you can use retirement money to pay tuition and fees and buy books, supplies and other required equipment. Expenses for special-needs students also count. And if the student is enrolled at least half-time, room and board also meet IRS expense muster.

Read more: IRS rules for early IRA withdrawals http://www.bankrate.com/finance/money-guides/irs-rules-for-early-ira-withdrawals-1.aspx#ixzz1unmmZ6Hq

This may be just the idea so I have freedom.

[idodishez]

*serious

Doorfront Parking like a BOSS

NoBama 2012

[Carwhore]

I will be following this thread. I want to have 65k saved up for my son I've got 14 years.

With the Ira it would be good, but if you contribute over 5k you can not get a tax deduction.

An I able to open up a ira in my sons name?

[crb]

*serious

Doorfront Parking like a BOSS

NoBama 2012

And....

Go bother exarch the big boys are talking here!

Edited May 14, 2012 by crb

[crb]

I will be following this thread. I want to have 65k saved up for my son I've got 14 years.

With the Ira it would be good, but if you contribute over 5k you can not get a tax deduction.

An I able to open up a ira in my sons name?

Good question. 14 yrs X $5,000 = $70k though, but that won't leave you much in the way of retirement.

Isn't there another IRA where you pay todays tax rate and it grows interest free? Rath maybe?

[JStump]

And....

Go bother exarch the big boys are talking here!

Good question. 14 yrs X $5,000 = $70k though, but that won't leave you much in the way of retirement.

Isn't there another IRA where you pay todays tax rate and it grows interest free? Rath maybe?

*Roth

[crb]

*Roth

I changed the damn thing twice. I'm just about ready to run this phone over with the truck, but I'm trying to stick to the budget.

[madcat6183]

Good question. 14 yrs X $5,000 = $70k though, but that won't leave you much in the way of retirement.

Isn't there another IRA where you pay todays tax rate and it grows interest free? Rath maybe?

Roth IRA, is when it is taxed first so when you get the lump sum at the end it is not taxed again. Traditional IRA's and 401K's you will pay taxes on at withdraw date.

If you are just looking at putting money back, starts a 529 for son(I dont know the laws on this, it wasn't out when I was licensed), ROTH IRA, REGULAR IRA, and MAX your 401K up to what your business will match NO HIGHER. Anything more than that, put into a ROTH or Normal IRA.

ALSO; probably about age 8-12 you will want life insurance with a cash value for your son. Get 250K, but make sure it has cash value AND renewing premium. My parents haven't paid my premium in like 10 years and it's still worth 250K if I die/cash value if I decide to dump it.

I could go on forever, we just met with our financial planner out of Mansfield. If you search this section there is another thread like this, I provided his name there I believe. If not, I have his card and email. We just set my Fiance' up with her first Roth IRA and need to get the check mailed this week.

I paid 0.00 and not one loan for college, with only 7500 a year in scholarships, and small private school, my parents never made more than 60K each, their house was paid for in 13 years, (250K built), they retired by 57mom 61dad, and they travel all year long, all over the world.

Im not being a dick and bragging, but like I posted in that thread, this guy is legit. You definitely don't want to just put money into CD's, savings, checking, etc. You need to truly invest it and chances are if you don't do it often or have the time to truly research and stay on top of it, it won't end well.

[Big Chief201]

I have been doing a lot of calculations on this lately and have come to realize some serious statistics that you may want to consider, especially with the 20K number.

1) OSU is currently charging a little under 20K/year for undergrad (tuition, room+board). Since 2002 this the cost of tuition and fees has increased 60%. with that being said you may want to calculate in increases and the time value of money.

2) A 529 plan is great because of the tax savins it allows and is super easy to set up. Only thing about this is you should expect minimal returns compared to other investments. The key here is this money should not be placed in high risk since the beneficiary will need this money and losses are something you dont want.

3) Based off my calculation of a 4% annual return one would need to put away $166 per month for 18 years to have saved roughly $50,000.

[smashweights]

Here's my advice: you have 17 years to figure out your plan. If you haven't worked out a comprehensive financial plan: retirement, loans, kids college, etc. Take a few months, read good investment books, get involved in an investment forum, and nail down exactly how you're going to tackle your total financial picture over the long haul. There's a lot to consider with tax implications that you'll want to be aware of and plan ahead to cover. For instance, do you know if the 529 tax deduction will be better off than the untaxed Roth growth (if that was part of the plan)? Should you even consider using your limited Roth space to hold future college money? How risky of an investment approach should you take with the funds? Stocks or bonds or both and what ratio and how to change it as your time horizon approaches. How to take expenses into account.

