College Planning Upper Middle Class

[Anonymous]

We have the same income but far less saved for retirement (about 1M- we are early 40s, kids are younger- 11 & 13). We are saving and planning to pay in full for public instate undergrad. For grad school we will simple have to see. If we had 3M saved for retirement that would be a different story- we’d be more generous. But you may be closer to retirement than we will be.

It is tough. I’d make sure you are set for retirement first, and then work backwards from there. That’s all you can do!

Also I would not be at all surprised if your DD changes her mind between now and then- most likely several times! I would not overly plan for med school at this stage.

[Anonymous]

How did you save that much for retirement by your late 40s on that income?????? So jealous.

[Anonymous]

Anonymous wrote:I am thinking if we could sock away another $100K that she'd be okay if she goes to a school in-state.

Neither my husband nor myself graduated with any debt and we both have master's degrees.

And in the intervening time, education costs have outpaced other COL and inflation by orders of magnitude.

[Anonymous]

Upper middle class?

Sure.

[Anonymous]

Save the money in a back door Roth IRA, depending on your age when your child would be going into med school, you can earn interest and withdraw without penalty or taxes since the money was put in post tax. I think you can withdraw the principle without penalty prior to retirement age.

[Anonymous]

Anonymous wrote:"Wondering how much you were planning on contributing towards your children's college education. We make about $275K per year and have $3M in retirement assets so I'm assuming we won't get a dime of aid. We currently have saved $220K which I thought would be enough..but now DD is contemplating medical school. DD is a HS junior and if we want to pay for medical school, we need to start savings NOW. We also have child #2 that's 4 years younger who also has $220K in college fund. Hopefully, he doesn't want to go to grad school :/."

If both kids were in high endowment, expensive colleges at the same time, you would qualify for about $20k in financial aid each year they overlap.

Another question is if attending a high endowment, expensive college is helpful or harmful in med school admissions?

My very casual understanding suggests that it's harder to get med school level grades at a tippy top school.

It has been suggested that even if you have the grades from the tippy top school, students end up competing for the limited number of med school slots with other students from their own school.

Look into it, each school and med school likely have their own admissions quirks.

I don't think that's true. WE had three in college at the same time and got zero except the $5500 FAFSA unsubsidized loans.

[Anonymous]

Anonymous wrote:Your children pay for grad school. Without that financial incentive, they will make poor decisions.

Do you have any idea how expensive grad school has become? Duke Law is $103K per year. No way my kid is racking up $310K in debt.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You already have very generous retirement savings and I'm assuming you're in your late 40s, maybe early 50s based on your kids' ages? So another 15-20, of working at peak earnings. Many people with your income will pay for the expensive 70K a year college out of both savings and current income. You say you have $220k per child. You can easily pay for expensive private colleges out of that $220k and your current income. Right now that's $55k from savings, 20k from current year income. Easily doable.

I find your post a bit of a humble brag - if it is genuine. Racking up $3M in retirement savings, plus $440k in college savings, plus presumably your house/mortgage/equity and any other assets while only making $275k HHI. I'm sure it can be explained to some degree but it's a bit unusual without inheritances. By the way, most med students take out loans for all their education as it's expected they will earn the high salaries in the future to pay off their loans with some ease and discipline. There is no requirement for you to pay for your child's graduate schooling. Helping out is great, but it's not the same obligation as college itself. Your "DD" is also years away from medical school. She may change her mind. She may get weeded out by premed courses in college.

Are we really that unique? You've guessed our ages. I don't think $3M is a highly unusual retirement amount for folks our age in our income as that only produces $120K per year income (in today's dollars)- in 10 years yes we will be fine assuming the stock market doesn't crash. We work at jobs that don't provide retirement health care or pensions. I only shared the retirement savings as I think it goes into financial aid calculations and I would guess based on that alone we wouldn't qualify.

No inheritance money but both my husband and I had college paid for and we both paid for our own graduate school through tuition reimbursements etc. I also lived with family rent free after college which helped.

I totally agree that she might get weeded out by premed courses in college and that's what makes this hard. If we put another $100K in a 529 plan and she decides not to go to medical school then we've probably just locked the money in for another generation. I don't want to pay the taxes to get the money out. We are planners and it feels easier psychologically to put let's say $25K away for the next 4-6 years than to come up with $100K at once. We will also have a younger one in college when the older one would theoretically be in med school. I realize I'm lucky but I'm just trying to get ideas.

