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Kids College Fund

Old 06-13-2011, 08:52 AM
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Default Kids College Fund

I've been going back and forth between an individual 529 plan or the Florida pre-paid. I'm going to start with a little chunk of deposit of a few grand and then put about $300/month into either (about what FPP is monthly). My boy is 5 months. I've looked into the details of each for the most part and my personality tells me to go 529 but then something tells me just do the Florida Pre-paid. Mostly bc its guaranteed by the state and it's kind of set it and forget it and my wife feels more comfortable with that. Also talked to a couple financial buddies of mine and they slightly lean toward the 529 but not a slam dunk decision. Plus one ended up doing FPP anyway but he's in a different financial situation.

I want to get started asap but been sitting on fence too long already. Any suggestions/input would be appreciated.
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Old 06-13-2011, 09:05 AM
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I'm a big fan of the prepaid program. By contributing, you are locking in your return at the inflation rate of tuition or the various other programs available. Your return in the 529 will be based on market returns. Our daughter is going to start her freshman year in the fall. The prepaid plan worked out great because we were grandfathered in for purposes of the "differential payment". We also have a 529, but the Prepaid Plan really outperformed, as the tuition inflation rate has outperformed a balanced portfolio.
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Old 06-13-2011, 10:59 AM
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I have 3 kids and two are at FSU now under the prepaid tuition plan. I bought them when they were a year or so old. I also have a high school senior that I started a 529 plan when he was young. The prepaid has worked great and the 529 is ready for the senior to go to college in a year. There are benefits to both and if I had to do it all over again I would probably go with 529 plans on all of them. I like the flexibility they offer over the prepaid plans.

The best thing is you are starting when your son is young. I have several friends who are struggling to pay for their kid's tuition because they did not plan when they were young. With two in college and one a year away from college we have not had any problems because we started when they were very young.

One more thing- If you do the prepaid with a dorm, I would only buy one year for thebdorm. After that they are probably going to want to move to annapt/fraternity/house/etc.
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Old 06-13-2011, 11:16 AM
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I have the FPP for both of my kids (9, and 11) bought the FPP when they were infants (lump sum). They also have a 529. I like the peace of mind of the FPP.
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Old 06-13-2011, 11:22 AM
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We have the 529 on our 2 little ones. We REALLY want to do the FPP as well We did hear however the FPP is MUCH more or will be much more costlier now then it was a year or so ago.
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Old 06-13-2011, 11:53 AM
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Originally Posted by Sailfish_WC View Post
We have the 529 on our 2 little ones. We REALLY want to do the FPP as well We did hear however the FPP is MUCH more or will be much more costlier now then it was a year or so ago.
One of the reasons the cost went up is what they call the "differential payment". To me it is just a way to increase tuition without calling it an increase.

I don't know the exact annual inflation rate for tuition, but I like the protection of locking it in versus the risk of a portfolio not performing at the same level. With everything else tied to marekt results, this was one portion I wanted locked in. If you project the tuition inflation rate over the next 17 years to be, say 8%, I would take the guarantee in a heartbeat.
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Old 06-13-2011, 11:58 AM
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Blackdawg, put in as much as you can...
http://money.cnn.com/2011/06/13/news....htm?hpt=hp_t2
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Old 06-13-2011, 12:38 PM
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Just curious as I don't have any children. Lots of my friends do and they are contemplating the same thing.
When I ask if kids just don't apply for student loans, scholarships, grants, etc anymore, they look at me like I'm nuts?
Wish someone would have paid for my tuition. I just applied for loans and got two jobs?

Don't we teach children to work for things on their own anymore?
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Old 06-13-2011, 12:46 PM
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We're in Michigan and have options for pre-paid and 529s so maybe an apples-apples comparison.

I ended up doing the 529s for the 3 kids. Also, our plan is to pay for half of undergrad, and have them get student loans for the rest. We both feel that a good motivator is signing your name on a loan for $5000 or more a couple times a year...
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Old 06-13-2011, 03:33 PM
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when my oldest was born(graduating high school this year) i asked the accountant for advice on planning for his education.the first thing he said was to put as much as i can into my 401k and if i was able to max it out then to save for my son.his reason was i could never make up the time in my 401k if i waited until later in life to max it out while saving for school and if i had to stop it or lower it while paying for college i would be better off. just something to think about. i wasnt able to do both at the time but now with maxing out the 401k for awhile now and paying off the mortgage i should be able to pay as he goes
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Old 06-13-2011, 03:35 PM
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I have a 529 plan for both kids. Didn't want to do the prepaid plan as I want my kids to go out of state and experience more in college...

