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Scanner, DisneySteve-
I have been doing some 529 research today for my kids. Based on what I advised each of you to do, I have added some detail to my plan for my kids.
I'll blog on this soon, but here is the plan I recomended to you and what I plan to do for myself and my kids.
Background: My kids were born 2 years into a 30 year fixed mortgage. They would start college at year 20 of the 30.
Goal 1 is to have mortgage paid off by year 20.
Goal 1 has lots of details:
a) 5.75% interest rate
b) ~$1600 P&I
c) extra payments of $1000+?? available around year 10 of the mortgage cycle (based on two cars being paid off and 2nd mortgage being paid off before 10 year point on timeline).
d) we have a taxable investment in Permanent Porfolio (PRPFX)- We plan to add to this a little each year for mid term expenses. Most mortgage payoff money goes into this account until it is large enough to pay off the mortgage (might take 15 years, might take 10).
e) once PRPFX has enough money to pay off mortgage, I plan to send the extra payments to the mortgage itself and pay off the mortgage by year 20. Whatever is not paid off by year 20 can be paid off from PRPFX and the remainder of PRPFX sits there for either college expenses, early retirement or other.
2) Find tax deductions for college expenses.
a) Did some reading on Hope and lifetime learning credits today. Maybe we will be eligible, it's possible I might retire before kids start college, so I think this is doable.
b) I could contribute in January to a 529 plan, get a state tax deduction, then withdraw that contribution in June for a tuition payment- I THINK. So chalk a deduction up for education. I need to confirm I can do this (obviously the contribution would be invested in cash because of 6 month duration).
c) I could take out a loan and get a tax deduction on the interest. I don't think this makes sense from an investing point of view, but it might be worth it depending on how much money I had saved or how much tuition actually cost.
3) Use as much of mortgage payment as possible for the college expenses- meaning the mortgage payment gets directed to a 529 plan once the house is paid off.
My wife and I agree we do not fund 100% of tuition already and that student loans are acceptable for the student to pay on graduation.
At one point we agreed we only pay 100% of tuition at one of 3 schools:
Notre Dame
University of Cincinnati (wife's a bearcat)
Kettering University (where I went)
I think we backed off that pedestal, but you never know- 17 years is a long time and I have a retirement to fund.
I have been doing some 529 research today for my kids. Based on what I advised each of you to do, I have added some detail to my plan for my kids.
I'll blog on this soon, but here is the plan I recomended to you and what I plan to do for myself and my kids.
Background: My kids were born 2 years into a 30 year fixed mortgage. They would start college at year 20 of the 30.
Goal 1 is to have mortgage paid off by year 20.
Goal 1 has lots of details:
a) 5.75% interest rate
b) ~$1600 P&I
c) extra payments of $1000+?? available around year 10 of the mortgage cycle (based on two cars being paid off and 2nd mortgage being paid off before 10 year point on timeline).
d) we have a taxable investment in Permanent Porfolio (PRPFX)- We plan to add to this a little each year for mid term expenses. Most mortgage payoff money goes into this account until it is large enough to pay off the mortgage (might take 15 years, might take 10).
e) once PRPFX has enough money to pay off mortgage, I plan to send the extra payments to the mortgage itself and pay off the mortgage by year 20. Whatever is not paid off by year 20 can be paid off from PRPFX and the remainder of PRPFX sits there for either college expenses, early retirement or other.
2) Find tax deductions for college expenses.
a) Did some reading on Hope and lifetime learning credits today. Maybe we will be eligible, it's possible I might retire before kids start college, so I think this is doable.
b) I could contribute in January to a 529 plan, get a state tax deduction, then withdraw that contribution in June for a tuition payment- I THINK. So chalk a deduction up for education. I need to confirm I can do this (obviously the contribution would be invested in cash because of 6 month duration).
c) I could take out a loan and get a tax deduction on the interest. I don't think this makes sense from an investing point of view, but it might be worth it depending on how much money I had saved or how much tuition actually cost.
3) Use as much of mortgage payment as possible for the college expenses- meaning the mortgage payment gets directed to a 529 plan once the house is paid off.
My wife and I agree we do not fund 100% of tuition already and that student loans are acceptable for the student to pay on graduation.
At one point we agreed we only pay 100% of tuition at one of 3 schools:
Notre Dame
University of Cincinnati (wife's a bearcat)
Kettering University (where I went)
I think we backed off that pedestal, but you never know- 17 years is a long time and I have a retirement to fund.