<p>We just saved a lot when younger, and paid the house off well before the kids were in college. With two in college, we’ve dipped into savings for about $15K per year. My guess is that we could have gotten that down to about $5K by cutting some discretionary spending and maybe down to zero by cutting a lot of discretionary spending.</p>
<p>Investment gains have been grand this decade and we are living well below our means so I didn’t see the need to cut discretionary spending this year. Still, getting the house paid off early and keeping expenses low made paying for college easy. Our son chose a state school even though we had saved up enough for full-pay private for both kids.</p>
<p>we are all in different situations. Different ages when our kids hit college. Different amounts of money already for retirement, or pensions. Different college options for different kids. Different financial aid packages. Different careers. I dont think you can generalize - different paths will work for different families. I dont find these generalized rants very useful.</p>
<p>Through defined benefit & matching plans at work when it was available and managing the investments semi-aggressively, we’ve been able to accumulate enough inside our retirement plans to, in theory, be able pay off our Parent PLUS loans for D1 (graduated, in med school on her own dime) and D2 (currently a soph undergrad) when it comes time to. Each girl also has unsubsidized Staffords that they will have to manage themselves once they finish their education.</p>
<p>Of course, the problem with the urge to pay off these PLUS loans now is the 10% hit & the declaration of the distribution as ordinary income in the year that you take it, a 40% whammy no matter how you look at it. So it’s paying the juice to the US Dep’t of Education for the time being & squeezing nickels the best we can to pre-pay them if possible.</p>
<p>Over the last 2-3 years I’ve also fought off the urge to take a home-equity loan/2nd mortgage to pay off/down the PLUS loans, a good move in hindsight now that the equity in my house has taken a $100K haircut easy. As squirrelly as lenders are these days, I don’t even want to come close to missing a payment there.</p>
<p>My in-laws did not plan right for retirement. We send them money every month to help support them. They are 76 and working at low paying jobs because they need more income. They are both college educated. I don’t mind helping them at all, but I don’t want my children to do it for me.</p>
<p>Obviously it’s best if you can do both. Through our jobs we were able to start saving for retirement right away. We were still paying a significant amount a month for our own college educations when we had children. We were not able to start saving for them until they were around 7. We did not save enough for a private 4 year education, but did save enough for a 4 year public education.</p>
<p>There was an interesting article on retirement savings on the Yahoo news page the other day.</p>
<p>When our kids where young, and we met with a financial planner, both retirement and paying for college seemed so hopeless. We were two newly minted MD’s, but had to pay back loans and time in the military. Less hopeless now, at least with regard to paying for college, but still too gun-shy to check the retirement numbers.</p>
<p>It seems very unlikely that I’ll ever be able to retire, so I’m focusing on college. I know this is not what most are doing, but the reality is that in this economy, unless you started saving for retirement early, some of us are going to have to work until we drop. Ever noticed the cashiers at Walmart who look like they are in their 70s or older? </p>
<p>Retirement just isn’t going to happen for some of us.</p>
<p>One thing to keep in mind re: people selling their homes to provide more money for kid’s colleges is that that may in fact be a retirement move and a college finance move in one. Many people plan to downsize anyway as they grow older and no longer require as much space, or they may be ready for a move out of the old family nest. In either case, moving to a smaller home might be a good option that would free up some capital and provide a more manageable, affordable place to retire. I don’t know many that do this and with the housing markets being volatile it’s probably not a good idea to count on it, but I do know at least one family personally that moved to a smaller, less expensive home when their D went to a more expensive college. That wasn’t the only reason why they did it, but it worked out well for them. </p>
<p>I agree that a financial planner is a good idea in any case. When I was going to college I was so grateful for my parent’s finance guy. He had worked with our family for years, helping my parents with their taxes, to plan their retirement, manage their investments and savings, and of course, save for college. So not only was he really familiar with our financial situation, we knew we could trust his advice. Whenever financial problems related to college costs seemed overwhelming, he was there to mediate, reassure, and provide some much needed outside perspective as to how we could make things work. Really helped.</p>
<p>I think the bottom line is that our retirement accounts were earmarked for our kids’ college anyway. Both girls picked different adjacent state flagships although either of them could’ve chosen UIUC with that alluring in-state tuition. That’s cost me somewhat but both have flourished where they ended up, so I can’t complain too much about that.</p>
<p>Six years ago…in a financial galaxy far away where the sun rose in the east and our investments were moving up, D1 applied far and wide. Ranked in the top 2% of her class, she was awarded some nice merit from quite a few privates but was denied at her ‘dream school’, Duke. Had she been admitted, there’s no doubt we would have allowed her to attend and bit the bullet. And I would’ve been easily $80,000 MORE in the hole, with the current economic landscape far different than 2004. Almost feels like an anvil has fallen right behind me…</p>
<p>Circumstances certainly enter into this decision. Parents 40 years old with one child headed to flagship public? Pay as you go, easy. Same scenario with kid headed to Stanford? Um, maybe we borrow for college. Three kids to put through college? Parents aged 55 instead of 40? Significant inheritance coming? Both parents eligible for defined benefit retirements? One parent ill and needing to retire early?</p>
