How much should I be setting aside for College

[CouponAddict]

I have desided that I am going to take Dave Ramsey's Advice and start saving for my DS college. I was for a long time under the belief that you should save for your retirement first because your children can get loans & funding for College. I have done every retirement calculater I can find on retirement and I find that no matter how I crunch the numbers, we should be comfortable come retirement.

I am wondering how do I deside how much money to put into the program each month. I do not want to put too much and have to get dinged the 10% fee for any leftover money we take back from the account for money he doesn't use incase we over save or if he desides not to go.

Also I not sure if I found this addressed on the 529 sites, but if I have a 529 account in my name with my husband as secondary owner for my son's education will we lose the education tax credits for my husband (he is in his second semester of college) on our tax returns over the next few years.

[sweeps]

Even though I'm not a huge fan of planning calculators, it's better than nothing. Here is one you could try out.

Your husband's tax credits will not be reduced by your contributing to a 529 plan.

[Snave]

Don't know the tax answer in the bottom 1/2 of your post, but I can tell you that I am in the same boat with saving for college for my little one that is 2. Since I don't know the age of your children, it is tough to say how much will be enough. Ours is so young young that college could be outrageous in another 16 years when he enters.

I just keep wondering if at some point in time, the cost outweighs the return. I know that isn't the case, but the calculators show a private school will run $225 - 250K when my son goes. Seriously! Who is going to pay for that. At some point the college tuition increases have got to end or slow down. Wouldn't I be better off investing $250K when he turns 18 for his retirement. If he didn't touch it until he was 65 and it returned 10%, it would be worth about $27 million. Even with inflation, that will be about 175K a year in todays dollars.

Now that I have ranted and raved, we are putting about $4,000 a year away. We know we will have more children, so we figure we can change the beneficiaries if we need to.

One of our little tricks to get this money in is paying ourselves when we get money from our HSA account. We have a few thousand in our Health Savings Account. So, when we go to the doctor or pay for a prescription, etc... we pay cash. When we get the reimbursement check, we just add it to the college fund. It feels like found money since we already paid for the medical expense!

[jIM_Ohio]

I would plan to pay for about 2/3 of the college cost of a state school. If the college chosen is more expensive, maybe the savings is half the need.

This way no penalties on withdraw.

I am not too familiar with 529s. Here is a comment-

You husbands tuition should be fully tax deductable- I think. 529's only grow tax free and give tax free withdraws. I do not know if this drops the deduction for tuition expenses or not. Look into this prior to making a decision.

[sweeps]

Again -- 529 contributions have no effect on whichever credit/deduction he is taking, the Hope Credit, the Lifetime Learning Credit, or the Tuition and Fees Deduction. If the husband were taking a withdrawal, that would be a different story.

[CouponAddict]

Thank you, I did the calculator and well 4 year public 143,487 is 445 saved per month.

I guess I will have to review the budget and see how much we can squeeze out per month without feeling we are sacrificing our retirement goals. I want to help pay for DS college but I want to have a fully funded retirement, so need to find a happy medium.

[Like2Plan]

CouponAddict,
The totals are shocking, aren't they? That was exactly out reaction 19+ years ago when we were trying to figure out how much to save for DS's college. (The estimate for 4yr public in state college back then was 50K--in reality it is going to be closer to 72K)

We were striving for somewhere between in state and private college, but our budget wouldn't permit full funding at first. As time went by, we increased our savings. Anything you save is going to be a help when college comes along.

[disneysteve]

I think you need to do what you are comfortable doing. There isn't really a right answer. We started DD's 529 with $250/month, I think. Then, when I finished repaying my own student loans, I upped the amount to $400. Then, just last month, to come up with part of the extra $2,000 we can put in our Roths this year, I dropped back to $300/month.

I don't expect or want to save 100% of the cost of college in the 529 because it isn't necessary and I don't want to end up with extra money in there. If we do pay for 100% of college (and I don't think we will), some of the money will come from sources outside of the 529 including other savings and current income.

[maat55]

Your spoiling your kids, let them pay for it.

A wise man once said, Why should I pay for my daughter's education when she already knows everything? One smart dude.

[Tree0164]

I just want to clarify Dave Ramsey doesn't say fund your kids college tutition before funding your retirement.

Step 4 is Retirement 15%
Step 5 is college savings.

Make sure you saving for retirement first.

We currently put $100 a month for each of our kids-2 into 529 and 1 into a mutual fund. He is autistic and I don't see him going to college but I want money set aside for him. It is in our name.

[disneysteve]

A wise man once said, Why should I pay for my daughter's education when she already knows everything? One smart dude.

Very funny.

I can't take credit for that, though. I actually read it on a plaque in a gift shop in Vermont a couple of years ago.

[Snoopy2645]

well my niece is going & the airforce is paying for it she only has to pay housing & food & thats $5k a semester thats just crazy

[Seeker]

Yeah, which is why I say "I don't know how the younger generation having to put themselves through higher education, ever comes out ahead." With the borrowing and loans that go on...???

I worked 7 years full-time before deciding to go back to school. When I made that decision I had 26k in savings. Mid-way through college, I got a part-time job and essentially took 6 years to put myself through college. My entire education costed me just under 9k; this was almost two decades ago. And also it was 2.5 years in a Communicty College, and 3.5 years in the CSU system.

Community Colleges are handy for saving dollars and while frowned upon by some, it may be the way to go for students who really do not know what profession they want to get into, or students who have to work and save dollars for their education.

[CouponAddict]

I just want to clarify Dave Ramsey doesn't say fund your kids college tutition before funding your retirement.

Step 4 is Retirement 15%
Step 5 is college savings.

Make sure you saving for retirement first.

We are currently saving 20% from my pay and 50% from my DH for retirements. The % on My DH looks high because he is a currently a fulltime student and a parttime worker.


maat55
I paid for my school and we are paying for my DH, and so I know my DS could do the same but I WANT my DS to go to college, so I feel I should provide at least part of the cost. And dont feel helping do so is SPOILING since the first two or so years the financial aid he can get will be adjusted my our income at the time. I do believe that him having to provide some of the costs through grants, scholorships or living at home to reduce the costs will make him take his education more seriously.

[disneysteve]

Your spoiling your kids, let them pay for it.

I didn't catch this comment at first.

Helping your kids get an education certainly isn't spoiling them (though I don't think a 100% free ride is necessary either). The cost of college has skyrocketed way, way faster than the inflation rate or personal income. Those of us who went to school 15 or 20 or 25 years ago may not realize how out of control prices have gotten. Working your way through school isn't feasible in the way it was when I was a student in the mid-80s. Even many state schools are pretty pricey these days.

At the same time, of course, a college degree has gotten more and more important in the job market, in almost every field. Employers won't even consider you if you don't have a degree, and quite a few fields now require a graduate degree, not just a BS/BA.

My parents paid for most of my undergraduate schooling, and even then, I finished with $14,500 in loans (this is in 1986). Then came med school and they helped out some, but not nearly as much and by the time I graduated, my total debt was $102,000 in 1990. Without their help, I would have owed more like $150,000 or more, if I was able to do it at all. I'm grateful that they were able to do it, but I certainly wouldn't say I was spoiled.