saving more for college

[boefixepa]

What the above poster said is true, I'm not saying don't help. It was an overwhelming feeling for me to try and tackle it on my own at times. I am a very determined person! I just wonder why it seems a "requirement" for parents and an expectation for kids. I have known kids who "expect" it. To the point the parents end up with tens of thousands of dollars of debt because they did not have it. So I guess, just set reasonable expectations for your children. Talk to them, tell them if they want the six digit college they better get a full scholarship to go with it, kind of thing. And yes, I expect my kids to work while in college. I am amazed that my husband was able to get a bachelors and a master without ever having to take out a student loan, but he did it. We have not been out of college that long that our experience is that dated. I did graduate this century, but it has and will continue to increase in cost as time passes, sad but true.

[sblatner]

Just to be clear here, the fact that their funds lost a lot of value has nothing to do with the fact that the money was in a 529 account. When the market crashed, virtually every equity fund lost a lot of value. Had the money been in a taxable account, the same thing would have happened, as I'm sure many of us can attest to.

Protecting the money from market swings would require investing it more conservatively with less equity exposure no matter what type of account you are using.

Except one friend had a senior in high school and the funds were supposed to have been moved to a less risky fund and they weren't. That fund lost 35% the year before she was going to college. The funds should have been in a cash type investment.

I like to be able to control my investments and not have someone else tell me how they have to be invested. In 2008, we had all our money in cash as my husband knew the markets were going to go down.

[disneysteve]

Except one friend had a senior in high school and the funds were supposed to have been moved to a less risky fund and they weren't. That fund lost 35% the year before she was going to college. The funds should have been in a cash type investment.

I agree. He should have been more conservative at that point but he chose otherwise. He could have made the very same mistake had he held the money in a taxable account.

I like to be able to control my investments and not have someone else tell me how they have to be invested.

I agree with this as well. There is nobody but me who decides how the money in our 529 plan gets invested. The same is true for our Roths, my wife's 401k, her 403b, and our taxable accounts. Nobody dictates how we have to invest our money in any account. I certainly wouldn't hand that control over to anyone.

I choose how the 529 is invested and I can change it whenever I'd like. My daughter is a junior now and I have definitely made it more conservative over the past couple of years and will continue to do so over the coming year in preparation for when we will start tapping that money.

ETA: The underlined part is incorrect. You can only change your 529 allocation once per year so there is that restriction. A taxable account would be much more flexible. Of course, it would also be a taxable account. With our 529, the money has been growing tax-free for the past 10 years.

[sblatner]

I agree. He should have been more conservative at that point but he chose otherwise. He could have made the very same mistake had he held the money in a taxable account.


I agree with this as well. There is nobody but me who decides how the money in our 529 plan gets invested. The same is true for our Roths, my wife's 401k, her 403b, and our taxable accounts. Nobody dictates how we have to invest our money in any account. I certainly wouldn't hand that control over to anyone.

I choose how the 529 is invested and I can change it whenever I'd like. My daughter is a junior now and I have definitely made it more conservative over the past couple of years and will continue to do so over the coming year in preparation for when we will start tapping that money.

DS - I have been told that they didn't have a choice where the money was invested. The money was supposed to have been put in a more conservative investment by the money managers as their daughter got closer to graduation but they didn't make it conservative enough. It was a managed fund I guess.

[disneysteve]

DS - I have been told that they didn't have a choice where the money was invested. The money was supposed to have been put in a more conservative investment by the money managers as their daughter got closer to graduation but they didn't make it conservative enough. It was a managed fund I guess.

I'm sure part of what goes into the ratings of the "best" 529 plans is the investment options offered by the plan. Just as there are lousy 401k plans, there are probably lousy 529s. The good thing is that you can pick any 529 you want. With a 401k you have to take the one your job offers.

[snafu]

LivingAlmostLarge: Trying to imagine retirement feels like trying to imagine myself living in some other country where they speak a different language and have a different value system...totally foreign. I know the two most important factors will be to maintain good health and remain debt free. When I visit seniors in our extended families I've noticed that they are in distinct categories. First period is incredible activity, they have time to work through every project they ever wanted to do. The second period seems to be fulfill their bucket list with travel, learn new skills, make new friends, downsize from house to condo. So many are bored in 5 years and go back to appropriate part time work or volunteer activities. By the time they're in their mid 80's they've agreed to some type of assisted living knowing they can get services as needed and that's when it gets expensive.

How do you expect to use time as a retiree? What activities will give you pleasure? What expensive do you imagine covering? What will your cash flow look like? While inflation is an unknown, I anticipate about 45% of current costs. You've a financial plan that will compound over the long term and should give yourself a great big pat on the back for doing the right thing!

[MonkeyMama]

I choose how the 529 is invested and I can change it whenever I'd like.

Is this really true? You can only change investment options in 529 plans once per year. Correct?

[disneysteve]

Is this really true? You can only change investment options in 529 plans once per year. Correct?

You're correct. It is once per year. So there is that restriction. I still control the allocation but it is true that in a taxable account, you'd have a lot more flexibility.

[MonkeyMama]

MM how would the 529 be a tax break for us?

Should we talk to a tax professional?

Savingforcollege.com is a good website. You don't need a tax professional, you just need to read up on college savings vehicles (same as you would read up on retirement vehicles).

How would it be a tax break? It's a little bit like a ROTH. As long as they money is used for education, it grows tax-free. The earnings are taxed and penalized if used for anything other than education. But there are way less limitations on how much you can contribute.

That said, for whatever reason, the downsides are not mentioned much. Like a 401k plan, the choices are restrictive and tend to be more expensive. Lots of complaints about lack of transparency (not quite sure what investments or fees are). I have never been a huge 529 fan, but makes more sense at higher wealth and income levels. Full disclosure - I have not voiced my personal opinions very much professionally (most my clients have not consulted me on their 529 plans), but many have ditched their 529 plans over the years because they were so unhappy with fees and performance. I just share because you are unlikely to find much about the downsides, anywhere else. Those are the downsides - plenty of the upsides are discussed all over the internet. Just do a little homework.

[disneysteve]

Like a 401k plan, the choices are restrictive and tend to be more expensive.

Just do a little homework.

I think this is perfect advice. I know that several 529 plans are run by Vanguard, obviously well known for having low fees. TIAA-CREF also runs some plans I believe and are also well respected. So the key is to choose the right plan.

[moneybags]

I know this a little off topic, but why do parents feel obligated to pay for their children's education?

I think an education is the best gift I can give my children. I have made it a priority to save enough money to do this. To me, it is like food and water, I wouldn't let them go without it.

Every situation is different, but I saw a lot of kids wasting their parents hard earned and hard saved money while I was working hard. They didn't appreciate it, nor value it. I am more then willing to help my children, to a limit, but I will not just "give" them tens of thousands of dollars. If they value the education, they better be willing to work for it and show me they are getting something for the money.

I hear this all the time, and yes it does happen. Know your kid, put them in a college that is the right fit, and if they fail, change the plan. No need to keep pouring money into a plan that isn't working. I worked my butt off to pay for my college education. I don't appreciate it or value it any more than people I know who had their parents help. My daughter values her college experience far more in her first year than I ever did.