<p>Have to admit, I ran out of time reading the entire thread after about page 6, but I wanted to put in my 2 cents (hey, after my EFC, it's all I have left).</p>
<p>I added up the following items: my living expenses (mortgage, property taxes, utilities and insurance ) plus my federal and state tax liability and our pension contribution and it totals nearly 60% of our gross income. The EFC totals another 25%. We have lived in our home for 17 years (have 12 more years on the mortgage, but it is a refinanced mortgage at 4.375% so we'll never refinance it for any reason - even college), and the pension contribution is another untouchable, imho. We have never lived in the lap of luxury. The kids go to public schools, and most of our vacations are of the camping in a tent variety. Apparently our luxuries are our home and our 401(k), lol.</p>
<p>As the OP stated, the EFC IS a shock. Who wouldn't be shocked with a $40,000 bill handed to them? I don't understand the tone of some of the replies. OP also expressed dismay at the cost of college. Amen to that. I say, vote with your checkbooks. Send your bright kids to the state universities to bring up the perceived quality of those institutions. Get a bargain education in the deal. I know, there are definitely some stellar private universities out there (with their less than stellar admit rates as well) but once we get past the hang up of where our kids "need" to go (just like they "need" ipods etc) and send them where they can get the best education for the money, we'll all be better off, at least financially. </p>
<p>And one other financial "tip" from a financial professional...please strongly reconsider any temptation to cut back on retirement savings (especially if there is a company match involved - that is free $$) or even borrow against a retirement plan. You are going to need that money someday.</p>
<p>I totally agree with your financial tip, klmcpa. In desperation, DH offered to raid our retirement fund to meet our shocking EFC. Of course, upon further discussion, we agreed that this was a bad move. I suspect that if we were 70 and unable to buy groceries (lost our home, couldn't afford medical care, etc) we would not look back on expensive private colleges as a good decision.</p>
<p>I agree that there are some great schools out there no matter what your pocketbook
What I object to-is the whinging that the low income and very rich have it made- as well as to inaccuracies about need based aid.
First lots of great schools meet 100% of EFC
Don't like your EFC- well if it is above the cost of an instate school- theres your bargain.
Low -middle income families still have their EFCs to come up with, it likely isn't any easier for them than it is for you to squeeze out of their budget.
Need based aid- does not come out of your pocket
Money that is raised through fundraising campaigns and other donations as well as special investments covers grants.
Our EFC is the same amount as an instate public school.
So for our family, it was about the same price for our daughter to attend a top private school as it was to attend the state U.
Sorry that some would have to come up with more to attend the same expensive LAC.
Thats life.
But assuming a high bar for admittance & good academic expectations at the college- take two students- both at similar academic levels entering college- but one came from an educated background, parents are even professor perhaps, college has been part of their family history and expectations.
The other student comes from parents who aren't educated, who haven't been able to help academically with applications or essays, who really know very little about attending college and what it could mean.
These students have arrived at the same place, with vastly different tools. Its like they were in a race, one walking the other on a bicycle.
BUt say the college gives them both the same tools- which one do you think has potential to go farther?
If the college has as a value, opening the door of education, to those who haven't been able to benefit before, shouldn't they offer need based aid? Shouldnt' that be their choice?</p>
<p>Why would they discourage business? Do you have any basis for saying this? Someone on the NYU - Stern board just said business (especially accounting) was a good major for law because so many lawyers do corporate law. Is this some throwback to when people who studied business were considered greedy and unidealistic? And you can get a pretty good cognitive workout studying business. Marketing and organizational behavior get very into psychology, etc.</p>
<p>It's interesting to see how different groups of people live. Minorities tend to use their money for their children's education and the children take care of their parents when they (the parents) are in their later years. Retirement plans are mostly unheard of where I live because parents know that when they are older, their children will take care of them. However, it seems like a majority of posters in this thread are making pretty big contributions to their pensions, 401k, etc. Everything seems to work out in the end or at least it does with minority parents, which brings me to my question even though it may seem ridiculous to some of you: obviously having a little cash when you grow older is a smart thing to do, but is it really necessary to have a huge retirement fund? what do you do in retirement? travel the world? anything that requires a lot of money?</p>
<p>A "huge" retirement fund is like a huge endowment. You need it to live on the interest. You should not touch the capital.
Suppose you retire at 65 and live until you are 90. You have before you another 25 years in which you will not earn any income. You still will have to pay for housing, food, clothing, gas and electricity, etc...
