csmommy
DIS Veteran
- Joined
- Jan 17, 2003
My suggestion is to do both.
Or put all the money into retirement & get financial aide for college. The sad truth is College Savings Plans get held against you when you apply to college.
My suggestion is to do both.
My 2 cents.
If you save for college & apply for financial aide, it gets held against you.
You cannot take a loan out for retirement.
My suggestion is to fund your retirement.
Your contributions will be counted as income, but the account will not be included as an asset.Only problem is, unless you are very near full social security retirement age, money you are putting into a retirement plan is money that FAFSA requires you to add back into your income as money you could be using for child's tuition.
Correct, the money you are putting into retirement each paycheck is the money they want you t spend on college instead, not what you had in the account prior.Your contributions will be counted as income, but the account will not be included as an asset.
Keep in mind that Roth contributions can be withdrawn without penalty. It's probably best to max out your roth and then dip into it if you come up short for college.
Perhaps a better way of sorting out what to pay yourself for 1st...
1. All tax-advantaged retirement assets get funded 1st (401K, IRA, Roth IRA) to their max taxable benefit
2. Once you max those resources, fund tax-advantaged college funds to their limit (some states do give both a state income tax break for what you put in and then another tax break when the money comes out, but they limit the amount you can put in per child per year)
3. If there's anything left (and most, except the tippy-top %, will not have anything left - we never do - heck, we can never complete #2 in full, then fund what you deem most important...
I fully admit we're in a good position, #1 is not a problem for us at all, we hit that early in the year. #2 we could hit, but our daughter is currently 2 years old. And with compound interest if we max it out every year for the next 10 she'll have a small fortune. I was more curious on what most feel is a safe amount as college for kids and how many are expecting a reasonable amount of compound interest, though I fully understand that's a huge unknown and crazy to expect great insights. At this point I should probably quit complaining and assume she'll probably be quite fine, though I suppose at the same time can't help but still moderately stress in the back of my mind
I'm wondering about this too but from the other end of the spectrum - We have saved modestly but as a single income family haven't been fully funding any long term savings to the levels experts recommend. But now we're in the position of our income doubling right before we get to the college years, and I know the FAFSA formulas will assume a level of savings based on our income at the time. Plus we'll be going from below the "no family contribution" threshold at the private colleges DD is considering to just above it. So we're trying to figure out how to scramble to make up the difference. I suspect I'll be working just to pay college tuition for my first few years after finishing my degree. I just hope it'll be enough!
I don't know too many people that get free money for college:
- The Federal Pell Grant is usually awarded to undergraduates who have a high degree of unmet financial need. Students whose families have a total income of up to $50,000 may be eligible for the need-based funding, though most Pell grant money goes to students with a total family income below $20,000
Federal Pell Grants - Scholarships.com
Save, save, save, and then save some more, not too many are going to qualify for the grant money. Yes the accounts can be switched to another beneficiary if your child doesn't use it if you don't want to pay the penalty. I plan to keep my kid's accounts open once their done with them and start saving small amounts for future grandkids.
csmommy - I understand where you are coming from. I had a very similar conversation with DH's family. They all assumed my valedictorian son would get a free ride to college. I had to explain that if he chose to attend the very best school he could get into (a top 25 school), we would have to pay. If he went to a smaller, much lower ranked school, they would pay for him to attend as they want kids with his stats to beef up their numbers.
DS's guidance counselor also explained it to him and tried to get him to apply to a couple of small Catholic colleges. DS wouldn't hear of it. He worked his tail off in school and wanted to attend the very best university that would take him. Lucky for all of us, he chose UVA, a nationally top ranked public university in our state. We have in state tuition covered for both our kids thanks to the Virginia Prepaid program. He won't have any student loan debt until law school - if he stays on that path.