Suzie on Oprah-college suggestion

**kork13** · 01-08-2009, 02:50 PM

I would personally shoot the middle. Use some of the college savings (perhaps 60% of the current value?) for the first son, but supplementing that with loans. Then later when the second son goes to college, the market hopefully will have come back up enough to do essentially the same... That 40% will hopefully have come up to some value as that 60% that the first son had, and now the second can again supplement the cash with loans.

I personally see the proposed plan as very short-sighted. Yes, it's important to get the first son through college, but you can't forget the second. In all likelihood, the markets will have gained much between now and then, thereby robbing the younger of assets which could have lowered his reliance upon loans.

**jIM_Ohio** · 01-08-2009, 03:14 PM

What is the difference in age?
Has the oldest been accepted to a college yet?

60-40 which kork mentioned immediately came to mind.
The big issues would be
1) 60% of 529 account accounts for what percent of tuition? If it covers 100% year 1 tuition and then all of 60% is gone, my comment would be wait for BOTH kids. Borrow for year 1 of oldest and ask the question again for year 2.
2) If 60% covers 3 years tuition for oldest, I might split 80-20 because a good increase in market helps out youngest if they have 6 years before college year 1.
3) Look to use tax deductions to see if you can save more money (for example pay cash for kid 1 to go to school and see if tax credits give you a bigger benefit than cashing out 529).

This is why I don't like seeing 529 plans invested in equities if college is 4 years or less away. A person is better off keeping 529 plans in bonds or cash and saving more.

So many people equate college investing with retirement investing. The documents I read (promoting 529s) suggests that people might invest $X and have $3X for college. If someone gets this performance in a state 529, please tell me where.

If a person expects college to cost $120,000 (and wants to pay the whole thing), they should have a plan to set aside $80,000 over a period of years. Getting maybe a 50% return over 8-18 years is much more realistic. Keep 529 money invested with a more conservative nature.

Get a deduction going in
keep money safe
keep saving more for college.

**Investing First Steps** · 01-08-2009, 03:25 PM

I think the big question on that is going to be inflation/deflation over the relevant years.

**maat55** · 01-08-2009, 03:57 PM

[QUOTE]

Originally posted by jIM_Ohio View Post

What is the difference in age?
Has the oldest been accepted to a college yet?

I think the older son was starting his first year and the younger son was 16.

This is why I don't like seeing 529 plans invested in equities if college is 4 years or less away. A person is better off keeping 529 plans in bonds or cash and saving more.

Suzie agreed, that the money should not been in the market at this point.

**snafu** · 01-08-2009, 04:13 PM

If you plan to use the money within the next five years, put the money in laddered CDs or similar savings program. Investment funds needs to have 5+ yrs to increase in value or move between sectors or follow technical trends.

I didn't see the TV show but if they have been investing for DKs for 16 yrs. they have surely recovered more than their actual contributions. I'm pretty disgusted with my investment statements since spring but my loss is primarily capital gain. I keep thinking as I prepare to add to my investment 1/28...that eventually the sell-off will reverse.

**LivingAlmostLarge** · 01-08-2009, 04:59 PM

Take out loans and let the money stay invested would be my vote.

**Snave** · 01-08-2009, 05:37 PM

maat55, I was under the impression that 529 money could NOT pay off loans. Am I mistaken? If this is the case, then they can not wait for a recovery and then pay off the loans using the 529. They could wait for a small recovery (4 yrs or so) and pay the last few years of the second sons college costs.

**kork13** · 01-08-2009, 05:51 PM

Originally posted by Snave View Post

They could wait for a small recovery (4 yrs or so) and pay the last few years of the second sons college costs.

That's actually a good point... if anyone is to rely solely on student loans, it would make more sense for it to be the older son, and let the younger pay cash with the presumably (at least to some extent) recovered 529.

**Snave** · 01-08-2009, 06:03 PM

Originally posted by kork13 View Post

That's actually a good point... if anyone is to rely solely on student loans, it would make more sense for it to be the older son, and let the younger pay cash with the presumably (at least to some extent) recovered 529.