<p>Unless a family’s circumstances are “plain vanilla” (and whose are?) it seems that the decision how to divide resources between retirement and college would really depend on the family’s situation.</p>
<p>Husband and I are dual-income professionals. Our financial goal was to put aside enough for each kid to have 4 years fully paid for at a public institution and have the house paid for, by the conclusion of the third child finishing. My husband is a diabetic and we based our retirement plan on his being able to work until he was 55, with adequate insurance in place to take care of this “plan” if he could NOT work until he was 55. Savings were planned to replace 80% of income at retirement. Despite a significant unexpected illness of one of our three children, we have worked the plan. Our son has chosen a college that will cost about 10 grand a year more than we planned. Because we are on target with the rest of our savings, we have told him that we will split the difference, with him borrowing 5K per year. If he makes a 3.5 or better each year of college, if his dad is still healthy enough to work through his years of college, we will reimburse him the 5K/yr.<br>
So yes. Absolutely. Retirement BEFORE college.</p>
<p>OK. So, I work in the Retirement field and feel qualified to share some musings of my own.</p>
<ol>
<li> I’m glad to see most realize Social Security is not going to be around to an extent that any one person can live from that benefit. Your SS check and a smile might get you a cup of coffee.</li>
<li> You should start saving for retirement with your first paycheck. Its all about time IN the market. Didn’t do that? Well, start today and don’t stop. </li>
<li> Don’t plan to fully retire until mind or body gives out.<br></li>
<li> If you and your kid (together) can’t cash flow the college expenses during the year, your kid is going to the wrong school. Live within your means and teach your kids to do so as well. That is one of the best life lessons you can pass to your kiddos.</li>
<li> Your kid can work in school to help cash flow their college. Do the math now. How much can you cash flow and what is your kid’s expected earnings? As I have told my son, “wow …a $500 scholarship is a LOT of burgers you won’t have to flip … .might wanna apply for that.” </li>
<li> Do NOT under any circumstances borrow money from your 401(K) for college … hello, that would be time OUT of the market (this bad, very bad). Even worse, don’t take a withdrawal before age 59.5 unless you really love to pay the government huge taxes (like 1/2 will go to taxes and penalties … seriously bad move)</li>
<li> If you are thinking “hmpf … that’s not fair, obviously she doesn’t understand how talented, gifted, etc my child is and how he/she MUST attend an expensive school we can’t possibly afford” …oh, really, life is fair? </li>
<li> Look into honors programs at state schools instead of Ivies]</li>
<li> Take a deep breath and repeat after me … college debt is bad, very bad.<br></li>
<li> We have tuition covered. So, what is left to cash flow is room, board, books. Our first son is carefully choosing between state schools based on what we and he can afford. Second son has been all ears thru this process.<br></li>
</ol>
<p>Finally, best wishes to you all. Its not easy to tell your kid they can’t have everything they want, but it is the truth. As a friend of mine says, “you can have anything you want, but not everything you want” … pretty wise guy.</p>
<p>It’s more important to understand the economic context of the market
than it is to simply be in the market. The period from 1982 to 2000 is
generally acknowledged as a secular bull market. The $SPX went from
103.71 to 1527.46 (low to high) during that period for massive,
massive gains. The period from 1960 to 1982 had the $SPX going from a
low of 53.32 to a high of 140.52 or under 200% for 20+ years during a
period of high inflation.</p>
<p>The period from 2000 to now yields a loss. My guess is that you would
be somewhere about breakeven at best with dollar-cost averaging over
the last decade.</p>
<p>Wall Street is a game of sharks. The bankers and hedgefunds that make
tons of money to return to their shareholders and pay out salaries and
bonuses have to take it from someone.</p>
<p>Conventional wisdom in investing doesn’t go back far enough
historically. At least the last decade has taught us that trees don’t
grow to the sky.</p>
<p>^^^ well said^^^, i’ll go even further that todays stock market is nothing but a big ponzi scheme…from 1980±-late 90’s the game wasn’t as rigged as it apparently is now…Hedge funds are in and out in milliseconds,computers make many decisions whether to buy or sell that has NOTHING to do with the merits of a particular company…I really laugh when the experts say the market will continue higher, as “there is a lot of money on the sideline” or the retail investor(read as the suckers) will come in soon…Then the pros will pull the rug out from us AGAIN…As for retirement “tread” very carefully about $$$ needed…The so-called experts/fund managers/investment houses have a vested interest in scaring the bejesus out of you!!! They make a living offf your investments…that said, put away as much as you can, but also LIVE for today!!! Tommorrow may never come,or you may not be heathly enough to enjoy all your “savings”</p>
<p>I think you need to prioritize retirement savings. The trick is figuring out how much you’ll need. That is especially tricky if no pension and the chance that interest rates will continue to stay low.</p>
<p>eaglemom10, I am also in the retirement field and I can’t tell you how sad I am when I see people in their 40s and 50s taking out loans from their 401(k) plans, or worse, taking cashouts at pre-59 1/2 termination. Between locking in recent investment losses and taxes, the true cost of the distribution is enormous, and a lot of these people didn’t have huge accounts to begin with.</p>
<p>Pay yourself first, folks. The days of collecting a traditional lifetime pension are mostly gone – it has happened over the span of my career (and I’m not that old!). My parents and in-laws were terrible with money and put nothing in the bank during their working careers, but have had comfortable retirements thanks to the military (my dad) and union (FIL) pensions they earned. The three legged stool of retirement security (pension, Social Security, personal savings) is darned wobbly.</p>
<p>I’m ahead 50% tonite. Blackjack at 20 and out at 30.
If only I had a 5 more zeroes to the 20. :(</p>
<p>Got back in the equity markets today. Big bet on January bump.
Toomuch $$$ in bonds and mmkts. And I need to catch what we lost during W’s reign.</p>
