College Planning Upper Middle Class

[Anonymous]

Anonymous wrote:OP we make half as much as you, with one kid. I know you have two, but especially since you have no mortgage, can't you just use one of your incomes (or half of total income) to devote to tution for whatever years your kids need it? Seems with what you've saved you would have no problem funding college and grad school that way. You can also borrow against retirement savings for college I believe. I don't think you need to save more per se now.

Not really, we effectively devote one salary to retirement savings. ~$45K 401K (one catch up contributor) and $13K (after tax IRA) so total $58K.

[Anonymous]

Anonymous wrote:OP again...

So I've been thinking about this a lot.

I looked to see exactly what our contributions to date were and they were a little higher than I had written in my OP due to compounding. I didn't check my statements before writing my OP. It just kind of hit me a few nights ago with DD told me that she wanted some sort of medical career (most likely doctor). Before people give me a hard time about taking it seriously, DD is a strong student in a very selective HS program. She's in one of the select programs at either TJ, RM IB, Blair or PHS. I just wrote checks for $10K each to their college funds last night ($452K). We contributed $15K earlier this year.

I just ran the numbers and this is what I feel comfortable doing (gulp):

*Paying $50K each for 4 year undergrad (2 Kids)
*Paying $70K each for 4 year graduate/medical school (2 kids)

I can do this by assuming that we will be paying $30K per year out of pocket for schooling for the next 12 years and using the balance from their 529 plans. The kids are 4 school years apart. I'm assuming only 3% growth because I've moved most of their college fund money to the "safe" investments. We've had a great run up in the stock market and I wanted to lock in my gains which I did earlier this year. I was hoping that we could be a little more frivolous with our spending instead. Oh well.

It's probably unlikely that both kids will want to become medical doctors but likely that they will both want to go to some sort of graduate school. I'm very much a planner and I guess I would feel awful if they both wanted to be doctors/were accepted to medical school and I felt like I couldn't pay or that I felt like it strained our financial resources too much.

For the last 16 years, I had always planned on paying for undergraduate school and had never given much thought to graduate school. My husband and I both work in fields were tuition remission is common for graduate school. My husband and did not get to where we are by having the attitude that so many people do- we will figure it out when it comes. That attitude drives me bonkers.

I applaud your planning but given how much you have saved, isn’t it constraining your kids to allocate only $50k/yr for college? That writes off most selective private colleges for them. Especially given that you have no idea how/if/when they may do graduate school. Vs. you know with a lot of certainty that they are going to college and when. I am the poster above with similar savings and fact pattern and we intend to let our kids select whatever college is best fit. If it turns out that they attend state uni or get some kind of merit aid, then the remainder of their 529 can be used for grad school. We will also contribute to their grad costs out of then current income to the extent we can and it makes sense (eg, they may go to grad school at night while working and get some kind of employer tuition contribution, or a grad stipend, or whatever). Just another perspective since you are soliciting opinions and feedback.

[Anonymous]

Anonymous wrote:

For the last 16 years, I had always planned on paying for undergraduate school and had never given much thought to graduate school. My husband and I both work in fields were tuition remission is common for graduate school. My husband and did not get to where we are by having the attitude that so many people do- we will figure it out when it comes. That attitude drives me bonkers.

Can you tell us what the fields are? I know companies can help contribute towards graduate school costs but not full remission. It'd be useful advice to pass along to kids about what they want to do.

Based on what you have told us about your finances, and that you still have another 15 years of working life to go, I would have no hesitations paying in full for undergraduate, and at least 50% of graduate school. After all, you're not doing anything else with your money. You can easily drop a million on your kids' college and graduate school expenses and still retire very comfortably.

[Anonymous]

Anonymous wrote:

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.

What?!? I am just getting my head around DD's college tuition.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

For the last 16 years, I had always planned on paying for undergraduate school and had never given much thought to graduate school. My husband and I both work in fields were tuition remission is common for graduate school. My husband and did not get to where we are by having the attitude that so many people do- we will figure it out when it comes. That attitude drives me bonkers.

