Author Topic: question re saving for YOUNG kids college/future during FIRE  (Read 2174 times)

tag

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When we hit FIRE our kids will be 10, 9, 7 and 5. Right now we are saving around $500/mo for their futures. Maybe college, maybe travel, maybe house - we don't want to decide now when and why we'll support them with this, we just want to be ready with something so we can.

But when we retire in 3 years....well, I can't figure out what we should do then. Keep contributing $500/mo from our 4% draw? That doesn't really make any sense to me because we would be taking it out with our draw, and then just re-investing it - probably back into vanguard.


Cwadda

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Re: question re saving for YOUNG kids college/future during FIRE
« Reply #1 on: June 21, 2017, 06:40:49 AM »
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But when we retire in 3 years....well, I can't figure out what we should do then.

The solution is figuring what you want to do then. If it's to put aside $500/month for them then treat this as an expense. You'd need to have 25x $6,000 stashed.

Prairie Stash

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Re: question re saving for YOUNG kids college/future during FIRE
« Reply #2 on: June 21, 2017, 09:59:56 AM »
You need to remove the maybe's and decide what you're saving for. How much does each child need for each expense; house, education and travel. You also need to draw a timeline for disbursement, for example your 10 year old might be going to university at age 18 and that's what you're saving for. That would be 8 years X $6000 or $48,000 more you need (is it $500 each or combined?). If you drop $40,000 into their savings at age 11 it will more than grow enough to get to the same finish line at age 18 (compare the monthly to a lump sum).

Repeat for each child and you'll find out how much you need to save in addition to your FIRE target. It will be much less then the 25X rule, if its $500 each I calculate distributions of $180,000 ($78, $54, $48k) and then at age 18 you're done. In this scenario you draw the reserves to $0, its a finite expense.

Cossack

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Re: question re saving for YOUNG kids college/future during FIRE
« Reply #3 on: June 22, 2017, 06:27:03 PM »
Those ages are similar to our kids now. We are not actively saving for them. I actually think that it can be a hindrance to their money handling and wealth building skills by having such a stash for them. "Why work hard when Ma and Pa will give it to me?" Teaching them your how you were able to FIRE is much more valuable than a college degree.
FIRE'd at few years ago. I am 43, DW 39. 5 young kids 10,8,7,4 and a newborn. We have lived in Auckland, Melbourne, Guangzhou, Zhuhai, Suva and currently living in Brisbane.

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Goldielocks

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Re: question re saving for YOUNG kids college/future during FIRE
« Reply #4 on: June 23, 2017, 07:14:28 PM »
It's ok to not know precisely right now what you are saving for, for your kids.

  --Only When our oldest hit 12, we gelled on what we were saving the money for -- tuition and books for an instate 4 year degree (living at home).  I wanted to be able to give her the basic opportunity for a bachelors if she chose.

  --BUT, if she does something else, we can decide what to do at that time with the money.

Next, as we were thinking about FIRE within 5 years, we decided to save up for all the near term (within 7 year) large expenditures before FIRE-ing.   Kids education, 5 years of annual property taxes and car/home insurance, vacation fund, and maybe even a used car fund.  At your kids' age, I would add in $5k each for braces or medical expenses.

After FIRE, the savings stopped.
  Everything draws down the pool of retirement money, so why withdraw, then put it back into a different form of savings?

tag

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Re: question re saving for YOUNG kids college/future during FIRE
« Reply #5 on: July 04, 2017, 03:18:52 PM »
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The solution is figuring what you want to do then. If it's to put aside $500/month for them then treat this as an expense. You'd need to have 25x $6,000 stashed.

We'd save for them in a Vanguard index fund. So isn't taking $500/month out of vanguard as part of our draw and putting it back in in the name of saving for their futures kind of silly? What am I missing?

Those ages are similar to our kids now. We are not actively saving for them. I actually think that it can be a hindrance to their money handling and wealth building skills by having such a stash for them. "Why work hard when Ma and Pa will give it to me?" Teaching them your how you were able to FIRE is much more valuable than a college degree.

Excellent point and I totally agree. We always say that we may never give them the money at all - ha! We just want to be able to if we want to. Even if I am a bazillionaire, I will not fully fund my kids' education. Or house. Or car. etc. I might help with those things though. MAYBE. :)

You need to remove the maybe's and decide what you're saving for.

I feel really comfortable with leaving this undecided. I can't possibly know where their lives will take them or how I will feel in 15, 20 25 years, or where I will be. I also don't wan't to pre-decide disbursement because how much and when I give is entirely dependent on so many variables.

Next, as we were thinking about FIRE within 5 years, we decided to save up for all the near term (within 7 year) large expenditures before FIRE-ing.   Kids education, 5 years of annual property taxes and car/home insurance, vacation fund, and maybe even a used car fund.  At your kids' age, I would add in $5k each for braces or medical expenses.

After FIRE, the savings stopped.
  Everything draws down the pool of retirement money, so why withdraw, then put it back into a different form of savings?

