Fully Funded College

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:HHI just over 550k.

We have 2 kids 12&9. Both have Virginia prepaid tuition. We also have approx 100k sitting in invest that will presumably grow. We now only contribute a very minimal $250/mo in the invest. We consider college a done deal. Any extra will be paid out of pocket. I also hope I have raised bright children that take advantage of the VA public schools. I will consider myself a failure if they dont. Only a moron who hasn't been taught basic personal finance wouldn't go the free option. George Mason and UVA did both DH and I very well. Zero debt, great jobs, excellent local network.

On that income you can afford to pay for where ever they want to go plus graduate school. I don't get why you have so little saved. Yes, you can do very well at a state school, but different kids thrive at different schools.

We have the prepaid and about $80K, maybe more for our 9 year old. We have about $180K in income. I'm tryin for about $10K a year, usually more. We want to pay for college and graduate school. If child wants private and we can afford it we will do that. My goal is debt free.

Just because we make good money doesn't mean we make stupid choices with that money, nor does that mean we teach our kids financial illiteracy.. I don't consider a full state ride "so little".

Dh and I didnt "thrive" at GMU or UVA. We went to school, got a degree, and used our network to get good jobs. College is a means to an end. Not a social experiment, nor a place for my adult children to find themselves in the most optimum environment.

Most of us want our kids to thrive, be happy and successful. Not all kids do well in large schools nor do they have all the majors one may want. There are many reasons why kids would not choose to go there. And, not all kids can get in. You can teach your kids financial literacy without forcing them to go to a specific school because you went. There are plenty of good state and other schools that are affordable. I hope my child goes to the state school so we can help with graduate school. But, I also want them to be happy and be at the right fit for them. You sound pretty selfish. But, if you'd rather your big house, fancy cars and clothing vs. best for your kids, sounds like a good plan. Hopefully those will be the best schools for them.

NP, but in case you are not aware there are more than 2 public schools and a bunch of out of state public schools have repricocity with Virginia for in state tuition.

I went to an expensive school and it was stupid and did not pay off anymore than had I gone with the smart and free choice.

[Anonymous]

I think it means a trust fund in addition to a 529.

[Anonymous]

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Anonymous wrote:I’m not sure what people mean by fully funded. Our financial planner advised us to not over save in a 529, so we have stopped contributing for now.

Different financial goals. We fully fund the 529s to create tax-free generational wealth. Our grandchildren can use the 529 money leftover after our kids’ college and grad school costs.

Interesting idea. It has to be used for educational expenses, unless you want to pay the tax penalty on the earnings.

Sure. We’re banking on grandchildren and those grandchildren having educational expenses sometime from K through grad school.

I don’t want to put the of grandchildren on my own kids, and I’d rather build wealth that doesn’t have strings attached, but I can see that this would be an appealing strategy. I will ask our financial adviser about it.

Why wouldn't you try to use a Roth IRA to build generational wealth that has no strings attached?

Our advisor has recommended against Roths for us, so we do traditional IRAs. I just want to ask what he thinks of over-funding 529s for a future generation to use.

Kids have to have earned incomes to have ROTH IRAs. Inherited roths have required distributions, but 529s continue to grow with earnings not being taxed, ever. Over funding 529s to have them benefit grandkids is a great option for people who can afford it.

ROTH IRAs are great but if you have traditional IRAs then you can't do a ROTH conversion in a worthwhile way, and if your income is low enough that you can deduct IRAs then that may make more sense for your personal situation. There are a lot of reasons to do ROTHS but your advisor knows your personal situation and what makes sense for you.

[Anonymous]

We are full pay at a $70k Ivy and $50k private - sometimes I fantasize about taking the money and buying a franchise for DC instead

[Anonymous]

PP, I have had that very same thought several times recently! Bruegger's Bagels, Einstein's Bagels, FirstWatch, Compass Coffee, Clinton St. Baking Co., Chick-fil-A
But I really wish I could establish the first White Castle around here with my kids owners/operators

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Contribution is not maxed out at $8k per year. (That would take 35 years to get to $280,000 “fully funded”).

$8k is not the max for a married couple or for anyone else.

This $8K is where the state tax deduction is capped (which is a minimal part of the overall benefit) - $15K per person, so $30K per couple, per kid is the gift tax cap and even then you can do more within a five year window.

Educational funds are exempt from the gift tax.

[Anonymous]

We did the Maryland prepaid college fund and a separate account for room and board. It is not easy.

[Anonymous]

Anonymous wrote:We front loaded the accounts 18 years ago and today each account has over $400k - enough to pay and some left over for head school. Although I haven’t looked at amount in account since Spetember...

My husband and I want to do this for our kid who will be born in 3 months. How much did you initially fund the account with?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Contribution is not maxed out at $8k per year. (That would take 35 years to get to $280,000 “fully funded”).

$8k is not the max for a married couple or for anyone else.

This $8K is where the state tax deduction is capped (which is a minimal part of the overall benefit) - $15K per person, so $30K per couple, per kid is the gift tax cap and even then you can do more within a five year window.

Educational funds are exempt from the gift tax.

This is somewhat true but not in the way that you imply. If Grandma and Grandpa, or mom or dad, cut a check directly to State U or Private HS, then yes, not gift tax. If Grandma or mom cut a check to junior's 529, then it is subject to gift tax.

