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disneysteve
04-20-2006, 02:35 PM
This month's (the May issue) Money magazine has an article about one family and how they are planning to pay for their son's college education. The son is 18 and will be starting college in the fall. They have saved just $9,500. The husband is 55 and the wife is 52. They earn $110,000/year. Also, they have saved less than $40,000 for retirement but expect to need about $1 million to retire by age 65.

I think this is just the kind of family we are often talking about here. Good income but lousy savings. The article does say they had "unexpected family expenses" but didn't give any details.

The article also said that the average American family has saved less than $7,000 for college by the time their child is in high school. The exact amount was $6,625. Sorry, but even if you go to a state school, 7K isn't going to get you too far.

Plus, how the heck do these folks expect to go from 40K to 1 million in retirement funds in the next 10 years? They would need to save about 50% of their gross income each month and earn a 10% return on their money to end up with $1 million at age 65. That ain't gonna happen. If they could invest 20% of income, a more reasonable possibility, and earn 8% which is doable, they would end up with about 425K, less than half of their expected need.

Dad is quoted as saying, "Should we have saved more? Yes, absolutely. I wouldn't call us terrific financial planners, but the bottom line is, we'll find a way."

If anyone knows a way to turn 40K into a million in 10 years, let me know. I'm a pretty optimistic guy, but I really wonder what is going to happen to the baby boomers over the next 2 decades as they reach retirement with inadequate savings.

punkin
04-20-2006, 03:11 PM
Hey, that's not far from where I am except my DD is only 13 and I have $8K saved for her college. My retirement is a whole lot better though (more than 2X theirs) and I am only 39 so I have more time for it to grow.

I plan to pay for college with a combination of loans for DD and out of my current earnings. Up until this year I was paying $13K per year for private school for DD13 so I think I can swing it.

I am also behind on savings for my DD7. I only have $4K saved for her.

I am also very optimistic.

KelNottAt
04-20-2006, 03:17 PM
OK. I'll bite. Other than "we'll find a way," did the article say how they're gonna pay for college?

Julia M
04-20-2006, 03:22 PM
This month's (the May issue) Money magazine has an article about one family and how they are planning to pay for their son's college education. The son is 18 and will be starting college in the fall. They have saved just $9,500. The husband is 55 and the wife is 52. They earn $110,000/year. Also, they have saved less than $40,000 for retirement but expect to need about $1 million to retire by age 65.

I think this is just the kind of family we are often talking about here. Good income but lousy savings. The article does say they had "unexpected family expenses" but didn't give any details.

The article also said that the average American family has saved less than $7,000 for college by the time their child is in high school. The exact amount was $6,625. Sorry, but even if you go to a state school, 7K isn't going to get you too far.

Plus, how the heck do these folks expect to go from 40K to 1 million in retirement funds in the next 10 years? They would need to save about 50% of their gross income each month and earn a 10% return on their money to end up with $1 million at age 65. That ain't gonna happen. If they could invest 20% of income, a more reasonable possibility, and earn 8% which is doable, they would end up with about 425K, less than half of their expected need.

Dad is quoted as saying, "Should we have saved more? Yes, absolutely. I wouldn't call us terrific financial planners, but the bottom line is, we'll find a way."

If anyone knows a way to turn 40K into a million in 10 years, let me know. I'm a pretty optimistic guy, but I really wonder what is going to happen to the baby boomers over the next 2 decades as they reach retirement with inadequate savings.

The one thing I hope I do is get my kids to open up their own IRA's and 401K's, ASAP. Does having an IRA impact college financial aid?

My dh started a 401 K when he first started working, but only put in up to what the company matched. Not bad, but he's kicking himself he didn't do more young. At least he did something!

I'd like my kids to open IRA's when they first begin working, even summer jobs. Even if it's small amounts.....I'd like them to have that concept.

Isn't there something that shows it's better to put money in a 401 K from 22-30, than it is from 30-50? I remember seeing something like that.

In terms of college, what is typical of some families I know that mom has stayed at home with the kids. When she goes back to work, that money is used for college.

We don't have tons of college savings, but we do have some. I only work part time, but I anticipate going back to work full time some day and that will go towards college. Maybe not a perfect plan, but something.

However, when both parents already work, and the income is already spoken for, that's hard. The child will either need to go the community college route, or look at loans, or going to school part time.

Julia

disneysteve
04-20-2006, 03:23 PM
Hey, that's not far from where I am except my DD is only 13 and I have $8K saved for her college. My retirement is a whole lot better though (more than 2X theirs) and I am only 39 so I have more time for it to grow.

I plan to pay for college with a combination of loans for DD and out of my current earnings. Up until this year I was paying $13K per year for private school for DD13 so I think I can swing it.
Sounds like you are already in much better shape than these folks and you are 16 years younger. And your oldest won't be in college for 5 years, not 5 months.

JuneChickie
04-20-2006, 03:29 PM
:badpc: oops

disneysteve
04-20-2006, 03:30 PM
OK. I'll bite. Other than "we'll find a way," did the article say how they're gonna pay for college?
They made a number of suggestions:

Pick a cheaper school. The kid's first choice is U. of Oregon, which is over 25K/year. So they suggest doing a public college or splitting the 4 years - 2 at a public school then finishing at the private school.

