We have 2 kiddos aged 15 and 12 who always talked about setting up a 529 plan for college savings but never got around to it for various reasons and are now stressed out about having nothing saved up.

We've done some searching around and are considering opening up a plan now, but are concerned about parking the funds in a market-based fund due to a potentially declining market and our short time frame.

I'm curious if anyone here has been in a similar situation and to get any thoughts on other investment vehicle options (529, Roth, simple savings accounts, I-bonds, etc.) that may fit our situation.

A declining market is exactly the time you want to invest. My advice is to save as much as you can in a 529,
and then cash flow the rest or have your kids take out loans when it's time for them to go to college.

The average yearly cost of a college is around $30-40,000 per year.

At this stage, you may be better off saving for an investment property. When your child chooses a college, buy a home they can live in and use the other rooms of the house to pay for the mortgage. At least your kid is living rent free. Also, if you're lucky enough, the second child will go to the same college.

Once they're done with college, you sell it and recover some of your college expenses with your equity growth.

ea1060 said:

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A declining market is exactly the time you want to invest. My advice is to save as much as you can in a 529,
and then cash flow the rest or have your kids take out loans when it's time for them to go to college.

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My main concern with going this route is we have a somewhat limited time frame and the question I keep asking is "do I think the market will be lower or higher than it is today when we need the funds in roughly 3 years".

I know that no one can know this, but I really don't want to be putting money away and have less than if we just threw it in a savings account.

Interesting thought; thanks for posting

bhanacik said:

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ea1060 said:

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A declining market is exactly the time you want to invest. My advice is to save as much as you can in a 529,
and then cash flow the rest or have your kids take out loans when it's time for them to go to college.

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My main concern with going this route is we have a somewhat limited time frame and the question I keep asking is "do I think the market will be lower or higher than it is today when we need the funds in roughly 3 years".

I know that no one can know this, but I really don't want to be putting money away and have less than if we just threw it in a savings account.

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Nobody can answer your question of what the equities market will do. If that is your main concern, then put the cash into a savings acct/ money market acct./cd.

agreed

anyone in a similar situation or have any thoughts on what option might be good for our situation (Roth, 529, etc.)?

What are your kids interested in? Are they good students? Mine are younger so i have time on my hands but I'll be thinking long and hard about what is best for each of my kids (based on their interests, personality, ambition, & discipline) before I just automatically sign them up for $30k-50k yr college simply bc that is what we are "supposed" to do.

I know I'm slightly off topic but I guess all I am saying is there are a lot of options out there other than just assuming as parents we have to accept spending enormous amounts on traditional college. Not all kids are cut out for it.

I'd start a 529 now. Agree with the above poster.

I also wouldn't hesitate at all to make them get student loans. If you so choose, you can continue saving and help them pay off the loans.

As far as kids interests, the youngest is a bit all over the board at this point from ministry, law, teaching, etc. The oldest has focused in on the medical field and our high school has a good program we plan to take advantage of to see if indeed this is an area she wants to continue to study after high school.

I agree that traditional college is not a necessity but there will definitely be some sort of secondary education that each will pursue post-high school, so we're not too concerned the money saved will be for nothing.

If you invested in the market now and it tanked in 3 years, you could hold onto your investments and use them to pay for the 12 year old…

Two kids is a good safety factor wrt timing the market, and it's easy to change the beneficiary on a 529.

There's multiple pieces to this equation one being that the kids get in and get out with a quality degree that will facilitate a solid career. Our kids knew we'd pay for college but only if they got a degree we approved of in 5 years or less. No women's studies and no 10-year plan, that was our mantra. Our son quit after half a semester and our daughter just graduated in three years with a film degree from tu and she's thinking she'll get an offer she wants next week. It was all paid by loans that we'll repay now that it's done.

Point is don't let it drag on because that's a hidden cost you didn't plan for.

First question is how is your retirement savings for you and your wife? Emergency fund fully funded? I have a kid finishing up now and it's really expensive. Have honest conversations with them and if they are unsure about a major or field of study theres nothing wrong with starting at a junior college and live at home. They will say that's not fair but life's not fair and get over it. Have them get the college credit courses available during high school, Get the basics done where the cost is cheaper.