Can you tell us what the fields are? I know companies can help contribute towards graduate school costs but not full remission. It'd be useful advice to pass along to kids about what they want to do.

Based on what you have told us about your finances, and that you still have another 15 years of working life to go, I would have no hesitations paying in full for undergraduate, and at least 50% of graduate school. After all, you're not doing anything else with your money. You can easily drop a million on your kids' college and graduate school expenses and still retire very comfortably.

Sorry don't want to give away too much personal information.

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP again...

So I've been thinking about this a lot.

I looked to see exactly what our contributions to date were and they were a little higher than I had written in my OP due to compounding. I didn't check my statements before writing my OP. It just kind of hit me a few nights ago with DD told me that she wanted some sort of medical career (most likely doctor). Before people give me a hard time about taking it seriously, DD is a strong student in a very selective HS program. She's in one of the select programs at either TJ, RM IB, Blair or PHS. I just wrote checks for $10K each to their college funds last night ($452K). We contributed $15K earlier this year.

I just ran the numbers and this is what I feel comfortable doing (gulp):

*Paying $50K each for 4 year undergrad (2 Kids)
*Paying $70K each for 4 year graduate/medical school (2 kids)

I can do this by assuming that we will be paying $30K per year out of pocket for schooling for the next 12 years and using the balance from their 529 plans. The kids are 4 school years apart. I'm assuming only 3% growth because I've moved most of their college fund money to the "safe" investments. We've had a great run up in the stock market and I wanted to lock in my gains which I did earlier this year. I was hoping that we could be a little more frivolous with our spending instead. Oh well.

It's probably unlikely that both kids will want to become medical doctors but likely that they will both want to go to some sort of graduate school. I'm very much a planner and I guess I would feel awful if they both wanted to be doctors/were accepted to medical school and I felt like I couldn't pay or that I felt like it strained our financial resources too much.

For the last 16 years, I had always planned on paying for undergraduate school and had never given much thought to graduate school. My husband and I both work in fields were tuition remission is common for graduate school. My husband and did not get to where we are by having the attitude that so many people do- we will figure it out when it comes. That attitude drives me bonkers.

I applaud your planning but given how much you have saved, isn’t it constraining your kids to allocate only $50k/yr for college? That writes off most selective private colleges for them. Especially given that you have no idea how/if/when they may do graduate school. Vs. you know with a lot of certainty that they are going to college and when. I am the poster above with similar savings and fact pattern and we intend to let our kids select whatever college is best fit. If it turns out that they attend state uni or get some kind of merit aid, then the remainder of their 529 can be used for grad school. We will also contribute to their grad costs out of then current income to the extent we can and it makes sense (eg, they may go to grad school at night while working and get some kind of employer tuition contribution, or a grad stipend, or whatever). Just another perspective since you are soliciting opinions and feedback.

I feel like there are enough public options that we don't need to spend $70K per year to get a great education.

[Anonymous]

Anonymous wrote:OP we make half as much as you, with one kid. I know you have two, but especially since you have no mortgage, can't you just use one of your incomes (or half of total income) to devote to tution for whatever years your kids need it? Seems with what you've saved you would have no problem funding college and grad school that way. You can also borrow against retirement savings for college I believe. I don't think you need to save more per se now.

I would never borrow against our retirement plan to fund college.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

For the last 16 years, I had always planned on paying for undergraduate school and had never given much thought to graduate school. My husband and I both work in fields were tuition remission is common for graduate school. My husband and did not get to where we are by having the attitude that so many people do- we will figure it out when it comes. That attitude drives me bonkers.

Can you tell us what the fields are? I know companies can help contribute towards graduate school costs but not full remission. It'd be useful advice to pass along to kids about what they want to do.