They talk a little about applying for aid and comparing offers from different schools. They advise against having the parents borrow against their home equity or their retirement savings ("retirement suicide" is the term they use).

Their #1 tip: "Tighten your belt." Squeeze every possible dollar out of the family budget. Cut things like restaurant meals and vacations and consider trading in their SUV for an economy car. Sounds familiar, huh?

#2: Spend 529 money first because colleges look at that as an asset which can reduce financial aid offers. By spending it first, they may qualify for more aid in future years.

#3: Share the cost. Let the kid take on some debt, but not so much that it will be unmanageable when he gets out.

arminnie
04-20-2006, 03:30 PM
This isn't going to help this particular family, but for people with lower incomes this article is very helpful.

The moral of this - if you have smart kids make sure they work like crazy to make good grades.




Stanford Report, March 15, 2006 Families earning less than $45,000 need not make tuition contribution
Families with annual incomes of less than $45,000 will not be expected to contribute to the cost of tuition at Stanford University, and the requirements for middle-income families will be cut in half, Richard Shaw, dean of undergraduate admission and financial aid, announced today.

The change applies to both new and continuing undergraduate students and will go into effect with the new academic year in September. The program is anticipated to cost the university $3 million in the first year.

"When Jane and Leland Stanford created the university, they wanted students admitted based on their abilities, promise and willingness to work hard and not on whether or not they could pay the cost of tuition," Shaw said. "With this new program, we are telling talented students from families with low to moderate incomes that they should apply with confidence. If they are admitted, we'll cover their costs."

The implementation of the policies follows a decision made last spring by President John Hennessy that the university would work toward eliminating financial contributions for families with incomes below $45,000.

"From its earliest days, Stanford has had equal commitments to excellence and ensuring access to students from the widest variety of backgrounds and circumstances," Hennessy said. "Having a student body from diverse economic backgrounds benefits not just the students who receive financial aid, but also the entire student body—enhancing their academic experience and broadening their worldview."

During the current academic year, parents of enrolled students with incomes below $45,000 contributed an average $2,650 toward educational costs. Under the new program, that contribution will be eliminated. Parents with incomes between $45,000 and $60,000 will see their expected contribution reduced to an average of $3,800. The changes will affect more than 1,100 students.

The university already has committed $66 million of its own funds for next year's financial aid program. This year, the total aid provided to undergraduates from the university and other sources surpassed $112 million. About 76 percent of Stanford undergraduates receive some form of internal or external financial aid.

The change improves Stanford's already generous financial aid program. Stanford is one of the few universities in the nation that is "need blind," meaning that U.S. citizens and permanent residents are admitted without regard to their ability to pay. The university then meets the full need of all students who qualify for aid.

In the coming year, Stanford's undergraduate tuition will be $32,994, and total costs including room, board, books, transportation and personal expenses will average $47,000. The average financial aid package will include $28,700 in scholarships and grants. In addition to an expectation of support from parents based on their ability to pay, students are expected to contribute summer earnings, work during the academic year and take advantage of student loans.

"Students from low-income backgrounds are underrepresented at our nation's most selective institutions," Shaw said. "Stanford has historically had a strong financial aid program for low-income students. But many families may not know that or may be discouraged by the stated tuition. So we want to be more forceful with this new program in encouraging talented low-income students to consider Stanford."

disneysteve
04-20-2006, 03:41 PM
Raised 6 kids and all are going to college on their own. working and getting loans but doing what they have to do.
Two of them signed up and joined the Air Force to help get extra for schooling.
Both put in 4 plus years,, now out and both are going to college full time.


Our home was just paid off and we own both of our
10 year plus cars. We are in the process of buying a new car and to us
that is a real treat .
the money that was going on the house is going on the
new car every month. *that was for all you financial people out there who
willl say,,, u're home is paid off , put that in savings ,, nope,, going to put
that on a car payment.
Sounds like you guys have done just fine with what you had to work with, especially raising 6 kids and now preparing to take in your grandchild.

You must have had a great mortgage if the car will cost the same as the house payment. At least the car will be paid for in 4 or 5 years and then you'll have that money to put aside.

Lyn5
04-20-2006, 03:43 PM
:guilty: college has been on my mind more and more lately....time goes by too fast and my kids grow by the day. My oldest is starting K soon, so after much thought and research, DH and I decided to contribute less to paying off our debt (house) and to use the money we used to pay for preschool/childcare towards saving for college. It was a hard decision, I really want the mortgage gone, but our rate is 4.75% on 30 years, so we decided that saving for college was the way to go. There are so many competing needs and desires, it is very difficult to make the decision on how to set prorirties, at least for me it is. And, I am thankful we have been able to pay for childcare all these years, I figure if we have managed this long, what is another 18 years :rolleyes:

punkin
04-20-2006, 04:02 PM
Sounds like you are already in much better shape than these folks and you are 16 years younger. And your oldest won't be in college for 5 years, not 5 months.

Actually it's slightly more than 4 years. She's going into 9th grade this fall (yes, she is very young-but she has an October birthday). In order to save enough money to fully fund her education at my alma mater, I would have to save over $200K over the next 4 years. :lmao:

That is just not going to happen. She better get some financial aid.