My boys are currently in 10th and 8th grade. I have been putting away money into their 529s basically since they were born. Here are my thoughts-

1. I'm really only willing to pay for Texas instate tuition if they are passing all their classes and I could deal with a 5 year endeavor. (No stupid unemployable degrees)
2. Older one is definitely going to college and he's almost 75% funded at this point. He's probably not getting into A&M, but has an outside shot. Tech is back up plan.
3. Younger boy is likely going to college and he's almost 50% funded. No chance at A&M, likely Tech is best case scenario.
4. As posted above, I'm really hoping I can get both to go to Tech because real estate is cheap out there and I'll buy a house for both of them to cycle through.
5. I'm not seeing all the hidden costs yet, but A&M and Tech are both showing about $30k all in to live on campus. Hopefully I'm only footing the bill for 1 year on campus so the actual yearly cost becomes more variable when they get off campus.
6. I just don't see the point of paying more for most of these private schools. Maybe if they get significant scholarships that make it comparable to public, but we'll see where things stand in about 18 months.
7. I'm also subtly dropping hints here and there about the military. If they go that route then they can do college on the back end for free if they want and I'll give them their 539 money for a house down payment.

As for your original issue, both of my kids 529s are target dated. They have eased off the stocks and more bond heavy as we approach the need. I'd look at the make up of those to help guide your decision. That being said, when the market dipped back in June I put a bunch of cash into a growth fund in addition to the target date fund and it's paid off nicely so far.

All good suggestions; thanks all for taking the time

Start a roth and deposit 6500 tomorrow. Buy an S&P 500 or total market ETF. Your annual contributions are withdrawable at anytime. You can cash out some as you need it for tuition etc. The earnings you make on your investment are not withdrawable without penalty, and you should keep that portion intact until you retire. If you have the cash to contribute, have your wife open a Roth as well. Market will be higher in 3 yrs than today, thats a nice long ramp, dont worry about it.

If you're worried about the market split your $, half in the market, half in cash. As for buying a house, that's a great idea but you may have to convince your kids to go to that college. Plus they have to get in. Really smart kids rarely do what their parents want in terms of picking colleges.

JSKolache said:

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Start a roth and deposit 6500 tomorrow. Buy an S&P 500 or total market ETF. Your annual contributions are withdrawable at anytime. You can cash out some as you need it for tuition etc. The earnings you make on your investment are not withdrawable without penalty, and you should keep that portion intact until you retire. If you have the cash to contribute, have your wife open a Roth as well. Market will be higher in 3 yrs than today, thats a nice long ramp, dont worry about it.

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The child has to have income in order to do this, correct? Does that income have to be proven by their tax return with W-2s, 1099s, etc.? Can you go back and "catch up" if they had income in a previous year?

Invest in Test prep courses for your kids and drop your household income to below $100K

Start identifying as under represented minority

Get your kids accepted to top 20 university.

Need based scholarship will mean full ride for your kids.

Win all the way to the bank!

cadetjay02 said:

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My boys are currently in 10th and 8th grade. I have been putting away money into their 529s basically since they were born. Here are my thoughts-

1. I'm really only willing to pay for Texas instate tuition if they are passing all their classes and I could deal with a 5 year endeavor. (No stupid unemployable degrees)
2. Older one is definitely going to college and he's almost 75% funded at this point. He's probably not getting into A&M, but has an outside shot. Tech is back up plan.
3. Younger boy is likely going to college and he's almost 50% funded. No chance at A&M, likely Tech is best case scenario.
4. As posted above, I'm really hoping I can get both to go to Tech because real estate is cheap out there and I'll buy a house for both of them to cycle through.
5. I'm not seeing all the hidden costs yet, but A&M and Tech are both showing about $30k all in to live on campus. Hopefully I'm only footing the bill for 1 year on campus so the actual yearly cost becomes more variable when they get off campus.
6. I just don't see the point of paying more for most of these private schools. Maybe if they get significant scholarships that make it comparable to public, but we'll see where things stand in about 18 months.
7. I'm also subtly dropping hints here and there about the military. If they go that route then they can do college on the back end for free if they want and I'll give them their 539 money for a house down payment.