Based on what you have told us about your finances, and that you still have another 15 years of working life to go, I would have no hesitations paying in full for undergraduate, and at least 50% of graduate school. After all, you're not doing anything else with your money. You can easily drop a million on your kids' college and graduate school expenses and still retire very comfortably.

Sorry don't want to give away too much personal information.

Hmm. This is an anonymous forum. What occupations do you and your DH do that can possibly reveal who you are? Are you in the CIA?

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP we make half as much as you, with one kid. I know you have two, but especially since you have no mortgage, can't you just use one of your incomes (or half of total income) to devote to tution for whatever years your kids need it? Seems with what you've saved you would have no problem funding college and grad school that way. You can also borrow against retirement savings for college I believe. I don't think you need to save more per se now.

I would never borrow against our retirement plan to fund college.

OP refers to 3 million in retirement and it's not clear if that's all in 401ks and other retirement savings mechanisms as she'd have to pay penalties if she borrowed against them, I believe. But presumably some of that is in other long term investment accounts rather than retirement accounts. She is already in a super privileged minority with that much retirement saved and a house fully paid off and a long working life still ahead of her.

[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.

Yep! Same for DH and I. Both government employees for a very long time. Contributed the max to TSP starting early in our careers. Now, not in government anymore but contributing to employer 401ks. I do catch up because I’m over 50. DH will this year. Just started backdoor Roth’s a couple years ago. We have the about same amount. We did not save as much for college upon the advice of others that kids may not use it all. We currently pay for 2 kids in private (50k each) so for college, we really only have to make up the difference (20 or so k per year if kid chooses private and does not get merit). One kid is looking at an instate with a scholarship that would be 20k per year (30k less than we pay for private now).

[Anonymous]

To answer the OP's question. We are only promising to pay for our kids' undergraduate studies - and pretty much an in-state public college (or equivalent price) at that. We currently have about $135K saved up for our high school senior which will work out to be about a $35K school per year (we will also withdraw $4K per year for 4 years to take advantage of the Americans Opportunity Tax Credit (AOTC).

Our younger two children have a similar amount saved. My oldest doesn't plan to go to grad school. If there is any left over, it will be nominal, so I will either save it for his future children or put it toward the younger siblings' education. If any of the three have significant money left over because they earn scholarships then they can use that money for grad school. Other than that, we don't generally intend to pay for grad school, but we would revisit at that time and see if we can help out.

BTW, I beleive your financial scenario. We make less than you do and have managed to save pretty well for both retirement and college.

[Anonymous]

*believe

[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.

+1. NP here. I am not OP, but we have a similar income and almost similar retirement savings (without inheritance). I don't know if this is true of OP, but DH and I have benefitted from profit-sharing contributions to our 401(k) plans. That means a total of up to $56,000 per year contributed to my 401(k) and also to DH's 401(k). So some people may not realize that is an option, since the 401(k) individual contribution is something like $19,000. When you contribute approximately $56,000 each year to each 401(k), it adds up.

[Anonymous]

Anonymous wrote:I know we’ve gotten off topic by discussing OP’s astronomical retirement savings, but another reason it doesn’t make sense is that if the funds are truly in retirement accounts, then you’ve been limited in your contributions. Right now, a dual earning couple can contribute 40-some thousand to 401ks and IRAs. The limits were even lower earlier in OP’s career, so even with compounding, the numbers don’t seem to make sense. Does one of you have very generous employer matching? We are in our early 40s and have been maxing 2 401ks and IRAs for since our mid-20s and we are a bit north of 1.5 million in retirement accounts. For the past five years, one of us has had very generous employer matching.

The IRS max is $56,000 (when you combine individual and company match/profit-sharing). So many people think it's just $19,000 per year max.

[Anonymous]

I would focus on undergrad and that’s all for now. Who know what your kids will decide to do, if undergrad at all. And as PPs have said, there are a lot of employers who will pay or contribute towards grad school. My DS is premed, we’re funding undergrad, but for medical school - assuming he makes it - he’s on his own.