Chicago526
04-20-2006, 04:02 PM
WEll,, Let me just say that we live off of "less than half of that ,, yes, less than half
of that . We are around the same age as that couple. So if we were making that kind of money I'd be putting that 60 thousand I had left over in Savings for sure .... and in ten years ,, whoa , I would have me a nice liittle nest egg. ,,,,,,,,,,,, We are going
to have to work for the rest of our lives. And No I'm not proud that we aren't in a
higher income bracket but that just way the cookie crumbled for us. Both of us
are college graduates too. Just picked the wrong career fields I guess.


Just curious, but what do you do that you earn so little when both of you have college degrees? The only thing I can think of that pays so little is teaching, but teachers almost always get pensions (and often very good ones) and you said you'd have to work forever.

Anyway, if you don't have it, you don't have it! No flames here!

crisi
04-20-2006, 04:29 PM
The Stanford thing is great - but the competition will be fierce. Here is what is happening in the Twin Cities:

http://www.mnscu.edu/media/newsreleases/2006/010906powerofyou.html

Basically, if you graduate from a Minneapolis or St. Paul High School, your tuition is paid for the first two years at a small number of state schools. Only one is a four year university. Its a pilot, with only five years of funding, but they hope it catches on.

punkin
04-20-2006, 04:47 PM
Actually, the very competitive schools with huge endowments have always given better financial aid than the cheaper colleges. Stanford probably would have given out huge amounts of financial aid for anyone making less than $45K anyway and this just sounds like good publicity for the school.

dvcgirl
04-20-2006, 04:57 PM
This month's (the May issue) Money magazine has an article about one family and how they are planning to pay for their son's college education. The son is 18 and will be starting college in the fall. They have saved just $9,500. The husband is 55 and the wife is 52. They earn $110,000/year. Also, they have saved less than $40,000 for retirement but expect to need about $1 million to retire by age 65.

I think this is just the kind of family we are often talking about here. Good income but lousy savings. The article does say they had "unexpected family expenses" but didn't give any details.

The article also said that the average American family has saved less than $7,000 for college by the time their child is in high school. The exact amount was $6,625. Sorry, but even if you go to a state school, 7K isn't going to get you too far.

Plus, how the heck do these folks expect to go from 40K to 1 million in retirement funds in the next 10 years? They would need to save about 50% of their gross income each month and earn a 10% return on their money to end up with $1 million at age 65. That ain't gonna happen. If they could invest 20% of income, a more reasonable possibility, and earn 8% which is doable, they would end up with about 425K, less than half of their expected need.

Dad is quoted as saying, "Should we have saved more? Yes, absolutely. I wouldn't call us terrific financial planners, but the bottom line is, we'll find a way."

If anyone knows a way to turn 40K into a million in 10 years, let me know. I'm a pretty optimistic guy, but I really wonder what is going to happen to the baby boomers over the next 2 decades as they reach retirement with inadequate savings.


Yes, they'll find a way....it's called "continue working". Make no mistake about it, there are a lot of people in this boat. Also, they really can't afford to put their son through college, but like many others, they probably will help as much as they can....and further impact their ability to save for retirement.

Also, even if they had 1 million, that would bring their hypothetical retirement income to around 70K (counting SS).....still a bit cut from 110K a year. If they are lucky and can save 425 and get that 8 percent....their income is about 47K. Going from 110 down to 47K....tough to do.

DawnM
04-20-2006, 04:59 PM
Our county here in NC is just starting a new High School this next year. It will have grades 9-13 and will be held on the Community College campus. At the end of grade 13 the student will graduate with a HS diploma AND two years of CC under his/her belt! All for free at a ps.

I thought that was a great plan!

I don't know where we will be when my oldest starts college. We have just recently gone down to one income and I could go back to work full time if necessary.

In SoCal we made over 100,000 per year and here in NC we make a little less than 3/4 of that, but we live so much better here on less. In retrospect, we probably should have purchased a smaller home and had either no mortgage or a smaller mortgage, but it is done now.

I am concerned about getting my 3 kids through college in the future. My alma matter is now close to $30,000 per year (including room and board). My husband's alma mater is close to $40,000 per year.

Nothing wrong with community college first! Also nothing wrong with a local state University and living at home. That said, I will also say that if my child is passionate about a particular school and gets in and keeps his grades up, we will help him find a way to pay for it.

Dawn

PS: How much should one have in a retirement account?

crisi
04-20-2006, 05:02 PM
Actually, the very competitive schools with huge endowments have always given better financial aid than the cheaper colleges. Stanford probably would have given out huge amounts of financial aid for anyone making less than $45K anyway and this just sounds like good publicity for the school.

Yeah, my husband is the graduate of one of the privately well endowed schools - one of the best endowed in the country. (get your mind out of the gutter). He left with some student loan debt, but not nearly the amount the college cost. But those schools can be highly competative because of the financial aid they have, as well as many of them being really well respected schools.

punkin
04-20-2006, 05:09 PM
Mind in the gutter? Who me? I am a lofty-minded graduate of a well endowed University. My superior mind refuses to sink to such levels. :cool1:

Seriously though... That is presicely what I did and my student loans were not astronomical. Most of my aid was in the form of grants.

