College Planning Upper Middle Class

[Anonymous]

OP- your income might make you believe that you are only UMC but if your numbers are correct, you’re flat out rich.

[Anonymous]

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.

One of the strange effects of the 529 plan is to make smart people believe that it is the only way to pay for college. It isn't. It's understandable that you want to get the best tax treatment for this money, but there's enough uncertainty that it's not possible to guarantee that. So, if you don't want to risk rolling it over for future generations, or paying a penalty to access the money if she skips medical school, just invest it in a taxable account. No favorable tax treatment, but also no potential penalty, and you can use it for whatever you want.

[Anonymous]

All of the people doubting that OP can have amassed $3m in retirement accounts - it's more than feasible. I am 47 yo, and due to grad school and an unfortunate case of idiocy after I graduated, didn't start contributing ot a 401k until I was 29 - so 18 years ago. I have had a match for many of those years, sometimes generous, sometimes not. 18 years later, the account stands at more than $1.3m. I can easily believe that with two earners (thus access to two tax deferred plans), starting early, appropriately aggressive investments, use of backdoor Roths (which we, sadly, didn't do) and 5 more years OP and spouse have $3m. The math easily checks out.

[Anonymous]

Anonymous wrote:All of the people doubting that OP can have amassed $3m in retirement accounts - it's more than feasible. I am 47 yo, and due to grad school and an unfortunate case of idiocy after I graduated, didn't start contributing ot a 401k until I was 29 - so 18 years ago. I have had a match for many of those years, sometimes generous, sometimes not. 18 years later, the account stands at more than $1.3m. I can easily believe that with two earners (thus access to two tax deferred plans), starting early, appropriately aggressive investments, use of backdoor Roths (which we, sadly, didn't do) and 5 more years OP and spouse have $3m. The math easily checks out.

It is possible if everything worked out perfectly. For most people it doesn't. OP couldn't have been maxing out 40k/year in retirement savings 25 years ago as the limits and incomes were much lower. Many people, even on good incomes, don't max out retirements in their 20s because they need money for a down payment, childcare, and so on. The markets took a huge hit 11 years ago that took a while to get back to where it previously was so there were lost years. OP is also rather vague about their backgrounds. I can see why some people smelled something a bit funny about her scenario.

[Anonymous]

Anonymous wrote:

Anonymous wrote:All of the people doubting that OP can have amassed $3m in retirement accounts - it's more than feasible. I am 47 yo, and due to grad school and an unfortunate case of idiocy after I graduated, didn't start contributing ot a 401k until I was 29 - so 18 years ago. I have had a match for many of those years, sometimes generous, sometimes not. 18 years later, the account stands at more than $1.3m. I can easily believe that with two earners (thus access to two tax deferred plans), starting early, appropriately aggressive investments, use of backdoor Roths (which we, sadly, didn't do) and 5 more years OP and spouse have $3m. The math easily checks out.

It is possible if everything worked out perfectly. For most people it doesn't. OP couldn't have been maxing out 40k/year in retirement savings 25 years ago as the limits and incomes were much lower. Many people, even on good incomes, don't max out retirements in their 20s because they need money for a down payment, childcare, and so on. The markets took a huge hit 11 years ago that took a while to get back to where it previously was so there were lost years. OP is also rather vague about their backgrounds. I can see why some people smelled something a bit funny about her scenario.

First, tou're talking about two different things. The original challenge was that even if OP did max out tax-advantaged accounts, she couldn't have gotten to $3m. Now, you're saying you don't think she *did* max out (which you have no basis for saying). But that's not the issue.

Second, did you even read what I wrote? I started maxing out retirement accounts in around 2001. The limit were the same for me as everyone else, and I experienced all the same hits to the market. And my 401k is at $1.3m (with no 2019 contributions, since I changed jobs this year). No special manuvers, no wildly risky investments, no astronomical matches. Op had 2 people, so double the tax advantaged space, plus she took advantage of TIRA/ rollover Roth opportunities, plus she had anywhere from 5-10 extra years to contribute. This is not the case of everythign working out perfectly; it's an entirely typical result is she's been maxing her contributions.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:All of the people doubting that OP can have amassed $3m in retirement accounts - it's more than feasible. I am 47 yo, and due to grad school and an unfortunate case of idiocy after I graduated, didn't start contributing ot a 401k until I was 29 - so 18 years ago. I have had a match for many of those years, sometimes generous, sometimes not. 18 years later, the account stands at more than $1.3m. I can easily believe that with two earners (thus access to two tax deferred plans), starting early, appropriately aggressive investments, use of backdoor Roths (which we, sadly, didn't do) and 5 more years OP and spouse have $3m. The math easily checks out.

It is possible if everything worked out perfectly. For most people it doesn't. OP couldn't have been maxing out 40k/year in retirement savings 25 years ago as the limits and incomes were much lower. Many people, even on good incomes, don't max out retirements in their 20s because they need money for a down payment, childcare, and so on. The markets took a huge hit 11 years ago that took a while to get back to where it previously was so there were lost years. OP is also rather vague about their backgrounds. I can see why some people smelled something a bit funny about her scenario.

First, tou're talking about two different things. The original challenge was that even if OP did max out tax-advantaged accounts, she couldn't have gotten to $3m. Now, you're saying you don't think she *did* max out (which you have no basis for saying). But that's not the issue.

Second, did you even read what I wrote? I started maxing out retirement accounts in around 2001. The limit were the same for me as everyone else, and I experienced all the same hits to the market. And my 401k is at $1.3m (with no 2019 contributions, since I changed jobs this year). No special manuvers, no wildly risky investments, no astronomical matches. Op had 2 people, so double the tax advantaged space, plus she took advantage of TIRA/ rollover Roth opportunities, plus she had anywhere from 5-10 extra years to contribute. This is not the case of everythign working out perfectly; it's an entirely typical result is she's been maxing her contributions.