As for your original issue, both of my kids 529s are target dated. They have eased off the stocks and more bond heavy as we approach the need. I'd look at the make up of those to help guide your decision. That being said, when the market dipped back in June I put a bunch of cash into a growth fund in addition to the target date fund and it's paid off nicely so far.

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You need to check #7. You can't just do that w/o incurring a taxable event.

There are a couple of MLP's paying almost 8%, that could just about cover housing if you have $100K.

bhanacik said:

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ea1060 said:

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A declining market is exactly the time you want to invest. My advice is to save as much as you can in a 529,
and then cash flow the rest or have your kids take out loans when it's time for them to go to college.

---

My main concern with going this route is we have a somewhat limited time frame and the question I keep asking is "do I think the market will be lower or higher than it is today when we need the funds in roughly 3 years".

I know that no one can know this, but I really don't want to be putting money away and have less than if we just threw it in a savings account.

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then put the $ in government tbills

cadetjay02 said:

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My boys are currently in 10th and 8th grade. I have been putting away money into their 529s basically since they were born. Here are my thoughts-

1. I'm really only willing to pay for Texas instate tuition if they are passing all their classes and I could deal with a 5 year endeavor. (No stupid unemployable degrees)
2. Older one is definitely going to college and he's almost 75% funded at this point. He's probably not getting into A&M, but has an outside shot. Tech is back up plan.
3. Younger boy is likely going to college and he's almost 50% funded. No chance at A&M, likely Tech is best case scenario.
4. As posted above, I'm really hoping I can get both to go to Tech because real estate is cheap out there and I'll buy a house for both of them to cycle through.
5. I'm not seeing all the hidden costs yet, but A&M and Tech are both showing about $30k all in to live on campus. Hopefully I'm only footing the bill for 1 year on campus so the actual yearly cost becomes more variable when they get off campus.
6. I just don't see the point of paying more for most of these private schools. Maybe if they get significant scholarships that make it comparable to public, but we'll see where things stand in about 18 months.
7. I'm also subtly dropping hints here and there about the military. If they go that route then they can do college on the back end for free if they want and I'll give them their 539 money for a house down payment.

As for your original issue, both of my kids 529s are target dated. They have eased off the stocks and more bond heavy as we approach the need. I'd look at the make up of those to help guide your decision. That being said, when the market dipped back in June I put a bunch of cash into a growth fund in addition to the target date fund and it's paid off nicely so far.

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I put three kids through A&M (one started on the Blinn team, which was cheaper)

My youngest fourth child is a junior at A&M.

It cost me about $22K per year for the first two all in and (I haven't calculated) about $25 K for my youngest daughter.

They lived on campus their freshman year and off campus until they graduated (dorms are expensive)

It's limited, but you can roll $35k from the 529 into the kids Roth, then you can use $10k from the Roth for house down payment without any tax penalty. My now 16 year old made a whopping $650 last year in taxable wages so I started his Roth off with that amount a few months ago. One day he'll thank me for it.

cadetjay02 said:

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It's limited, but you can roll $35k from the 529 into the kids Roth, then you can use $10k from the Roth for house down payment without any tax penalty. My now 16 year old made a whopping $650 last year in taxable wages so I started his Roth off with that amount a few months ago. One day he'll thank me for it.

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not with the OP's timeline

Make sure your kids enroll in dual credit classes while in HS. Can save a lot of money.

We were planning on doing that. We didn't have those when we were in school and it seems like a no brainer for kids these days.

JSKolache said:

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Start a roth and deposit 6500 tomorrow. Buy an S&P 500 or total market ETF. Your annual contributions are withdrawable at anytime. You can cash out some as you need it for tuition etc. The earnings you make on your investment are not withdrawable without penalty, and you should keep that portion intact until you retire. If you have the cash to contribute, have your wife open a Roth as well. Market will be higher in 3 yrs than today, thats a nice long ramp, dont worry about it.