JuneChickie
04-20-2006, 05:19 PM
Chicago ****** nope ,, not teachers ,so no teachers pension for us ,, and yes
,, there are lots of people out there with college degrees making less than 50 thousand a year. Just because you go to college does not guarantee you a 100 thousand plus a year job.

DisneySteve :::,, Our mortage when we first got it 16 years ago ,, was 900 a month ,, at that time our taxes and ins. were included in that and started out at 250 a month
in escrow. Now our taxes and ins. are almost 600 . our home value has increased
along the way and so have the taxes we have to pay on it... that leaves 300 a month
for our new car payment ,,, 250 for the car payment and 50 a month for the
ins. payment.. so heres the math for you ,,,,, 600 for home taxes and ins.
250 plus 50 for our car. ,,, equals 900 ,, (which was our normal house payment untill
we paid it off. ) Hence,, """ the money that was going on the house "" is going on the car payment ,,,,,

MrsPete
04-20-2006, 05:26 PM
I really wonder what is going to happen to the baby boomers over the next 2 decades as they reach retirement with inadequate savings.I suspect it'll be a combination of things:

Social security will change, probably benefiting those who failed to save. Or perhaps just Medicare will change since health care is such a concern for everyone, especially the elderly. Why? Senior citizens are a powerful group, and the politicians can't afford to piss them off.

More and more seniors will continue to work (at least part-time), which will make things difficult for younger workers who won't be able to get a foothold in the work force.

More and more senior citizens will be forced (key word being forced, not doing it out of choice) to sell their homes and live with their children.

More and more seniors will develop a taste for cat food.

crisi
04-20-2006, 05:34 PM
DawnM, there is a recent thread that discusses retirement savings. If you do a search for retirement on the budget board in the past month (title only) it will pop up.

You need to be very careful about community college first. You need to have a pretty exact plan and know which credits transfer and which don't. And if the school you want to graduate from is competitive, there will not be many openings for transfer students. I know a few people who ended up spending a lot more thinking they were doing a very cost effective thing, or just stopping with their AA when they realized they weren't getting into engineering school without needing to repeat eighteen months of coursework because the credits didn't transfer. It isn't that it can't work, its just that you need to have done a lot of research ahead of time.

crisi
04-20-2006, 05:39 PM
I suspect it'll be a combination of things:

Social security will change, probably benefiting those who failed to save. Or perhaps just Medicare will change since health care is such a concern for everyone, especially the elderly. Why? Senior citizens are a powerful group, and the politicians can't afford to piss them off.

More and more seniors will continue to work (at least part-time), which will make things difficult for younger workers who won't be able to get a foothold in the work force.

More and more senior citizens will be forced (key word being forced, not doing it out of choice) to sell their homes and live with their children.

More and more seniors will develop a taste for cat food.

Yep. reduced means tested social security - but I anticipate the trade will be that your tax rate on retirement withdrawls past 65 will decrease or disappear. That would be bad news for the Roth-ers, who are paying now to get their break later, but the political money is in the wealthier people, who don't qualify for Roths. And the middle class will get lost - again.

Yep to the rest of it as well.

I hear the salmon and tuna aren't bad on crackers.

imsayin
04-20-2006, 06:06 PM
Going from 110 down to 47K....tough to do.

Especially if you've been living off the entire 110. Which, in this case they are.

disneysteve
04-20-2006, 07:38 PM
there are lots of people out there with college degrees making less than 50 thousand a year.
True, but you said you both have college degrees. That means you are making an average of 25K each. That sounds extremely low for 2 college grads. I think that's why Chicago526 asked the question.

Our mortage when we first got it 16 years ago ,, was 900 a month ,, at that time our taxes and ins. were included in that and started out at 250 a month in escrow. Now our taxes and ins. are almost 600 . our home value has increased along the way and so have the taxes we have to pay on it... that leaves 300 a month for our new car payment ,,, 250 for the car payment and 50 a month for the
ins. payment.. so heres the math for you ,,,,, 600 for home taxes and ins.
250 plus 50 for our car. ,,, equals 900 ,, (which was our normal house payment untill we paid it off. )
I'm confused. Correct me if this is wrong. If your original payment was $900 total and $250 of that was taxes and insurance, that means principal and interest was $650. Now, your taxes and insurance are up to $600. P and I was the same (unless you refinanced), so your total payment was up to $1,250 - right? Pay off the mortgage and you free up $650/month, not $300. Or does the principal and interest payment decrease over time? I'm not that many years into our mortgage so I'm not sure how that works.

disneysteve
04-20-2006, 07:41 PM
Also, even if they had 1 million, that would bring their hypothetical retirement income to around 70K (counting SS).....still a bit cut from 110K a year.
This may not be accurate. Both parents are teachers so they may have some type of pension. The article didn't go into this since it was about college, not retirement.

