How much to have in bank for college before RE?

[Lucky Girl]

Hi all,

I've been lurking for a little while and appreciate all the thoughtful ideas here.  Just wanted to get some thoughts on how others are factoring in the college savings along with retirement.

Quick sketch of my current thinking--

We have 2 kids, ages 5 and 2.  We are saving $500 per month into a 529.  Our overall savings rate is about 50% of net income, and we max out 401k, IRAs, and have about 2k left over that we are staching in taxable accounts every month.  Should we be adding more to the 529? 

My current thinking is that I prefer the flexibility of taxable accounts, which allows us to decide how much we will contribute to our kids college education and when we finally decide to hit the eject button on our full time jobs.  But we probably want to cover the full tuition for both kids undergrad (who knows what that will cost by then), so maybe we should just take advantage of the tax-free growth?

Thanks for any thoughts and comments!

[BadStache]

Hi Lucky,

Interesting, I've been thinking about this too and in about the same financial circumstances.  I've decided to shoot for 1/2 expenses for a full time in state college (about 110K) in each 529 then let them figure out how to pay for the other half.  In the meantime, my taxable accounts should grow to the point where I can re-assess whether or not to pay off their college loans after they graduate, or if I'll need it for my FIRE.  I'd like them to have some skin in the game.  Just my thoughts for now, you never know if one of them won't want to go, honestly.

[velocistar237]

My approach will be to put all our money into retirement accounts and try to minimize taxable accounts. We'll have some time to draw down the taxable accounts between FIRE and our first child applying to college. According to the FAFSA, I'll have no income and few assets, so my kids will get maximum financial aid. This will help them, since they will be paying for their own schooling with loans and aid, with some help from us maybe at a later point.

I've heard things about having 529s in grandparents' names. Anything in the student's name counts dollar for dollar against aid, but for parents and grandparents, it's less.

I have quite a bit of time to prepare, and I'm just starting to think about this. You might feel differently about this sort of asset protection approach.

[Lucky Girl]

Thanks Velocistar.  Your approach makes sense.  One of the reasons my handle is "lucky girl" is because we are pretty high income.  So the taxable accounts will not be especially low by the time the kids go to college, and I think it would be wrong for us to even consider applying for financial aid.  At that point I think we should be considering giving money to charities, not taking money from those who may be in a less fortunate situation than we have been given.

[Much Fishing to Do]

Hi Lucky,

We have tried to simplify as much as we could to take as many of the variables out of ER and these types of expenses as possible.  We're lucky enough to live within a few miles of a large state university and so are mostly buying prepaid tuition credits that would pay for 4 years of the school without lodging for each child (we're almost done), though they could be used at any school anywhere when the time comes. 

Not saying its the best approach, but for even the little one (5 year old) I know exactly what I have for them (4 years tuition to that school) no matter what tuition or the market does, so its easy to then just know I've reached my goal for it and then ignore these accounts when planning for my own ER.

[LiveLean]

+1 with Strick. Here in Florida we have a great prepaid program that we paid off in 2013 (tuition and fees only, though we could have done housing, too) for our two, now 12 and 9. Florida also has a Bright Futures scholarship program that incentivizes kids to stay in state at public schools. Assuming our kids stay strong students, we should be pretty much covered, judging by kids we've seen come through it in recent years. It's really one of the (many) great things about living in Florida. So many people act like college loans are now the norm. That's not true here in the Sunshine State. There will be some that will scoff at our public schools (though I'll put the University of Florida up there with most any public school), but having college pretty much paid for and likely no loans and minimal additional expense makes me sleep well at night.