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Old 06-13-2011, 04:17 PM
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Did the Pennsylvania pre-paid from babies up and had enough to pay 1/2 for both of my kids at any of the PA state universities. They needed to pay the rest or anything over and above if they decided to go elsewhere (they didn't). The PA plan allowed money to be withdrawn for out of state schools. IMHO the best college savings investment is to make the kid(s) have some investment. I never subscribed to the idea I owed my kids an education.
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Old 06-13-2011, 06:45 PM
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We did the Florida pre-paid for both kids (5 and 2) so it was done and out of the way and have full peace of mind as said earlier. First kid was paid in full before "differential". Second kid was one year too late and we had to pay $19k in differential for the same plan as our oldest - that HURT!

Decided I would rather deal with it now while I am working rather than when the kids get to college and we are trying to retire (I will be 60+ when they graduate high school).

We continue to fund our retirements to the max. and don't have to feel guilty about college vs. retirement savings. Remember, many ways to get through college, only one chance at retirement - unless you keep working or win the lottery!
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Old 06-13-2011, 07:26 PM
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Thanks for all the replies. I've been thinking the same things a lot of you have already done and the decision to go 529 or FPP appears to be a mix. I also like the idea of doing both. I've got a few other things to look into but almost positive I'm going to go with the basic 4 year FPP plan and when possible add a 529 or similar with extra chunks here and there. I want to get the tuition/books paid for and see what happens from there. It's probably money I wouldn't save anyway. As far as incentive and responsibility and all that I'll just say I agree and not go into the details.
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Old 06-14-2011, 02:35 PM
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Originally Posted by total mayhem View Post
when my oldest was born(graduating high school this year) i asked the accountant for advice on planning for his education.the first thing he said was to put as much as i can into my 401k and if i was able to max it out then to save for my son.his reason was i could never make up the time in my 401k if i waited until later in life to max it out while saving for school and if i had to stop it or lower it while paying for college i would be better off. just something to think about. i wasnt able to do both at the time but now with maxing out the 401k for awhile now and paying off the mortgage i should be able to pay as he goes
X2 on that one. Save as much as you can for retirement if you feel you have done well enough you can scale back contributions to your retirement and contribute to the school fund. I have Roth IRA's I could use "if" the situation presented itself.

However I am a firm believer that you max out all your retirement opportunities first then concentrate on the school fund. This 5K catchup after 50 is a bonus I must admit.

I will admit that I do like the tax write offs on the money contributed to the college savings plan here in Michigan. Nothing like taking deductions off the old tax form.
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Old 06-14-2011, 08:31 PM
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I did the FPP when my daughter was born. Other than that I agree with the "put as much as you can in your retirement. If you wind up short when the time comes kids CAN borrow for education, but you CANNOT borrow for your retirement. If you can't work and can't retire the kids are going to pay anyway so by taking care of yourself you are taking care of them. Don't ask me how I know.
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Old 06-18-2011, 07:14 PM
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If you consider the implied discount rate of the prepaid plan, IE what you pay in todays dollars for tomorrows tuition, you can beat it in zero coupon investment grade municipal bonds. With taxable equivalent yields in excess of 9%, you are paying well below 5oc today for a dollar in 15 to 20 years. An alternative, I guess. We moved to Florida recently and the differential payment made the lump sum very costly, so I have been buying odd lot zeros when I can.
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Old 06-19-2011, 04:42 AM
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You guys are on the correct track, save/put money away for kids education. When my kids were young my income didn't allow it. Thankfully I am now able to pay for it out of current income.
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Old 06-19-2011, 06:22 AM
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Im sort of thinking Ill buy my kids a tire franchise, or an apartment building or something like that. College degree seems to be worth less and less. We are doing the PA prepaid plan though.

The bigger question is what to urge them to study for as the economy changes. Definitely no humanities/theater, etc, at least not on my dime. I already teach them about grownups who waitress/work at Starbucks etc who majored in womens studies or the like....and who are serving us food-and I never even went to college.

I met a guy once who spent 4 years in school learning how to manually set typeface for printing. The year he graduated computing took over his job. He had a good sense of humor about it, though.
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Old 06-19-2011, 06:39 AM
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Originally Posted by CharlieFoxtrot View Post
Im sort of thinking Ill buy my kids a tire franchise, or an apartment building or something like that. College degree seems to be worth less and less.

I graduated HS with a guy whos mom gave him a tow truck for his graduation present. This was in 1983. He now has a fleet of them, roadside service trucks, lots of toys, a house at the coast, and who knows what else.
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