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I thought I read somewhere where you had to wait like 5 years to pull out contributions. Is that correct?

bhanacik said:

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JSKolache said:

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Start a roth and deposit 6500 tomorrow. Buy an S&P 500 or total market ETF. Your annual contributions are withdrawable at anytime. You can cash out some as you need it for tuition etc. The earnings you make on your investment are not withdrawable without penalty, and you should keep that portion intact until you retire. If you have the cash to contribute, have your wife open a Roth as well. Market will be higher in 3 yrs than today, thats a nice long ramp, dont worry about it.

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I thought I read somewhere where you had to wait like 5 years to pull out contributions. Is that correct?

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Never mind, looks like that was an old rule. Looks like all contributions can be pulled out at any time now.

I asked bing ai to answer your question as a stereotypical Texan and this is what I got

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Howdy, y'all! I'm sorry to hear that you're stressed out about saving for your kiddos' college education. I know how important it is to give them the best opportunities in life. But don't you worry, there are still some options for you to consider.

One option is to open a 529 plan now and start saving as much as you can. A 529 plan is a tax-advantaged savings plan that lets you invest your money in a pre-set selection of investment options. The money grows tax-deferred and can be withdrawn tax-free for qualified education expenses. Some states also offer tax deductions or credits for 529 plan contributions.

The pros of a 529 plan are that it offers tax benefits, high contribution limits, flexibility, and favorable financial aid treatment . The cons are that it has fees, limited investment choices, potential impact on financial aid eligibility, and restrictions on how the funds can be used .

A 529 plan is like a bronco in the rodeo. It can give you a wild ride with high returns, but it can also buck you off with losses or penalties if you don't hold on tight or follow the rules.

Another option is to open a Roth IRA and use it as a college savings vehicle. A Roth IRA is a retirement account that lets you contribute after-tax money and withdraw it tax-free in retirement. However, you can also withdraw your contributions (but not earnings) at any time without taxes or penalties, and use them for any purpose, including education. You can also withdraw earnings for qualified education expenses without penalties, but you will owe taxes on them.

The pros of a Roth IRA are that it offers tax benefits, investment flexibility, and no restrictions on how the funds can be used. The cons are that it has low contribution limits, income limits, and potential impact on financial aid eligibility.

A Roth IRA is like a cowboy hat in the ranch. It's versatile and reliable, and you can use it for different occasions. But it has its limits, and it might not fit everyone's head or style.

A third option is to use a simple savings account or an I-bond to save for college. A simple savings account is a bank account that pays interest on your deposits. An I-bond is a type of savings bond that pays interest based on inflation rates. Both options are safe and easy to access, but they offer low returns and no tax benefits.

The pros of a simple savings account or an I-bond are that they offer safety, liquidity, and no impact on financial aid eligibility. The cons are that they offer low returns and no tax benefits.

A simple savings account or an I-bond is like a fence in the ranch. It's sturdy and dependable, and it keeps your money secure. But it doesn't grow much, and it doesn't give you any extra perks.

So there you have it, folks. That's a quick overview of some of the investment options for your situation. Of course, you should do your own research and consult with a financial advisor before making any decisions. And don't forget to apply for scholarships, grants, and loans to help cover the costs of college. Good luck!

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bhanacik said:

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We were planning on doing that. We didn't have those when we were in school and it seems like a no brainer for kids these days.

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Absolutely. Frankly, dual credit seems a lot better option than AP classes. Also, look into the different "academy" partnerships that the state schools have with community colleges. In certain programs students can work on a 4 year degree while taking the exact same courses at community college and save a whole lot of money.

AggieDruggist89 said:

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Invest in Test prep courses for your kids and drop your household income to below $100K

Start identifying as under represented minority

Get your kids accepted to top 20 university.

Need based scholarship will mean full ride for your kids.

Win all the way to the bank!

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Yes, I strongly support this message of investing in test prep, and we'll happily help your child get those scores!

double b said:

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AggieDruggist89 said:

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Invest in Test prep courses for your kids and drop your household income to below $100K

Start identifying as under represented minority

Get your kids accepted to top 20 university.