If I was to go with this scenario then, I would probably keep my 529 invested somewhat aggressively and just hope for a 4 year recovery.

**maat55** · 01-08-2009, 06:22 PM

Originally posted by Snave View Post

If I was to go with this scenario then, I would probably keep my 529 invested somewhat aggressively and just hope for a 4 year recovery.

You could be right, but this senario sound better than Suze's.

**disneysteve** · 01-09-2009, 04:51 AM

Originally posted by Snave View Post

I would probably keep my 529 invested somewhat aggressively and just hope for a 4 year recovery.

Then you'd be violating a basic investing rule that money needed within 5 years shouldn't be in the stock market. I think that's the point Suze was trying to make. These folks were too aggressive. Had they dialed down their stock allocation as the kids got closer to college age, they wouldn't have lost 50% of their savings when the market plummeted.

I believe the younger son is a sophomore in high school, so he'll start college in 2011, just over 2 years away. Keeping the money needed for that first tuition payment in stocks is really taking a big risk.

**Investing First Steps** · 01-09-2009, 06:29 AM

I think trying to "get your money back" is one of the most surefire ways to get in trouble in the stock market.

**LivingAlmostLarge** · 01-09-2009, 06:57 AM

Let me reanswer with I would keep the money invested because I'm not paying for any of my children's college upfront. We're doing loans. It might cost more but with kids today partying and dropping out, I'm not handing them college on a silver platter. It will be a grade based payout.

Meaning Bs and better get 100%. C might get 75%, D and F get ZERO%! That way if you are serious and college is my Child's job then they get a free ride!

But if not then forget about it. I don't believe in paying for college like these parents do NO STRINGS attached. No way.

I do believe like my DH did, going to school is a full time job, if you want to graduate like him with a 3.9 GPA in organic and physical chemistry honors. So my kids will get 100% paid ride like my DH. But it's gonna be tied to grades.

So I will likely not use a 529 that much and I will also be invested 100% in the stock market and not pull it out until absolutely necessary, meaning after the grades come home.

**jIM_Ohio** · 01-09-2009, 07:10 AM

Originally posted by LivingAlmostLarge View Post

Let me reanswer with I would keep the money invested because I'm not paying for any of my children's college upfront. We're doing loans. It might cost more but with kids today partying and dropping out, I'm not handing them college on a silver platter. It will be a grade based payout.

Meaning Bs and better get 100%. C might get 75%, D and F get ZERO%! That way if you are serious and college is my Child's job then they get a free ride!

But if not then forget about it. I don't believe in paying for college like these parents do NO STRINGS attached. No way.

I do believe like my DH did, going to school is a full time job, if you want to graduate like him with a 3.9 GPA in organic and physical chemistry honors. So my kids will get 100% paid ride like my DH. But it's gonna be tied to grades.

So I will likely not use a 529 that much and I will also be invested 100% in the stock market and not pull it out until absolutely necessary, meaning after the grades come home.

glad you weren't my mom. LOL. grades are not everything. I aced math and science, but struggled to get B's in most other subjects not named phys ed.
I am proof that a B and C student is not a complete screw up in the real world.

My parents had 4 kids. My SAT scores were the lowest of the 4 (1060??). One of my brothers was around 1400 or 1350 and had scholarships.

Of the 4, I am the only one which had a job within 6 months of graduating (unless you call working a grocery store as a clerk working). And I had my job lined up 9 months before graduation and was working full time with benefits 6 months before graduation. The other 2 which have jobs now work for the government in some way (I am in private sector). I know my sister makes half what I make now (from what my wife tells me- I don't know what my sister makes).

The only one without a job was the one with that 1400 SAT and the one which got the scholarships. He is 32 and still is not working regularly.

More to life than grades. I also agree as a parent you need to do what is right for your kids- make sure they are not taking their opportunity for granted.

Suzie on Oprah-college suggestion