JuneChickie
04-20-2006, 07:59 PM
Disneysteve : you stand corrected and u are wrong ,,,, also u're also going to have stay confused because I don't know how to explain so you'll understand it.
Sorry ,,, I need more schooling ,,,

disneysteve
04-20-2006, 08:07 PM
Disneysteve : you stand corrected and u are wrong ,,,, also u're also going to have stay confused because I don't know how to explain so you'll understand it.
Sorry ,,, I need more schooling ,,,
Can someone else explain that to me? As you pay down your mortgage, does your P and I decrease? I was thinking it stayed the same but more went to principal and less went to interest.

ETA: I just checked my mortage statements. My P and I total is the same now as it was 4 years ago, just divided up differently. Now more is principal and less is interest. Will that change later in the life of the loan?

JuneChickie
04-20-2006, 08:14 PM
that part is right,, but we refinanced ,, so things change when you do that,, I give up Disneysteve ,, and I think you are picking on me , ,, not sure why ,,,,,,, but if you want to be right ,, OK,,, DISNEYSteve is right ,,,,,,

disneysteve
04-20-2006, 08:17 PM
that part is right,, but we refinanced ,, so things change when you do that,, I give up Disneysteve ,, and I think you are picking on me , ,, not sure why ,,,,,,, but if you want to be right ,, OK,,, DISNEYSteve is right ,,,,,,
Not trying to be right at all. Sorry if it came across that way. My original response to you said " P and I was the same (unless you refinanced)" so I considered the possiblity that you had refinanced. That would answer the question. Thanks.

imsayin
04-20-2006, 08:28 PM
Can someone else explain that to me? As you pay down your mortgage, does your P and I decrease? I was thinking it stayed the same but more went to principal and less went to interest.

Assuming you have a fixed mortgage, your payment (for P&I only) stays the same for the term of the loan. The amount of principal you pay increases each month, and the amount of interest decreases, but the total is always the same. The interest portion is calculated based on the balance of the loan, which is decreasing with each payment.

blanq
04-20-2006, 10:58 PM
This month's (the May issue) Money magazine has an article about one family and how they are planning to pay for their son's college education. The son is 18 and will be starting college in the fall. They have saved just $9,500. The husband is 55 and the wife is 52. They earn $110,000/year. Also, they have saved less than $40,000 for retirement but expect to need about $1 million to retire by age 65.

The article also said that the average American family has saved less than $7,000 for college by the time their child is in high school. The exact amount was $6,625. Sorry, but even if you go to a state school, 7K isn't going to get you too far.

I am more concerned about this families retirement savings than I am about their college savings. I am one of those people who does not believe that parents owe their kids a college education. I got my 4-year degree without one dime of assistance from my parents. Now, that said, if parents are able and willing to contribute that is okay too. We do have a college savings plan for our DS, although we have no intention of handing him a free ride even though we likely could fully fund his higher education. He will be contributing to some of the cost of that education.

$7,000-$9,000 today will buy two years + books/fees for a student at many community colleges, with money left over if the child opts to live at home during these two years. 15 credits will cost $1950 per semester at a community college near my home. I personally think that community college is a great way for students to get their generals out of the way, and then transfer to a university or college for their final two years. There is also the option of taking a halftime load and working halftime. My point is there are ways to make college work even if parents haven't socked away a ton of money for their kids to attend.

The family in that article needs to seriously kick themselves into gear regarding their retirement though!

DawnM
04-21-2006, 05:05 AM
Hmmm.....I don't know where you live and I will certainly need to look into that further. In CA it was actually encouraged by some of the schools to attend CC first if you don't get in right away. The US schools would absolutely take all the credits from the CA CC's in the area. It may be different in different parts of the country and I admit I don't know much about the rest of the country as my experience has been primarily CA.

I am not sure why general eds wouldn't transfer. An English Lit class is an English Lit. class isn't it? If you didn't take anything specific to your field why would it matter for just general eds?

Dawn


DawnM, there is a recent thread that discusses retirement savings. If you do a search for retirement on the budget board in the past month (title only) it will pop up.

You need to be very careful about community college first. You need to have a pretty exact plan and know which credits transfer and which don't. And if the school you want to graduate from is competitive, there will not be many openings for transfer students. I know a few people who ended up spending a lot more thinking they were doing a very cost effective thing, or just stopping with their AA when they realized they weren't getting into engineering school without needing to repeat eighteen months of coursework because the credits didn't transfer. It isn't that it can't work, its just that you need to have done a lot of research ahead of time.

crisi
04-21-2006, 07:44 AM
General eds do tend to transfer. Schools and majors like Engineering, Physical Therapy, some of the Science fields don't necessarily transfer science, engineering or even math classes. Sometimes business school is picky in the credits they will accept.

It also depends on the program. For instance, PT is a program you are admitted to as a Junior. When my sister applied for the PT program (she didn't get in, honors student, highly competitive), they didn't consider anyone who had transferred in because you couldn't compare an A from University of Wisconsin - Madison with one from Kennedy Jr. College. When I was at the U (quite a while ago) Computer Science had the same problem, you couldn't declare it as a major until Junior year, and then they only took so many students to the program.

I'm in the Twin Cities. My alma mater is the Univerity of Minnesota, the University of Iowa and I'm back going to Metro State University. All have similar catch 22s.