I would think $3.44M in savings - retirement and college, out of $275k HHI is a bit unusual. Put it this way, assuming you and your DH have 25 years of working experience to date, that's $137k each year for the last 25 years. That's impossible out of a $275k HHI, obviously, as you have taxes to pay and a life to live, and that's also assuming your incomes have never been higher and you made this amount from the get go 25 years ago. And we still haven't even talked about your house/equity or other non-retirement savings. Yes, I'm aware of stock market appreciation and being frugal. But the only way it possibly makes sense is if you/DH went into IB or big law and racked up big salaries and bonuses for a decade without missing anything or suffering from the 2008 crash, and then scaled back into lower paying jobs. Or had a spectacularly lucky investment in a start up. So that's why the numbers don't crunch logically for me unless there's something you're not telling us.

You are forgetting the power of compounding. Once you hit $2M in your accounts at a 10% savings rate you are making $200K per year- I realize that's a little high but the math was easy. I'd have to go through my numbers to figure out exactly how we got there but we are currently saving about $70K of our gross income. I remember reading once that your first million is the most difficult to earn and that's the truth. Theoretically in 4 years we'll have another $1M-$1.2 in retirement savings.

Yeah, sure. But the numbers still don't work with your ages. If you were in your 60s, yes. But not late 40s at that income. The market has not been compounding at 10% each year for the last 25 years. We had a spectacular near collapse in 2008-09. Did you and your DH start out making 275k 25 years ago? You mentioned grad school being paid through tuition remission. That rules out law and MBAs, and if you had a MBA paid for you should be making more money. People who have HHI of 275k today in their late 40s made a lot less 25 years ago. Because a joint HHI of 100k for a young couple in their mid 20s was a very, very, good income in 1995. So coming up with the first million in order to have amazing compounding yields by now is tricky to figure out.

And life is expensive. Mortgages, home expenses, car expenses, health expenses, raising a family, feeding yourself. Somehow you did all that while achieving amazing retirement accounts on a not impressive HHI.

The PP with similar income but half the retirement amount is the realistic scenario. You also made a few other comments that cast doubts on the authenticity of your posts. You don't seem to understand how retirement income works. And the strange automatic assumption that you are on the hook for funding med school is a bit weird.

[Anonymous]

State school if planning med school. VCU guaranteed med school admissions the way to go.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You already have very generous retirement savings and I'm assuming you're in your late 40s, maybe early 50s based on your kids' ages? So another 15-20, of working at peak earnings. Many people with your income will pay for the expensive 70K a year college out of both savings and current income. You say you have $220k per child. You can easily pay for expensive private colleges out of that $220k and your current income. Right now that's $55k from savings, 20k from current year income. Easily doable.

I find your post a bit of a humble brag - if it is genuine. Racking up $3M in retirement savings, plus $440k in college savings, plus presumably your house/mortgage/equity and any other assets while only making $275k HHI. I'm sure it can be explained to some degree but it's a bit unusual without inheritances. By the way, most med students take out loans for all their education as it's expected they will earn the high salaries in the future to pay off their loans with some ease and discipline. There is no requirement for you to pay for your child's graduate schooling. Helping out is great, but it's not the same obligation as college itself. Your "DD" is also years away from medical school. She may change her mind. She may get weeded out by premed courses in college.

Are we really that unique? You've guessed our ages. I don't think $3M is a highly unusual retirement amount for folks our age in our income as that only produces $120K per year income (in today's dollars)- in 10 years yes we will be fine assuming the stock market doesn't crash. We work at jobs that don't provide retirement health care or pensions. I only shared the retirement savings as I think it goes into financial aid calculations and I would guess based on that alone we wouldn't qualify.

No inheritance money but both my husband and I had college paid for and we both paid for our own graduate school through tuition reimbursements etc. I also lived with family rent free after college which helped.

I totally agree that she might get weeded out by premed courses in college and that's what makes this hard. If we put another $100K in a 529 plan and she decides not to go to medical school then we've probably just locked the money in for another generation. I don't want to pay the taxes to get the money out. We are planners and it feels easier psychologically to put let's say $25K away for the next 4-6 years than to come up with $100K at once. We will also have a younger one in college when the older one would theoretically be in med school. I realize I'm lucky but I'm just trying to get ideas.

I would think $3.44M in savings - retirement and college, out of $275k HHI is a bit unusual. Put it this way, assuming you and your DH have 25 years of working experience to date, that's $137k each year for the last 25 years. That's impossible out of a $275k HHI, obviously, as you have taxes to pay and a life to live, and that's also assuming your incomes have never been higher and you made this amount from the get go 25 years ago. And we still haven't even talked about your house/equity or other non-retirement savings. Yes, I'm aware of stock market appreciation and being frugal. But the only way it possibly makes sense is if you/DH went into IB or big law and racked up big salaries and bonuses for a decade without missing anything or suffering from the 2008 crash, and then scaled back into lower paying jobs. Or had a spectacularly lucky investment in a start up. So that's why the numbers don't crunch logically for me unless there's something you're not telling us.