[Anonymous]

Anonymous wrote:We are full pay at a $70k Ivy and $50k private - sometimes I fantasize about taking the money and buying a franchise for DC instead

We are a high earning family and like one of the PPs are only willing to pay for in state tuition. Period. Luckily my kids are smart and took the free option. This allowed us room to set aside money for their first home. We have 2 rental properties in FFXCO and each kid will get either the rental deeded over to them and have their first home for free, and nearly mortgage free or can take profits from the sale and for a downpayment on the home of their choice and in the location they want. The equity in those homes is substantial.

I feel like a free education, plus a huge boot up into early home ownership will pay off much more in the long run that an expensive name brand school that only pays off upon obtaining their first job.

[Anonymous]

Anonymous wrote:

Anonymous wrote:We are full pay at a $70k Ivy and $50k private - sometimes I fantasize about taking the money and buying a franchise for DC instead

We are a high earning family and like one of the PPs are only willing to pay for in state tuition. Period. Luckily my kids are smart and took the free option. This allowed us room to set aside money for their first home. We have 2 rental properties in FFXCO and each kid will get either the rental deeded over to them and have their first home for free, and nearly mortgage free or can take profits from the sale and for a downpayment on the home of their choice and in the location they want. The equity in those homes is substantial.

I feel like a free education, plus a huge boot up into early home ownership will pay off much more in the long run that an expensive name brand school that only pays off upon obtaining their first job.

PP, you are right, these are wonderful gifts to give your child. My parents paid for all my undergrad, and gave me $10,000 towards a down payment for our first home. It was a fantastic step up in the world and led to a life that is much more financially secure than it otherwise would have been.

I hope to offer the same step up for my kids. For me, a DC resident, fully funded is "able to pay for four years of full tuition at a public college, after the DC Tag discount." We put away about $7,000 per year per kid in 529 accounts, and we are basically on target to get there.

[Anonymous]

Anonymous wrote:

Anonymous wrote:We are full pay at a $70k Ivy and $50k private - sometimes I fantasize about taking the money and buying a franchise for DC instead

We are a high earning family and like one of the PPs are only willing to pay for in state tuition. Period. Luckily my kids are smart and took the free option. This allowed us room to set aside money for their first home. We have 2 rental properties in FFXCO and each kid will get either the rental deeded over to them and have their first home for free, and nearly mortgage free or can take profits from the sale and for a downpayment on the home of their choice and in the location they want. The equity in those homes is substantial.

I feel like a free education, plus a huge boot up into early home ownership will pay off much more in the long run that an expensive name brand school that only pays off upon obtaining their first job.

Financially, I don’t disagree this makes sense but I think it’s a bit too controlling.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We are full pay at a $70k Ivy and $50k private - sometimes I fantasize about taking the money and buying a franchise for DC instead

We are a high earning family and like one of the PPs are only willing to pay for in state tuition. Period. Luckily my kids are smart and took the free option. This allowed us room to set aside money for their first home. We have 2 rental properties in FFXCO and each kid will get either the rental deeded over to them and have their first home for free, and nearly mortgage free or can take profits from the sale and for a downpayment on the home of their choice and in the location they want. The equity in those homes is substantial.

I feel like a free education, plus a huge boot up into early home ownership will pay off much more in the long run that an expensive name brand school that only pays off upon obtaining their first job.

Financially, I don’t disagree this makes sense but I think it’s a bit too controlling.

How so?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Contribution is not maxed out at $8k per year. (That would take 35 years to get to $280,000 “fully funded”).

$8k is not the max for a married couple or for anyone else.

This $8K is where the state tax deduction is capped (which is a minimal part of the overall benefit) - $15K per person, so $30K per couple, per kid is the gift tax cap and even then you can do more within a five year window.

Educational funds are exempt from the gift tax.

This is somewhat true but not in the way that you imply. If Grandma and Grandpa, or mom or dad, cut a check directly to State U or Private HS, then yes, not gift tax. If Grandma or mom cut a check to junior's 529, then it is subject to gift tax.

I don't think that is quite right either. A child, or anyone, can accept multiple gifts. For instance, my MIL and FIL each wrote checks up to the amount subject to the gift tax to my children for many years. We also put money into their 529s for a few years. The Utah 529's, that we used, accept third party contributions so you can superfund those 529's with checks written from multiple individuals. In hindsight the strategy of putting in as much money as we could when my kids were little (between 2000-2005) worked really well, because there was a lot of growth in the stock market between now and then, even with the 2009 crash. However, since we invested in Utah's 529, but lived in DC, we did not get any state tax benefits.

Fully funded college for us means $280k. The kids can do with it as they please, and keep any left over funds.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We are full pay at a $70k Ivy and $50k private - sometimes I fantasize about taking the money and buying a franchise for DC instead

We are a high earning family and like one of the PPs are only willing to pay for in state tuition. Period. Luckily my kids are smart and took the free option. This allowed us room to set aside money for their first home. We have 2 rental properties in FFXCO and each kid will get either the rental deeded over to them and have their first home for free, and nearly mortgage free or can take profits from the sale and for a downpayment on the home of their choice and in the location they want. The equity in those homes is substantial.

I feel like a free education, plus a huge boot up into early home ownership will pay off much more in the long run that an expensive name brand school that only pays off upon obtaining their first job.

Financially, I don’t disagree this makes sense but I think it’s a bit too controlling.

How so?

Look, your kids are super lucky. In our case I simply wouldn't force the kids to go to a state school. I might tell them it's smarter (and they are welcome to keep the money which in their case they are because their 529's are already fully funded for private) and I think it is smarter outside of the top privates, but I will allow them to make that choice.