Schools can be very difficult to transfer into. They often admit a larger freshman class than they have room for as Seniors, knowing that some will drop. So, unless the drop rate is high, there will not be room for transfers. Private schools are more difficult than public in this respect (from my understanding), but it can be hard to transfer into a good public school for the same reason. If you don't get into UCSC right away, transferring in may be just as competitative as the original application. But I don't know the California system at all.

imsayin
04-21-2006, 07:55 AM
General eds do tend to transfer. Schools and majors like Engineering, Physical Therapy, some of the Science fields don't necessarily transfer science, engineering or even math classes. Sometimes business school is picky in the credits they will accept.

I funded 100% of my college, starting with a community college. I transferred all 60 credits I earned at the cc. I knew where I was going to complete my degree, so I took only classes that would transfer. A big key is to not earn an Associates degree at the CC. There are a lot of wasted credits that won't necessarily transfer.

Just an interesting side note on whether or not to pay for your child's college: I am 1 of 8 kids, my parents funded $0 for any college, 5 out of 8 of us have college degrees. DH is 1 of 8 kids, his parents funded 100% of college for all kids, 6 out of 8 have college degrees. So, it can be done, don't panic!

mickeyfan2
04-21-2006, 08:12 AM
General eds do tend to transfer. Schools and majors like Engineering, Physical Therapy, some of the Science fields don't necessarily transfer science, engineering or even math classes. Sometimes business school is picky in the credits they will accept.

I funded 100% of my college, starting with a community college. I transferred all 60 credits I earned at the cc. I knew where I was going to complete my degree, so I took only classes that would transfer. A big key is to not earn an Associates degree at the CC. There are a lot of wasted credits that won't necessarily transfer.
Not true in my case. I have an engineeing degree and went to a CC and got my AAS degree. I was a full standing junior at the private college I graduated from just two years later with my BSECE degree. BTW I was ahead of the other juniors, since the new school only required 60 credits in two years but my CC required 80. I had harder and more engineering classes, so when I transfered some of it was repeating for me. I had to do the 60 credits to get my degree, but it was easier then the first two years.

dvcgirl
04-21-2006, 09:01 AM
This may not be accurate. Both parents are teachers so they may have some type of pension. The article didn't go into this since it was about college, not retirement.

Ahh, well that would obviously change the situation. However, if they are calculating that they need one million, they are trying to generate about 40K in retirement income. Perhaps pension+SS for them= about 70K and they're trying to get back up to 100% of their income, or $110,000. In their case this is probably a good idea because they are currently *spending* just about 100% of their income. That's the big disadvantage of being a spender vs a saver... you haven't developed the habit of living on less than you make, and doing so in retirement will likely leave you somewhat disappointed.

WDWorld2003
04-21-2006, 09:57 AM
We have a college fund for both of our kids but it will not pay for all of their college years. I also find it interesting when we file the FAFSA it actually would be better if they didn't have $ in their name. They would qualify for more assistance and possibly, scholarships. We will help them as much as we can but I think they should contribute, also.

I also find it interesting that everyone's basing their assumption on this couple's current income. Our income is considerably better in the last 3-5 years and hopefully, will be even better in the future and we are in our 50's. However, in our kids first 10-15 years we had a tough time paying for daycare, activities, etc. They were hard times and there wasn't anything left for college savings or much else. I think a lot of people have a tough time when kids are young. All of of sudden there are less hours in the day to work - you need a bigger house, more food, more clothes, etc.

We have always contributed to our retirement but that really took a hit in the market a few years ago and is finally getting back on track.

If this couple was making that kind of money all along then they should have more $ saved, especially for retirement. However, if their first years were like ours it would be tough to do. Also, $110,000 a year may sound great in a rural area, but try in live on that in New York City or California.

MrsPete
04-21-2006, 10:08 AM
I am more concerned about this families retirement savings than I am about their college savings. I am one of those people who does not believe that parents owe their kids a college education.I agree that if you MUST choose between your retirement and your children's education, you should save for your retirement; however, I think most of us can do both IF we start saving from a young age.

Also, when it comes to college savings, SOMETHING is better than nothing. If you can only manage to give your kids a couple thousand per year, it's better than giving them nothing. Maybe I'm reading more into it than's there, but it seems that some people (general some people -- no one in particular) are saying, "I'll never be able to save $$$$ for college, so I just won't bother at all." I paid for 100% of my college education, and it was TOUGH! At times I made choices that were not wise or safe (sharing textbooks I couldn't afford to buy, living in some bad, bad apartments); if I'd had just a little bit of help, it would've seemed so much easier.

MrsPete
04-21-2006, 10:13 AM
General eds do tend to transfer. Schools and majors like Engineering, Physical Therapy, some of the Science fields don't necessarily transfer science, engineering or even math classes. Sometimes business school is picky in the credits they will accept.One key is taking community college credits with an eye towards the university. Not everything will transfer, so it's wise to work carefully with an advisor and make sure that you choose wisely.

My high school offers a great program that allows high schoolers to take community college classes during their senior year. They receive credit on their high school transcript AND it can be transferred to the university of their choice. They don't pay for tuition or books -- just their own transportation. It's a great program, and I'm going to encourage my girls to do it when they're older. I'm also going to encourage them to take community college classes during the summer before and after their senior year in high school.

