Will you will be retired or not when you kids go to colleg?
First, thanks for the reply. Very much appreciated. Interesting question. Kid #1 will be entering college the same year we expect to hit what I consider my low-end FI number. More than likely we'll keep working while the kids are in school, but perhaps part time, but certainly at a point where we can up and go visit them whenever we want.
Do you expect to be eligible for financial aid?
I haven't researched income level cutoffs yet, but if we are both working, I doubt it. At the risk of sounding like every other overly proud parent…we have pretty smart kids and both the wife and I played college sports, so we hope they have a shot at some sort of merit based aide (either academic or athletic or both).
Are you committing to pay the entire cost regardless of what school the kids attend?
We like to think this is open for discussion, but most likely we'll end up paying for it. We should hopefully be in a position to cash flow the expense if we have to. I still have some student loans (2% interest) and even though I do not plan to pay mine off any time soon, I do not want to see our kids saddled with any debt when they are starting out.
Can your pre-paid in state tuition plan be cashed out for use at an out-of-state college?
Yes. The equivalent amount can be used anywhere.
Personally, I am planning to RE and burn down my taxable accounts prior to the college years. We'll be highly eligible for financial aid (at least under the current rules.) So if I already had a fully funded in-state tuition plan, I would think that would already be enough to cover my EFC anywhere. In that case, it doesn't sound like you need to save any more in a 529 plan.
If they go in state, tuition is covered 100%. Of course, that leaves fees, books, room and board etc.
Regardless, I'd put as much as possible into the Backdoor Roth. Good for helping you RE and does give flexibility for paying for college. I'm not particularly familiar with the mechanics so I can't evaluate your plan for timing. It sounds like you are generally aware of the FAFSA implications of tapping a Roth (i.e. counting as parental "income" on the following year's FAFSA.)
The flexibility is what attracts me to this approach. If we need the money for school it is there, if not it just lets us RE-arlier, if we want to. I need to do more research on using the funds and the implications on financial aide. The simple approach seems to be to take out student loans for the first 3 years (assuming they are interest deferred) and then use the original contribution/conversion amount to the Roth IRA to pay off the loans in year 3 or 4, and to pay for year 4 school. But I'm not sure if that will work or not. Luckily I have some time to figure it out. LOL!
If you're planning to RE before your kids go to college, I'd be interested in hearing your plan for funding living expenses before and during the college years.
No plan as of yet, but the longer I work, the more attractive that becomes. We just aren't ready to make the plunge yet.
(If you're interested, my thinking about living expenses during college is discussed here: http://forum.mrmoneymustache.com/ask-a-mustachian/fafsa-and-roth-pipeline-income-alternatives/)
Very much interested. I will spend some time looking at the info in that link. Thanks again. Glad to know at least on mustachian doesn't think it is a crazy plan. :)