<p>Late to this conversation, but what is wrong with sending kids to good schools that offer a better value? And what is wrong with parents who aren’t willing to sacrifice their retirement so that their kids can go to some overpriced university?</p>
<p>Guess I want to see our kids have opportunities as much as the next set of parents, but I draw the line at having/spending around $100K per kid for undergraduate. There are enough decent schools around that would cost about that much. Maybe if either of our kiddos had real high academic credentials and wanted to go to MIT we’d consider finding more funds…otherwise we really don’t see paying $50K/year (and yes that’s what we were looking at for kid #1 a few years ago).</p>
<p>Part of the problem in the conversation is that we’re talking about absolute dollar amounts rather than, say, percentages of people’s incomes, or percentages of their home values or retirement accounts or whatever. And that’s going to vary enormously across the CC readership. The $250k or so that it costs to put a kid through the most expensive colleges as a full-pay is the cost of a home (or two, or three) in some places, and a down payment in others. Paying $100k to put one kid through college may be utterly outside of a family’s budget, or it may be a bargain for a full-pay family who can instead pay a “mere” $100k+ for their child at an excellent instate flagship. </p>
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<p>Disagree with you about this, kluge. This seems to me to be good basic advice, what I think of as a “put your oxygen mask on before you put one on your child” situation. If the tradeoff is to just work a few more years to be able to manage both, that’s fine. If it’s a question of having nothing in retirement funding and just living on social security because of paying for three kids to go to wonderful but expensive schools–that’s a different matter. </p>
<p>One of my coworkers is looking forward to retiring at age 55. His mortgage is paid off and he owns income property. His household income (his wife was a stay at home mother) is signficantly lower than mine…but the spouse and I certainly won’t be retiring early and our mortgage has another 15 years or so to go. One of the big differences? His two children are going to community college, which is really the sensible option for them. One child went through a very rough patch and is now managing fine with school and a parttime job; the other wants to be a nurse and figured it made much more sense to do the prereqs at CC and then move on from there. I wouldn’t call him self-indulgent any more than he’d consider me overly indulgent of my kids. Just different choices, different circumstances.</p>
<p>But see, some would say your coworker is being self-centered. And/or that his wife was.</p>
<p>The old line is: “you can borrow for college, but you can’t borrow for retirement.” In the context of tis thread, I’d revise it to: you may have more options for college costs, but you’ll be in one sure pickle if you think SS is going to carry you. And, if your living expenses include loan payments, the equation can go out of whack.</p>
<p>Again, not selfish or arrogant parents. </p>
<p>I don’t think most families on CC are high income/assets. When we have threads that discuss it, many changed their lifestyles, drive older cars, put off certain discretionary expenses, to help get our kids through.</p>
<p>Yes, it’s all relative. And there could even be some folks that would judge kluge to be a real slacker and cheapskate for ONLY spending $240,000 of his money to put 3 kids through college. And it’s no fun to be judged.For a low income family, coming up with even $10,000 could be next to impossible. Like lookingforward, I don’t see many boomer parents taking a self centered approach to this issue. Paying for college is a source of anxiety for all but the truly wealthy.</p>
<p>But what I do see lots of boomer parents doing differently from the “greatest generation” parents is spending a lot of money on cars, vacations, meals out, and stuff in general (especially electronics). Our parents just didn’t spend as much money, so they saved more–for education or retirement.</p>
<p>^^^^Those people may just have large incomes. They could be doing all that and still saving, taking care of elderly parents, giving to charity, etc. We rarely know whether people with apparent affluence are mortgaged to the hilt or just really wealthy.</p>
<p>Are you sure? Lots of posters claim to be in the “middle class that won’t get financial aid”; the “won’t get financial aid” part puts their income at a very high level (certainly higher than the ~$50,000 median household income in the US, or the ~$70,000 median income for households headed by someone of age 45-54).</p>
<p>Now, they may not have that much in the way of assets (or savings for their kids’ college costs or their own retirement), given typical American spending and (lack of) saving habits. Many do not feel that they are living luxuriously, although they may have ratcheted up their baseline spending over the years (larger houses, more expensive cars, etc.) to consume all of their raises over the years. Obviously, some posters in this thread are critical of such people with high income who spend it all. Indeed, this is poor financial planning. But by the time the kids are going to college, it is too late to undo the results of such poor financial planning, as parents in this situation are unlikely to be able to afford to service the debt needed to send the kids to expensive colleges.</p>
<p>True, the silent and greatest generations remember the depression and wartime rationing, so their habits may have been shaped toward frugality. Meanwhile, the early boomers grew up in times of economic expansion.</p>
<p>But also note that the greatest generation did not have to worry so much about college costs for either themselves (GI Bill) or their boomer kids (really cheap state universities). The boomers as parents, even the few who consciously saved for their kids’ college costs, may be surprised now by how much even the cheap state university that they worked their way through with no parental support or financial aid costs now.</p>