Social Security will not cover all your expenses (and may not be there beyond 2025). Medicare and Medicaid may also not be available or not cover all your costs (health costs will rise as you get older).
You don't really want to be a burden on your children as they seek to save for a house, a car, and for their own kids' education. So saving for your retirement is the responsible thing to do. Your kids will be able to borrow against future earnings. You will not.</p>
<p>Without a defined pension plan, most people need to save enough in their 401k's to provide 75-80% of pre-retirement income. If someone pre-retirement income is $150K then they should have assets which will provide around $120K/year. Assuming a 5% return on investment that means retirement accounts of around $2.4M. So you can see why those of us who have to fund our own retirements find this to be a big deal.</p>
<p>It is a huge generalization to say that "minorities tend to use their money for their children's education and the children take care of their parents when they (the parents) are in their later years." Also, what does that imply about non-minorities? That they are a hedonistic bunch who neglect their elderly as well as their children? Lets hope not.</p>
<p>I really don't see anything wrong with planning for retirement; in fact, I think it is foolish not to. We can not assume that our children will have the means or desire to care for us in our old age. If we have excess cash...great! We may like to have a few luxuries that we denied ourselves all of these years!</p>
<p>well thank you:)
I was expecting flames because I just don't * understand* all the pressures higher income families have.</p>
<p>I don't begrudge those with higher incomes- I know there are tradeoffs for everything, and I am sure it is pretty galling to figure out how you are going to continue your lifestyle and pay for the college that you had planned on too.</p>
<p>I was watching the Insider, last night, and was struck by Jeffery Wigands wife, walking through the big house they were having to leave.
He was leaving his well paying job as a big tobacco exec, because he was fired for calling attention to health risks.
I understood it is difficult to leave a house where your children were born ( been there done that), but to take a bigger stand that really means something- that speaks to me.
It doesn't have to be a terrible thing, to live within your means.
Having big expenses, sometimes doesn't mean anything more than your eyes are bigger than your wallet.</p>
<p>"It is a huge generalization to say that "minorities tend to use their money for their children's education and the children take care of their parents when they (the parents) are in their later years." Also, what does that imply about non-minorities? That they are a hedonistic bunch who neglect their elderly as well as their children? Lets hope not."</p>
<p>First, it is not a huge generalization, it is a resonable one, and it doesn't seem like anyone brought up this point of view. Second, if anyone is implying anything about white people, or "non-minorities", it's you ("That they are a hedonistic bunch who neglect their elderly as well as their children?"). I only wanted to see the reasoning behind contributing 5000-10000 dollars a year to these plans, and not being able to afford to send your your child to the college they want to attend because of finances which are the result of parents wanting to have money when they retire. Children are investments too. Moreover, children taking care of parents when they are in their later years doesn't seem like that big of a burden when you realize that children have been burdens on their parents since the day they were born so they might as well return the favor.</p>
<p>The last thing I want my children to feel is that they have been a burden to me. <em>I</em> chose to have them--not the other way around. But more importantly, there is no guarantee that our children will be able to take care of us when we are old. Perhaps they will not earn enough to do so, perhaps they themselves will experience financial difficulties. And let's not forget, they will have children of their own. Many old folks need 24 hour care. This is enormously expensive. If they have not set aside anything for their old age, they put a huge burden on their children.</p>
<p>The general idea is that if children borrow money to finance their education, they have the rest of their working lives to pay back what they borrowed. They also have time to accumulate interest on their savings. That's why some far-seeing parents invest their children's savings into retirement funds as soon as the children start earning. Older folks do not have the rest of their lives to pay back whatever they borrow--assuming that anyone would let them.</p>
<p>We as a society live longer and longer. If we depend on our children, we will be depending on them for many many years. And if we do not have any retirement fund, we will start depending on them before they have reached their peak earning power, are beginning to have children of their own, etc... While many immigrant parents do depend on their children, it is not an optimal scenario.</p>
<p>" I only wanted to see the reasoning behind contributing 5000-10000 dollars a year to these plans, and not being able to afford to send your your child to the college they want to attend because of finances which are the result of parents wanting to have money when they retire. Children are investments too. "</p>
<ol>