My goal for my own daughters is to go straight to a university after graduation, but taking a few community college classes with them will be a great benefit.

MrsPete
04-21-2006, 10:17 AM
Can someone else explain that to me? As you pay down your mortgage, does your P and I decrease? I was thinking it stayed the same but more went to principal and less went to interest.

ETA: I just checked my mortage statements. My P and I total is the same now as it was 4 years ago, just divided up differently. Now more is principal and less is interest. Will that change later in the life of the loan?Assuming the poster has a fixed interest rate, the amount of the payment should remain constant for the life of the loan; however, each month less of that money will go to interest and more will go to principle.

However, IF the poster also has an escrow account which pays insurance and taxes, that can change over time. Since escrow is rolled into the payment, it's easy for a person to mistakenly believe his or her payment has increased.

disneysteve
04-21-2006, 10:23 AM
I also find it interesting that everyone's basing their assumption on this couple's current income... I think a lot of people have a tough time when kids are young. All of of sudden there are less hours in the day to work - you need a bigger house, more food, more clothes, etc.

If this couple was making that kind of money all along then they should have more $ saved, especially for retirement. However, if their first years were like ours it would be tough to do.
I think this is a good point. Very few people start out their careers earning what they will be earning 20 or 30 years later. I certainly earn more today than I did 10 years ago when my daughter was born. I also save a larger percentage of my income today than I did back then.

The problem is for too many people, as their income grows, they manage to increase their spending but not necessarily their savings.

deltachi8
04-21-2006, 10:23 AM
I am more concerned about this families retirement savings than I am about their college savings. I am one of those people who does not believe that parents owe their kids a college education. I got my 4-year degree without one dime of assistance from my parents. Now, that said, if parents are able and willing to contribute that is okay too. We do have a college savings plan for our DS, although we have no intention of handing him a free ride even though we likely could fully fund his higher education. He will be contributing to some of the cost of that education.

$7,000-$9,000 today will buy two years + books/fees for a student at many community colleges, with money left over if the child opts to live at home during these two years. 15 credits will cost $1950 per semester at a community college near my home. I personally think that community college is a great way for students to get their generals out of the way, and then transfer to a university or college for their final two years. There is also the option of taking a halftime load and working halftime. My point is there are ways to make college work even if parents haven't socked away a ton of money for their kids to attend.

The family in that article needs to seriously kick themselves into gear regarding their retirement though!

Very nice, well thought out post.

When I went to college (the first time) I really didnt want to but everyone said you had to (i probably just wasnt ready) and my parents said they would pay it all. Great times..I failed out. One of the main reasons...I had no real stake in it, it wasnt my bank book being effected. Foolish? Yep. Selfish? Yep. Common for an 18-20 year old? Many times.

When I went back, it was on my dime. I worked full time and attended school full time. I took on the loans, I applied for the grants. I knew how much everything cost and it made me take it sooooo much more seriously. I earned an Associates with high honors and my BS Suma Cum Laude.

So when my DS is ready for college (if he chooses to go), he will get some help from me, but it will be mostly on his efforts.

Also, I could not recommend community college more for the first year or two of school. It helps the transition and helps you find out where you want to go.

As for retirement, its another discussion, but i wont judge what others choose to do with their money, its theirs, they eraned it, they have plenty of information to go by, they can make up their own minds.

crisi
04-21-2006, 11:06 AM
I think this is a good point. Very few people start out their careers earning what they will be earning 20 or 30 years later. I certainly earn more today than I did 10 years ago when my daughter was born. I also save a larger percentage of my income today than I did back then.

The problem is for too many people, as their income grows, they manage to increase their spending but not necessarily their savings.

But you can't PLAN on making more. There are lots of people who won't see significant increases to their income. I know a number of people who planned to pay for college with the next raise, next promotion, or the next job - but the raises have barely covered cost of living and promotions aren't automatic. If it isn't there, though, it isn't there. And not everyone values paying for their kids college.

It is wrong to judge the family in the article - even if we had a whole history of their finances they could just have different values. However, the article is interested and you can take away some lessons.

On the community college thing - it CAN work, but you need to know what pitfalls your individual plan has and step around them. Research is key (or luck). Don't ASSUME that the credits will transfer or that they will apply to the major you want. Don't assume that getting accepted as a transfer student does not mean going through an acceptance process - it may be harder to transfer in than get admitted as a freshman.

kfeuer
04-21-2006, 11:40 AM
But you can't PLAN on making more. There are lots of people who won't see significant increases to their income. I know a number of people who planned to pay for college with the next raise, next promotion, or the next job - but the raises have barely covered cost of living and promotions aren't automatic. If it isn't there, though, it isn't there. And not everyone values paying for their kids college.



That's so true--DH's 2-3% annual raises haven't even covered the increases in our health insurance premiums, much less the increased cost of everything else! The only way he can make more is to take a job that involves a lot of travel, which is something we've chosen not to pursue since our children are still so young. I've gotten some nice raises, but with only working 18 hours a week they don't make much of a difference.