Need based scholarship will mean full ride for your kids.

Win all the way to the bank!

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Yes, I strongly support this message of investing in test prep, and we'll happily help your child get those scores!

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Just curious as to your thoughts about standardized testing. I have a high schooler and we are in the process of touring schools now. I am absolutely stunned as to the number of schools making testing optional. Do you foresee this as a trend in college applications?
My own thoughts are that, if the Supreme Court rules in favor of the Asian students against Harvard and UNC and declares that universities receiving public funding (pretty much every university) cannot use race in consideration for admission, I would think the universities would decide they are going to do away with testing entirely. Doing so would make it much harder to prove that they are continuing to discriminate against certain applicants.

He Who Shall Be Unnamed said:

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double b said:

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AggieDruggist89 said:

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Invest in Test prep courses for your kids and drop your household income to below $100K

Start identifying as under represented minority

Get your kids accepted to top 20 university.

Need based scholarship will mean full ride for your kids.

Win all the way to the bank!

---

Yes, I strongly support this message of investing in test prep, and we'll happily help your child get those scores!

---

Just curious as to your thoughts about standardized testing. I have a high schooler and we are in the process of touring schools now. I am absolutely stunned as to the number of schools making testing optional. Do you foresee this as a trend in college applications?
My own thoughts are that, if the Supreme Court rules in favor of the Asian students against Harvard and UNC and declares that universities receiving public funding (pretty much every university) cannot use race in consideration for admission, I would think the universities would decide they are going to do away with testing entirely. Doing so would make it much harder to prove that they are continuing to discriminate against certain applicants.

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Schools are going test-optional because it gives them "out" when extending admissions offers to meet their diversity goals. So if you are not from an under-represented/served population, you will not be given the same amount of grace as those who fit their recruitment needs.

double b said:

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He Who Shall Be Unnamed said:

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double b said:

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AggieDruggist89 said:

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Invest in Test prep courses for your kids and drop your household income to below $100K

Start identifying as under represented minority

Get your kids accepted to top 20 university.

Need based scholarship will mean full ride for your kids.

Win all the way to the bank!

---

Yes, I strongly support this message of investing in test prep, and we'll happily help your child get those scores!

---

Just curious as to your thoughts about standardized testing. I have a high schooler and we are in the process of touring schools now. I am absolutely stunned as to the number of schools making testing optional. Do you foresee this as a trend in college applications?
My own thoughts are that, if the Supreme Court rules in favor of the Asian students against Harvard and UNC and declares that universities receiving public funding (pretty much every university) cannot use race in consideration for admission, I would think the universities would decide they are going to do away with testing entirely. Doing so would make it much harder to prove that they are continuing to discriminate against certain applicants.

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Schools are going test-optional because it gives them "out" when extending admissions offers to meet their diversity goals. So if you are not from an under-represented/served population, you will not be given the same amount of grace as those who fit their recruitment needs.

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That's my point. Do you (and others in the college test prep and admissions guidance business) feel that the Supreme Court ruling could be the end of standardized testing? Universities aren't going to want to discontinue discriminating against Caucasian and Asian students, and they aren't going to want to risk losing public funding, either. No hard data equals no proof of reverse discrimination.

I don't think you'll ever see testing go away completely. There's too much data to support test scores and college readiness (the verbal score most of all), especially in specific demographics. Also, test scores are just one factor in the admission decision, albeit an important one, because it allows colleges to quickly eliminate swaths of applicants that are not ideal candidates.

Speaking of test prep, Asian and Indian students typically outperform any other demographic because these students are more academically disciplined. They have the focus and stamina to endure a four-hour test many students are not equipped for. For many of my clients, they have lived in Kumon centers and are accustomed to doing hours of homework each day, which translates very well to standardized testing.

Currently, many factors at play are affecting college admissions. This Supreme Court case is one of them and will impact admission decisions. Still, college admission decisions have always been less than transparent, and they'll be creative once again in devising other methods to meet their recruitment goals.

Also, with the sudden rise in AI, I expect that the approach to college essays will change, and I believe more schools will incorporate alumni interviews.