<p>Holy cow, Hunt. That “greatest gen” were the parents in my neighborhood or my grandparents’ neighborhood- the house, new cars, swim and ski clubs, vacations, the furniture. Their sacrifices for the good of the whole were balanced by a new economic reality, post war. College costs were less, there were no student or PP loans. They did what they could afford, re: college. There was no mania to find super matches. Sure, some families sent them to HYP for the social connections. How much of the rest can we generalize?</p>
<p>I thought that, post 2008, people were better evaluating discretionary spending and the saving, though it is jumping back up. The last few years of holiday spending showed real concerns in the marketplace.</p>
<p>In a way, ucb, you make my point. The people beyond good finaid, those who can’t truly afford full freight, are squeezed. They may earn statistically higher than others- but I consider the wealthy are those having much more. You can earn 140 and still need to squeeze, still have focused goals- nothing says that, because we earn more than 80k, any inability to financially prepare to the max advantage is “poor financial planning.” Though it “may” include mistakes.</p>
<p>Yes, my parents spent less than I do. At death, my father had a 23 year old pick up and a 17 year old car. However, they provided a state university education for their children and all of us have done just fine. As a consequence of their frugality – in spending for college AS WELL AS other spending, my parents were able to live comfortably for years of retirement.</p>
<p>Although we kids have done just fine, my pay as a professional is substantially less than what my father’s was, even without adjusting for inflation. Adjusting for the different costs of living, I make a good deal less. I have paid for 12 years of private education for 2 kids, which has resulted in both of them being extremely well prepared for college. I drive a small inexpensive car with good gas mileage and my husband drives a 12 year old van. We do have a nice home, which we purchased primarily so that our children could be near school and friends and not have to feel like the “poor” kids at their school. And as for vacations, yes, we take them – with our kids, which has allowed my kids to visit art museums and natural wonders which have given them an appreciation for the world and broader horizons. We consider that our luxury, but also consider that it has benefited the kids.</p>
<p>When my parents helped me with school, the costs were substantially less; however, we kids went with low cost/no frills. It was normal to have 2-3 pair of jeans, some t-shirts and sweaters and feel like that was what you needed. I remember stressing about paying $15 for some shoes because I didn’t really need them. No one in my stratosphere had ever heard of a semester abroad.</p>
<p>My kids attend and will attend a very good state university (younger may do something else if she gets scholarship to make up the difference) on my dime. Oldest has already had a semester abroad, which allowed her to complete her foreign language minor in the best possible circumstances and see more of the world than I have ever seen. Younger plans to do a foreign study block of some sort as well.</p>
<p>Do I feel guilty about providing on this on less than $100K gross annual income? No way!</p>
<p>Just to clarify, I don’t think it’s fair to say that “the Greatest Generation” were frugal and to argue that they did or would spend extravagantly on their children’s education. Every family situation is different, but my experience was that the Greatest Generation saw no obligation to provide an expensive private university education for their children. My experience was that most kids in the 70s who were the children of the greatest generation saw in state colleges as their option. Period. At some socio-economic level, I’m sure that kids were worrying about getting into top 30 private schools, but it wasn’t where I lived.</p>
<p>Lookingforward, the figures come from the US Census Bureau: [Wealth</a> and Asset Ownership - People and Households - U.S. Census Bureau](<a href=“http://www.census.gov/people/wealth/]Wealth”>http://www.census.gov/people/wealth/) They require some interpolation because they only average household wealth vs. income in quintiles and we’re talking about the top 1/2 of the 4th income quintile in the OP’s scenario. Average household wealth increases with income and age up to age 75.</p>
<p>The conventional wisdom is that a family should only withdraw 4 to 5% of their retirement savings per year. That means $80K is good for something in the neighborhood of $266 - $333 per month in retirement. If a person has been earning $100K per year consistently and doesn’t retire until they’re 70 their SS income will be about $3K per month - and at least $4500 for a retired couple, unless I’m mistaken. (Less than that for earlier retirement, of course.) So if the parents have $80K and keep it that means they’ll have less than 10% more income in retirement than SS alone. If the parents didn’t save anything then they’re left with nothing but SS in any event, correct? That ~$300 per month shortfall is the disaster that’s presumably avoided by putting one’s oxygen mask on first. Except, of course, in this scenario there’s only one mask. (Okay - that’s snarky, I admit. But I hate that comparison. It sounds good, but it doesn’t actually follow. When you make your kid take out loans to fund his or her own education so you can fund your retirement, you’re not doing it so you’ll be able to take care of them; you’re doing it to take care of you. You’re actually taking oxygen that they could use.)</p>
<p>How much retirements savings is “enough?” One fellow I know said his goal was $4 million. By my assessment that would mean he would have at least three times as much income when he retires as what I think he actually spends now. $80,000 more or less won’t make a difference to him; he’ll have “enough” either way. On the other hand, I am pretty confident that $80,000 in retirement savings and no more isn’t “enough” for a family that is used to living on an annual income of $80,000 to $100,000. So where’s the tipping point where that $80,000 makes the difference between having “enough” savings for retirement and not having enough? I’m hard pressed to pinpoint that figure.</p>