Isn't it typical of DCUM to nitpick everything to death. It's not just one person but several who have cast doubts on OP's retirement claims so different arguments are being made by different people, who also have experience with maxing retirements over the years, addressing different aspects of it. You can infer from the posting style and what's been said. For example, if OP has been maxing out her and DH's retirements, plus socking away all that money in the 529s, plus all the other pretax deductions most people have to make such as health insurance for the family, she's left with not a whole lot to live on. There's mortgages and the usual costs of raising a family. That's why it also smells a bit funny to me.

[Anonymous]

Yes PP 11:52- it's OP and you are one of the people nitpicking this to death. If you know how to do compounding in Excel start with time zero at $0 take $40K in new contributions per year and compound it by 7%. Then take the next 15 years with new contributions at $50K per year and compound it by 7%. That gives you almost exactly $3M. Obviously that's not exactly how it worked out for us but just to show you it's possible.

I'd really prefer to get back to my OP which is about how much philosophically to contribute to college and potential med school.

[Anonymous]

Op we are in a similar position with savings and income. We plan to pay for college for our senior via his 529 plus about $20k/ year. He has no financial restrictions from us as to where he can attend, and if where he attends costs less than his 529, then the remainder will be his to use for grad school Our hope is that for our younger his account has grown such that our cash contribution will be less for him but we are prepared to do the same for him as for his brother.)

If either goes to med/law/graduate school, most of the cost will be on them via loans, although to the extent we are in a position to assist via cash we will do so. Meaning, we do not intend to deposit in their 529s for grad school.

[Anonymous]

Anonymous wrote:

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 :/.

Vote for Warren or Sanders and hope for that candidate to win. Then Public College education will be free. You can use the $220K towards your DD's medical school, assuming she will get into one. If your second kid gets free Public College education and not go to grad school, then you can actually pocket the $220K already saved. You can then splurge on pampered saps on your worldwide vacation!

No, public college education will NOT be FREE. It will be paid for by taxpayers.

Gesh....

and just like when the government got involved in student loans, tuition rose at a must faster pace than before.
Please don't vote for Warren or Sanders.

[Anonymous]

IMO I suspect there's an unmentioned inheritance factored into the numbers here. Yes the numbers are mathematically possible, assuming combined earnings & savings at this (or higher) level right out of undergrad with sustained above market returns through the years. Also any decent level of living expenses (say avg DMV level TH mortgage, etc...) throws a wrench in the savings accumulation. There's got to be either inherited IRA's/401K's or an inherited paid-off home for this level of savings in the late 40's or early 50's age at the stated income.

[Anonymous]

Anonymous wrote:Yes PP 11:52- it's OP and you are one of the people nitpicking this to death. If you know how to do compounding in Excel start with time zero at $0 take $40K in new contributions per year and compound it by 7%. Then take the next 15 years with new contributions at $50K per year and compound it by 7%. That gives you almost exactly $3M. Obviously that's not exactly how it worked out for us but just to show you it's possible.

I'd really prefer to get back to my OP which is about how much philosophically to contribute to college and potential med school.

I'm actually having fun trying to figure out how your scenario plausibly works in the real world. You'd have to be setting aside 40k in contributions for the first ten years of your working life starting mid 20s, going back to approximately 1995. That's amazing for your income level as you likely were only making a fraction of your current income in 1995-2005. For example, BIGLAW associate salaries were below 100k till about 2000ish when the first firms in NYC started crossing the six figure threshold for new associates. Consultants right out of college or grad school made 50ish. There were very few occupations that paid six figures to people in their 20s at that time, but as other posters pointed out, if you were making six figures or close in your 20s, 25 years ago, you should have much higher HHIs today. Unless, of course, you scaled back in your careers, which is plausible. But unusual. Even with, say, a generous 150k HHI between two people in their 20s-mid 30s in the 1995-2005/08 time frame (the kind of income that could see you leverage up to 275k today) it's impressive to pay your taxes, still make your 40k in contributions, and still manage to live and start a family. No mortgage? No home repairs? No cars to buy? No child expenses?

[Anonymous]

Maybe this thread should be moved over the the finances board.

[Anonymous]

Anonymous wrote:PP thank you. I can’t imagine though paying for 4 kids for college and grad school. That’s a crazy amount of money.

You're welcome, but I think you misunderstood--we *didn't* pay for grad school (or we won't be, if they decide to go). And FWIW, 3 of the kids chose public universities. I'd say each child cost ~$45,000/year by the time scholarships/grants were figured in, and we never had more than 2 children going at one time. Yes, $90,000/year was a lot to pay, but as I said, 50% of that was pulled from savings, so only $45,000 needed to be paid out of earnings--and we are high earners at $300K/year.

You can absolutely do this!

[Anonymous]

Anonymous wrote:

Anonymous wrote:PP thank you. I can’t imagine though paying for 4 kids for college and grad school. That’s a crazy amount of money.

You're welcome, but I think you misunderstood--we *didn't* pay for grad school (or we won't be, if they decide to go). And FWIW, 3 of the kids chose public universities. I'd say each child cost ~$45,000/year by the time scholarships/grants were figured in, and we never had more than 2 children going at one time. Yes, $90,000/year was a lot to pay, but as I said, 50% of that was pulled from savings, so only $45,000 needed to be paid out of earnings--and we are high earners at $300K/year.

You can absolutely do this!

Wow . Thank you!

[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 :/.

$275,000 and $3MM in retirement??? Damn. Good for you.