You are forgetting the power of compounding. Once you hit $2M in your accounts at a 10% savings rate you are making $200K per year- I realize that's a little high but the math was easy. I'd have to go through my numbers to figure out exactly how we got there but we are currently saving about $70K of our gross income. I remember reading once that your first million is the most difficult to earn and that's the truth. Theoretically in 4 years we'll have another $1M-$1.2 in retirement savings.

Yeah, sure. But the numbers still don't work with your ages. If you were in your 60s, yes. But not late 40s at that income. The market has not been compounding at 10% each year for the last 25 years. We had a spectacular near collapse in 2008-09. Did you and your DH start out making 275k 25 years ago? You mentioned grad school being paid through tuition remission. That rules out law and MBAs, and if you had a MBA paid for you should be making more money. People who have HHI of 275k today in their late 40s made a lot less 25 years ago. Because a joint HHI of 100k for a young couple in their mid 20s was a very, very, good income in 1995. So coming up with the first million in order to have amazing compounding yields by now is tricky to figure out.

And life is expensive. Mortgages, home expenses, car expenses, health expenses, raising a family, feeding yourself. Somehow you did all that while achieving amazing retirement accounts on a not impressive HHI.

The PP with similar income but half the retirement amount is the realistic scenario. You also made a few other comments that cast doubts on the authenticity of your posts. You don't seem to understand how retirement income works. And the strange automatic assumption that you are on the hook for funding med school is a bit weird.

Yeah, the math is puzzling due to all of the above comments.
We have a similar HHI but don't have nearly that retirement savings and very little college savings. We did have small student loans (less than $15k total) and I took about 7 years off and used to have a lower salary, but still...even at our current HHI with a very modest mortgage and no other debt, I don't see being able to save enough currently per month at the levels you must have all those years to get to where you are.

Re: your question, when I was in college I worked every summer, had academic scholarships, grants, etc., and I split the remaining loans with my parents. I paid my own way through grad school. I thought that was very fair, and forced me to make smart choices about my school, debt, and chosen career.

[Anonymous]

OP here- I guess none of you who doubt me have read the millionaire next door or financial samurai. One thing is that my husband and I have similar incomes 60/ 40 split so we’ve been able to stash roughly double the amount that a single earner would be able to in that time. We did pay for FT child care. In retirement 401k. I never took time off after having kids either with the exception of 10 weeks maternity after each kid. We bought our house prior to the bubble too etc.

Anyway this post isn’t supposed to me about my financial circumstances except to the extent of how much more to fund the college/grad school fund. I’m really interested in what folks with similar incomes would /have done and rationale.

[Anonymous]

Sorry for typos above. Typing quickly on phone.

[Anonymous]

You can pay for college out of funds other than a 529. So if you are unsure whether your dc will go to med school, you can save funds in a taxable account and have it available if needed. We lost a lot in in the 2008 recession and our 529 savings are not as robust as yours. But we have a high income and other savings vehicles we can draw from. We told our kids they could apply anywhere for undergrad. Dc #1 is going to a slac that is well respected but not overly competitive (think 50% acceptance rate). The school gave dc a very nice merit award so we only have to dip into savings/cash flow for a small amount as the 529 covers most of it. Dc #2 is attending a public university that is slightly cheaper than DC #1’s school after merit. So we got lucky. We will not be making any more contributions to the 529 and will discuss grad school later but will likely pay most of it (only dc 1 would attend). We would pay out of cash flow or savings.

[Anonymous]

Anonymous wrote:OP here- I guess none of you who doubt me have read the millionaire next door or financial samurai. One thing is that my husband and I have similar incomes 60/ 40 split so we’ve been able to stash roughly double the amount that a single earner would be able to in that time. We did pay for FT child care. In retirement 401k. I never took time off after having kids either with the exception of 10 weeks maternity after each kid. We bought our house prior to the bubble too etc.

Anyway this post isn’t supposed to me about my financial circumstances except to the extent of how much more to fund the college/grad school fund. I’m really interested in what folks with similar incomes would /have done and rationale.

I don't understand your comment about stashing double what a single earner would have. Most high HHI are dual incomes too. Our HHI is higher at 300k and we are younger in early 40s and have worked full time. But even with employee matching 401k and 529s, minimal grad school debt, a mortgage we can easily afford, generous savings each year, and a non flashy life, we are still a long way away from 3.4 million. The biggest problem I have with your scenario is that you would need to be making a very high income when you were young in order for those numbers to materialize, and in general people with high incomes in their 20s make a lot more in their 40s. As in 400-500k dual income, not 275k. Most people have career trajectories before plateauing. The finance help books aren't going to magically make millions if your incomes aren't there to begin with.

[Anonymous]

If you read those sites- you’ll see we are not that unique. I don’t have time to figure out how but figure 2-3 million was 5 years.