It might be conventional wisdom, but in today’s environment, a 4% withdrawal rate (SWR, or “safe withdrawal rate”) is considered by many to be a bit aggressive. A 5% rate is, IMO, unwise for anyone in normal health. Ymmv.</p>
<p>My parents were able to put four children through California public universities out of their income without much recourse to savings–this even though their household income was far less than mine in inflation-adjusted terms. They saved for retirement, but didn’t need to save anywhere as aggressively as I and the spouse have done, because they have excellent pensions along with great retirement medical coverage. </p>
<p>If I moved them forward in time and had them try the same thing nowadays, in their same professions–it simply couldn’t be done. They wouldn’t be able to manage the UC educations plus squirrel away enough for retirement and retirement health care.</p>
<p>Wasn’t that $300 amount put out in the OP’s 30 year note scenario repeatedly debunked here and corrected to $500 or more? And how many people here have only one kid to put through college? My FIL, due to some business disasters is living only on his SS. His standard of living is very sad even with our help, and I cannot imagine the stress if he was still paying off student loans for his 5 children well into his retirement! No, he put his older kids through expensive privates without taking out loans, but none of them are willing to give him even a penny in his golden years to help him out. :rolleyes:</p>
<p>Secondly, there is so much more to retirement than a roof over a head and money for an occasional golf game. We are living longer and longer, while being sicker and sicker in old age. I think many people are just nervous about being able to survive into old age and do not want to end up being a burden on loved ones or the general public or forced into some hideous nursing home. There are some really horrible tales about substandard care received at all too many nursing homes, which are not inexpensive even at the lowest levels.</p>
<p>Even with insurance, 20% of DH’s cancer treatment bills were $22K per month. You better believe we are socking it away for later, because we have no idea what kind of medical bills we will have and we don’t want to be limited to bare bones medicare or be restricted in whom we can see or treatments we can get because of the type of plan we have. </p>
<p>I totally understand why parents would not want to go into the kind of excessive long term debt advocated by the OP, and most of the reasons have nothing to do with living large in retirement. And most people posting here are NOT talking about denying their kids a college education; they are more than willing to pay for a college degree, but not necessarily to the tune of hundreds of thousands of dollars of debt ON TOP OF what they are able to contribute in real time.</p>
<p>Many people do not expect Social Security to be able to continue current levels of benefits in the future without excessive taxation on those working at that time.</p>
<p>Also, people who earn $100,000 per year but have little or no savings might find it hard enough to live on $36,000 per year. Not that it cannot be done (probably a third of households in the US live on that much or less), but after years of being accustomed to life on $100,000 per year, with baseline costs ratcheted up to consume most of the income, that might be more of a downshift than most can easily handle. The people who can handle that probably have been living on $36,000 per year for decades and have huge piles of savings from the rest of their $100,000 income from which they can easily fund any kids’ college and their own retirement without any need to depend on Social Security.</p>
<p>It does depend on your remaining life expectancy. Someone who is 65 and someone who is 110 may have different SWRs, even if neither has any current medical problems.</p>
<p>Kluge, need to say I am not doubting that you think about this- nor am I an expert. I am not trying to nitpick, but can’t see it your way. </p>
<p>After taxes, 100k comes out to about 6700/month. If you think you can live on 75% of income, that’s $5000/month. So you get about 3k from SSA. You need $2000 addl- 80k at 5% would give you, as you say, $333.</p>
<p>Maybe it’s in high growth, maybe, by itself, it generates 8k annually. That’s maybe 900/month. Plus you pay taxes on SS over a tier. And, growth in your assets can be taxable, certainly when you take it, depending. Medicare/supplemental have costs. You get my drift.</p>
<p>When OP stated 300/mo, he was assuming based on friends with a 12 year old loan, 30 year term, at low rates. My info shows more like $700+/mo, for 80k in accumulated loans with today’s 10 year payoff. If you are 55 today and send your kid to college this fall, obviously the 10 year repay period finishes before you turn 70. If you can afford to pay. And, that 8k/year ($700/mo) isn’t going toward your own future needs. </p>
<p>Yes, if you have a spouse, that can change the picture. Maybe you sell the house. Maybe, otoh, you need care as an elder or assisted living.<br>
I’m scaring myself. If I am off here, someone can explain to me.</p>
<p>Whoa! I need to write more clearly. My $300 per month isn’t the cost of the hypothetical loan, it’s the (aggressive - per IxnayBob and a lot of other folks) additional money the hypothetical parents would have available to spend monthly in retirement if they saved $80K instead of spending it on their kids’ educations. </p>
<p>And the point I was making is that if you’re used to living on $100K per year, an additional $300 per month isn’t likely to make much of difference - just as you folks noted. So these hypothetical folks aren’t going to be able to continue on the way they’re going whether they pay for their kids to go to college or not. It’s not enough savings to actually make a difference. Hence the query: at what point does it make a difference?</p>
<p>(In case you hadn’t figured from what I’ve written: I’ve been eligible for social security for a couple years now, and the amount “needed” to retire with financial security is something I’ve paid a lot of attention to lately.)</p>