I've got a question (I know nothing about college financing/aid etc.)--my parents have set up investment accounts for each of my son's in my boy's names. Is that a mistake as far as college aid goes? If so, any recommendations on how to fix it?

disneysteve
04-21-2006, 11:45 AM
Also, when it comes to college savings, SOMETHING is better than nothing. If you can only manage to give your kids a couple thousand per year, it's better than giving them nothing.
This is so true. I think lots of people meet with a planner or use an online calculator, see the huge number and get scared off. Yes, college might cost $200,000, but that doesn't mean if you don't save that much your kid can't go. Save what you can, help to the extent you are able. And don't forget that you can also fund some college costs out of current income while your child is in school. Those numbers usually don't enter into the projections at all.

disneysteve
04-21-2006, 11:48 AM
I've got a question (I know nothing about college financing/aid etc.)--my parents have set up investment accounts for each of my son's in my boy's names. Is that a mistake as far as college aid goes? If so, any recommendations on how to fix it?
Well, I wouldn't call any savings for college a mistake, but it would be better from a financial aid standpoint for your parents to invest that money themselves in their own names and just use it to help pay college costs when the time comes. That way it wouldn't enter into the financial aid calculations.

sweet maxine
04-21-2006, 12:05 PM
*************

kfeuer
04-21-2006, 12:06 PM
Well, I wouldn't call any savings for college a mistake, but it would be better from a financial aid standpoint for your parents to invest that money themselves in their own names and just use it to help pay college costs when the time comes. That way it wouldn't enter into the financial aid calculations.

But would they have to pay taxes on the investment gains if they did that? I almost wonder if we shouldn't move that money to a 529 plan, but I don't want to lock it in to having to be used for college in case they decide not to go.

WDWorld2003
04-21-2006, 12:15 PM
kfeuer - That's a tough one. If something happens to your parents then the money is not part of their estate - it belongs to your children and no inheritance taxes, etc. have to be paid.

However, we are finding out that when it comes time for college (this year!) all amounts saved are counted. My daughter had some money invested by her grandfather in her name, we had a 529 and she had some of her own savings and all of this comes into play when applying for FAFSA, scholarships, or any financial assistance from the colleges.

To date, she has not received any assistance or scholarships and probably will not until this saved money is spent and at today's prices it won't take long! She has excellent grades and has been involved in many volunteer activities and was really hoping to get a small scholarship or two. You may want to speak to a financial adviser that is very knowledgeable in this area (ours was not!) and find out the best place your parents should start a fund.

I do think it may be better for your parents to just gift them an amount each year during their college years from investments they have made. We've also had to pay income tax each year on the investment her grandfather made in her name. It's not a lot and we're very, very grateful for the contribution to her education. But, had we known what we know now I think there may have been better avenues.

crisi
04-21-2006, 01:05 PM
But would they have to pay taxes on the investment gains if they did that? I almost wonder if we shouldn't move that money to a 529 plan, but I don't want to lock it in to having to be used for college in case they decide not to go.

The answer to that depends on your parent's income, how much they intend to save for your children, and a whole lot of other factors. Inheritence tax thresholds are so high that most people won't hit them - if they have assets enough to hit them, they should be talking to an estate planner (attorney and/or CPA) now - steps may be able to be taken to ease any estate tax burden. If they are wealthy enough that they intend to save significant amounts of money for your kids, they should see a CPA to understand all the consequences. Gift tax, 529s, estate tax, trusts, etc. are highly complicated, and you are going to want to make sure you consult a professional.

crjack
04-21-2006, 02:04 PM
This is so true. I think lots of people meet with a planner or use an online calculator, see the huge number and get scared off. Yes, college might cost $200,000, but that doesn't mean if you don't save that much your kid can't go. Save what you can, help to the extent you are able. And don't forget that you can also fund some college costs out of current income while your child is in school. Those numbers usually don't enter into the projections at all.

This is exactly what we were just discussing when reviewing our recent college funds for our children. Right now, we fund both accounts but at our current investment rate it wouldnt fund two private school tuitions...possibly state schools but even so not 100%.

Right now we live on one full time income(DH) and my part time salary but as our children get older I will be back to work full time. That will be extra money that will go directly towards college.

Our mortgage will also be paid off as they start college so with that debt gone and two full time salaries, we should have more money available every month to put towards the tuition, in addition to what we have saved.

We have also made sure we have funded our 401k's well first so that we will be in good shape to focus extra on college when that time comes.

College is so competitive these days I'm more nervous about my children getting in than I am paying for it!!

arminnie
04-21-2006, 02:07 PM
One key is taking community college credits with an eye towards the university. Not everything will transfer, so it's wise to work carefully with an advisor and make sure that you choose wisely.


I might also add that it is so important pay attention to what you are taking with respect to your degree program period.

I am dealing with a student now who was told FOUR weeks before graduation that he is one unit short of his degree requirements because they don't want to count a 3 hour course taken in another section of THE SAME UNIVERSITY!!! And this is all post-Katrina where other students are being allowed to tranfer hours from ridiculous courses at ridiculous schools.

And this was for a very difficult Asian language course - taught at the night school because there is no day class offered.

Highly selective schools (public and private) can be very, very picky about courses they will allow from other colleges. And often for good reason. I know students at some of the less selective colleges whose mandatory freshman math classes are exactly what they had (and aced) in the 10th grade.