<li><p>I don't view my children as investments. I do know, however, that particularly in developing countries, children may be parents' main investment and main way of supporting themselves in their old age. That also may be true here of immigrants who have jobs lacking pensions or who invest all of their money into their kids' education so as to lift the family to a more comfortable economic status.</p></li>
<li><p>I don't think that parents owe their offspring payment to go to any college that the kids choose. Similarly, I don't think that parents owe their offspring the car of their choice or for that matter any car at all.</p></li>
</ol>
<p>I think that students who are sure that only one college would meet their needs are being very narrow minded and unrealistic. Just at all of the students who post on CC in April about having to turn down their first choice for merit aid or getting turned down by their first choices ( sometimes first, second, third, fourth and fifth choice) and who by December are happy at the place that they ended up. </p>
<p>Among the students who come to mind are FrecklyBeckly, who was Ivy rejected, and ended up at Michigan, her safety where she ended up having the lead in a major theater production. There also was the student who had to turn down his first choice (an Ivy, I think) because of money, and ended up accepting Vandy because of the merit aid, and also has been very happy at the place where he landed.</p>
<p>I should know the answer to this but I admit to a brain lock. Say a student attends Whatamatta U whose tuition+room+board is $40,000/yr and the EFC is $20,000 ergo the college chips in $20,000 need based aid. I get that! </p>
<p>The next year the student moves off campus and his housing cost goes from $9000(paid to the college) to $5000(paid to a landlord and grocery store). Does the EFC remain the same or is there an adjustment to credit the family for living costs now not going into the college coffers? If there were no adjustment the college would only have to pay $11,000(40000-9000-20000) and the family would have to pay $25,000(20,000+5000).</p>
<p>Though this scenario doesnt impact up because of our $80,000+ EFC, our son did move off campus soph year and is saving about $4400. I'm sure it must impact some of his housemates.</p>
<p>It's very hard to compare incomes and expenses in different parts of this country.</p>
<p>One tiny example: I am trying to hire a new sales associate. We're located within commuting distance of New York. I can pay $10/hr. I can't find local applicants that will work for that little. Of course, you can't afford an apartment, and maybe not even a 1/3 share on that pay in the town. </p>
<p>My friends with similar businesses in other parts of the country start their new sales people at $5.50 (or whatever the federal minimum wage is ... CT minimum wage is $7.40 right now). They are horrified that I start people at $9 and $10 -- in many cases that is more than their top wage.</p>
<p>So -- when a parent posts that they have $150,000 income and things are tight -- that $160K could be equivalent to $50K in a different part of the US.</p>
<p>elizabeth, you wanted to see the reasoning between contributing 5-10K to a retirement fund each year instead of using that money toward a child's desired school. Here's how I reason it:</p>
<p>Old age is EXPENSIVE. A moderately priced assisted living residence in my area is between $2500-3000 per month. That's $30,000-plus per year for ONE person - try paying that off with interest. And that's before adding in prescription and uncovered medical expenses, private transportation (since many seniors no longer drive), clothing, and other expenses. Medicare is a hugely expensive system, inadequate for the needs of many seniors, and it isn't going to improve when the boomers start to retire in droves. (And Medicare Part D, the latest gee-whiz social offering dreamed up by the White House, is already a mess - I see this at work every day.) </p>
<p>Ah, you may say, but my children will never put me in an assisted living facility. Even if that's true, you (or they) will have to pay for related support services, unless they are able to devote themselves to your care when they are middle-aged. Will they be available to drive you to your many doctors' appointments, see you get your meds at the right time, bathe you, accompany you on errands, supervise your meal preparation, etc. And assisted living doesn't support the many elderly with significant health problems. If you need more medical care, the cost skyrockets. Alzheimer's care? The cost is shocking, but many burnt-out Alzheimer's caregivers will tell you that it's worth any price.</p>
<p>Finally, the reason I continue to save for retirement instead of throwing every dollar into my children's education is that I WANT MY INDEPENDENCE as long as I can have it as a senior. I don't want to have to live where my children live, depending on them for everything I need. I don't want to intrude on their lives that way, and I don't want them making decisions for me based on their financial resources.</p>
<p>We can provide our children with excellent educations without jeopardizing our future security. There are many fine public and merit-aid institutions in our particular budget, and fortunately our kids have been able to realize this.</p>
<p>Here's another way to look at it, frazzled1: There are scholarships and loans for college educations. There are NO scholarships OR loans for retirement. Don't sacrifice retirement for your child's college education. They can always pay off the education, you can't pay off your retirement. Nuff said.</p>