Like this idea. Where did you keep that money? The 5 years worth of big expenses.


Prairie Stash

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Re: question re saving for YOUNG kids college/future during FIRE
« Reply #6 on: July 05, 2017, 12:46:32 PM »
The problem with indecision, how do you know you have enough? Is $500/month even enough? How much so you want to have for each kid?

If you can decide now how much you need to retire, is it that much of a stretch calculating the future amounts you might need for your children? I advocate a buffer, but there is a big difference between $500k/child and $100k/child in terms of how much longer you need to save. Where are you on the spectrum?

Cwadda

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Re: question re saving for YOUNG kids college/future during FIRE
« Reply #7 on: July 05, 2017, 01:43:12 PM »
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We'd save for them in a Vanguard index fund. So isn't taking $500/month out of vanguard as part of our draw and putting it back in in the name of saving for their futures kind of silly? What am I missing?

It's similar to sticking $500/month in a bank account. That bank account just happens to be Vanguard S&P 500. Just treat it as an expense and plan on giving them that money later.

LiveLean

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Re: question re saving for YOUNG kids college/future during FIRE
« Reply #8 on: July 07, 2017, 01:28:29 PM »
For us it was a matter of limiting exposure.

Here in Florida, we have a terrific prepaid tuition plan. You buy tomorrow's tuition at today's rates -- or 2009 rates, as was the case with us. In Florida, we also have a terrific lottery-funded Bright Futures Scholarship plan. That, along with the prepaid, covers most everything here in Florida. It's also why the University of Florida has become one of the toughest schools in the nation to get into.

Georgia, with its Hope Scholarship, has a similar arrangement.

First inevitable FAQ: What if we don't want our kid to attend an in-state school?

A. I guess you have the money to pay for out of state. That's more money than I want to spend. ($60K a year and counting)

Second FAQ - What if you leave Florida?

A. My God, man! Why would I want to leave?
Living lean at www.tolivelean.com

Goldielocks

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Re: question re saving for YOUNG kids college/future during FIRE
« Reply #9 on: July 25, 2017, 12:35:14 AM »


Next, as we were thinking about FIRE within 5 years, we decided to save up for all the near term (within 7 year) large expenditures before FIRE-ing.   Kids education, 5 years of annual property taxes and car/home insurance, vacation fund, and maybe even a used car fund.  At your kids' age, I would add in $5k each for braces or medical expenses.

After FIRE, the savings stopped.
  Everything draws down the pool of retirement money, so why withdraw, then put it back into a different form of savings?

Like this idea. Where did you keep that money? The 5 years worth of big expenses.

Kids education is 50 percent stockes (VSTAX, etc) 50 percent bonds / fixed income, timed to when they can start using it.

The rest is just cash.  It is about 3 years worth of ready (planned) spending, so it is just cash.  I would rather the cash than the chance of a 20% gain and a 30% loss when I need it.    I may miss out on a few thousand, but that's ok.

MrsWhipple

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Re: question re saving for YOUNG kids college/future during FIRE
« Reply #10 on: July 26, 2017, 06:30:20 PM »
Second FAQ - What if you leave Florida?

A. My God, man! Why would I want to leave?
Well, maybe not you, but I couldn't wait to gtfo of Florida when I turned 17 and graduated. What happens if your kid ends up getting a good scholarship somewhere out of state or they really want to leave? Do you get the money back with interest or something?

mikedom

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Re: question re saving for YOUNG kids college/future during FIRE
« Reply #11 on: July 26, 2017, 06:39:59 PM »
Is anyone leveraging 529s for these savings? Have a 7mo DD and trying to figure out a game plan. In Michigan where contributions are deductible for state income tax purposes.

meatface

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Re: question re saving for YOUNG kids college/future during FIRE
« Reply #12 on: July 27, 2017, 11:33:25 AM »
Is anyone leveraging 529s for these savings? Have a 7mo DD and trying to figure out a game plan. In Michigan where contributions are deductible for state income tax purposes.

Yes we are using a 529. Started off with the Utah plan, but recently moved to our in-state Massachusetts plan since the state now allows tax deductions for contributing to it.

moof

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Re: question re saving for YOUNG kids college/future during FIRE
« Reply #13 on: July 27, 2017, 12:31:15 PM »
In our case I have the philosophy of wanting to give my kid enough to help him out and avoid crushing debt early in his adulthood.  I don't however want to fund him 100%.  I expect him to have to get summer jobs, take some loans, etc.

With that in mind I looked up current tuition and fees at the local public university and back calculated what would need to be saved to cover it.  Maxing out the 529 till I FIRE will cover between 50-60% of that, growth should get it somewhat higher with growth, and I'm calling that good enough.

Come college time we'll blunty share how much we can help as the savings plan.  If he goes to a pricier school the delta is on him to figure out.  I had room and board support only for my degree, so he will already have a big leg up compared to that.