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401k v. college fund?

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nycmom
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401k v. college fund?  Reply with quote  

Hello --

I know I have read the advice "pay yourself first" in a lot of financial planning books, but I also have two children (8 and 5 yrs old), and am getting worried about paying for college, and wondering if I should start reducing my 401k contributions even though I have not maxed out on those. Here are the details:

-My husband and I each earn approx $125k
- Our 401Ks COMBINED are at about $340k (I am 42, he is 45)
- I am currently contributing 9% to my 401k (no employer match), he contributes 6% with a 100% match by his employer (that is the max they match)
- I have worked for state govt for 10 years, not sure if it will continue or not, but I will get a decent pension unless I move back to private sector
- so far we have not put anything into a 529 fund
- we live in nyc, so we've had high costs (childcare, housing etc.), and are also still both paying off law school loans, hence we have not saved more.
- we rent our apartment and do not own any property

Do we continue doing what we are doing and prioritize retirement over college funds? One big variable for me is whether I will stay w govt and get a pension, although the only reason I'd leave govt is if I got a significant raise in the private sector. So maybe I decrease 401k and start trying to accumulate money in a 529? And if so, how much....?

Thanks in advance!!!
- confused parent
Post Sun Nov 05, 2017 12:01 pm
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AnneE
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Paying for retirement  Reply with quote  

I'm not sure if this will be helpful or not, but my parents didn't contribute to my college education and I'm glad they didn't. They told me at a young age that they couldn't afford to pay for it so I took school very seriously (so that i could get grants) and as a result, did very well in school. A lot of my friends had parental help and some of them goofed around through high school and college. Having to figure out how to pay for college myself helped me become more responsible with money too.
If you decide to contribute to your retirement instead of 529, which I think you should, I hope you don't feel guilty about it, because there are good things about not paying for kids college too. Having enough saved for retirement is really important so that would be my priority if I were you.
Post Sun Nov 05, 2017 1:35 pm
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oldguy
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quote:
and are also still both paying off law school loans


Are these large/medium/or small?

In general, you & dh's wealth is WAY more important than a 529. If things ever get tough for your family, you need the retirement fund because if you are broke you do not want your kids to need to provide your care, you want to plan so that your kids can become adults, raise families, without the burden of taking care on you. Also, you can get SLs for your kids - but you cannot get loans to pay for your retirement - you will be unemployed and with no visible way to repay a loan, lenders are not allowed to lend in that situation.

Aside - Like the previous poster, I worked thru college, got my degree with almost no SL. That was in 1963, tuition was much cheaper then. in past 50 yrs, the politics of the education system has swung far-left. Now, we have a pro-business administration - someone who understands economic prosperity, wealth building, job growth, manufacturing. My hope is that current and future generations will be allowed (encouraged?) share in the kind of prosperity that I experienced many years ago - and the need for "gov't help" loans for all will go away. Ie, you may find that you'll be able to cash-flow college for your kids.[/b]
Post Sun Nov 05, 2017 11:12 pm
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nycmom
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Thanks for the response. To answer your question re the loans: we are near the end of paying them off. A couple more years I think and we will be done.

I hope you are righty’s to college costs, but unfortunately, I see college looking more and more unattainable for students who are neither so poor as to get substantial aid, or so rich that either can pay easily. I went to an excellent college on a nearly full financial aid package but when I applied to college most schools were need blind in their admissions and now that is rare. Not to mention the costs have gone up so significantly. And I don’t think the current administration cares at all.
Not that this means I should start diverting money from my 401k to an529, but it does weigh on me. I want my kids to have the same opportunities that I had and as of now I don’t think they do.
Post Wed Nov 08, 2017 8:27 am
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