Consider picking this book up, it's a great place to start for someone with minimal investment experience and does a great job explaining types of investments, tax implications, and even a short chapter on college savings:

http://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0471730335

There's also an associated forum at www.bogleheads.org that has some incredibly good information on topics just like this.

Anyway, the point is still don't rush into anything just yet. Take the time to figure out your financial plan so you're comfortable in any market situation. Your total financial picture is bigger than just a potential 529 savings plan and only you have all the information to figure this out successfully.

It's a long journey! Good luck!

Edited May 15, 2012 by smashweights

[wht_scorpion]

And....

Go bother exarch the big boys are talking here Go away rug rat!

Fixed LOL

[Disclaimer]

I'm just kind of curious why crb wants to send his kids to college....

College Makes You Liberal

Also, isn't it kind of conflicting from your political views? Have the kids pay their own way IF they decide they want college, don't give them that social safety net. And if you insist on giving them welfare off your financial teat, the least you can do is charge them 6.4% interest or better on the money you LOAN them. And IF they decide they want to go to college, are you planning on forcing them into a major? It'd be kind of silly to spend $100k at a college for a degree that only makes $25k/yr... so you're going to have to set some ground rules on your children "pursuing their dreams" or "pursuing their financial independence" because those aren't always 100% mutual.

Edited May 15, 2012 by JRMMiii

[crb]

I'm just kind of curious why crb wants to send his kids to college....

College Makes You Liberal

Also, isn't it kind of conflicting from your political views? Have the kids pay their own way IF they decide they want college, don't give them that social safety net. And if you insist on giving them welfare off your financial teat, the least you can do is charge them 6.4% interest or better on the money you LOAN them. And IF they decide they want to go to college, are you planning on forcing them into a major? It'd be kind of silly to spend $100k at a college for a degree that only makes $25k/yr... so you're going to have to set some ground rules on your children "pursuing their dreams" or "pursuing their financial independence" because those aren't always 100% mutual.

I believe there is a politcal forum. 2ndly this is a serious question if you don't want to be add actual advice fuck off!

All college aren't liberal! Just because I lean libertarian, doesn't mean my future children will as adults.

Once again if you don't want to lend actual advice FUCK OFF!

[Disclaimer]

I believe there is a politcal forum. 2ndly this is a serious question if you don't want to be add actual advice fuck off!

All college aren't liberal! Just because I lean libertarian, doesn't mean my future children will as adults.

Once again if you don't want to lend actual advice FUCK OFF!

Even if I gave advice you wouldn't take it anyway regardless of whatever credentials I had to give it, so that's a lose-lose.

Instead, I'm more interested in your motivation about why YOU, specifically, want to setup an educational nest egg for your potential future offspring, since you may have bigger problems than finances if your kids turn out to not think like you once they're educated.

[crb]

No I probably would have taken your advice into consideration, but instead you chose to make an sss of yourself. To think I actually unigored you, I guess that was a mistake. You may now proceed to FUCK OFF ASSHOLE!!!

GO STALK SOMEONE ELSE.

OH AND FUCK OFF!

I'm sure me telling you to FUCK OFF gets your rocks off, for that YOUR WELCOME

[Disclaimer]

No I probably would have taken your advice into consideration, but instead you chose to make an sss of yourself. To think I actually unigored you, I guess that was a mistake. You may now proceed to FUCK OFF ASSHOLE!!!

GO STALK SOMEONE ELSE.

OH AND FUCK OFF!

I'm sure me telling you to FUCK OFF gets your rocks off, for that YOUR WELCOME

Such language and closed-mindedness :tsk:tsk:tsk:

With that attitude I don't think you have the maturity to handle the financial and emotional needs of a child. You can't even cope with adults on the internet having a rational discussion.

[crb]

Rational?

I really think you should troll elsewhere unless you can add something usefull.

If you don't want to add useful info then Justin Fuck off, with all due respect!

[kawi kid]

Jesus tap dancing christ.