Last Articles

how much does it cost to mount a tire program homelink to liftmaster rim curb rash can you put 5w30 oil in a 5w20 engine what is vsa on honda odyssey honda crv sudden acceleration problems how to wire subwoofer to amp 2005 honda accord lower control arm bushing replacement interstate mega-tron plus how much does a front wheel bearing cost to replace acura tl headlights bulbs bumper cover repair cost costco group 65 battery homelink rolling code problems my car blows cold air with the heater on why winter tyres costco my scion tc wont start honda accord wont start clicking noise
Community
Search
Notices
Money & Investing Learn how to get rich on the housing bubble and the bull market…

Prepaid College Tuition Plans

Reply

Thread Tools
Old 01-08-2018, 05:14 PM
#1
Chapter Leader
(Northeast Florida)
Thread Starter
iTrader: (1)

gatrhumpy's Avatar

Join Date: Jun 2004
Age: 38
Posts: 32,020
Thanked 973 Times in 646 Posts
Prepaid College Tuition Plans

So my wife and I have been saving for our kids' education expenses in college since before they were born. Kid #1 has $28,153 in there (college in 2026) and kid #2 has $25,607 in there (college in 2030). I have been talking with my wife to invest in the Florida prepaid, which allows us to pay for a 4 year Florida university plan for each child. Looking at the website, kid #1 is $753 short for a lump-sum payment, and kid #2 is $3,765 short in a lump sum payment, due April 20, 2018. We can easily come up with the money for the guaranteed education. Then I could relax. We are currently investing $125 a month in a mutual fund for each kid, and it's very appetizing that on April 21st, 2018, we no longer have to save for their college tuition expenses (room and board we could come up with that on the fly in nine and 12 years). If they go elsewhere other than a Florida college, they will get the equivalent of what they would have received at a Florida university.

It's frustrating that my wife is not on board. She says that we'll lose the gains if we invest in Florida prepaid (uhh, duuhhh). She also wants to save money for weddings, etc. I told her fine, let's invest $50 a month (instead of $250) and they still will get the education. At the end of 12 years and 16 years, they each will have roughly $10K in their mutual funds for weddings, cars, house down payment, whatever. The other thing is tax implications. Every time we take out money from the mutual fund, we get taxed on it. That's money we lose every time we take money out.

I'm hoping when we talk with our financial advisor that they'll say the same thing: That we'd be stupid not to invest in the Florida Prepaid option. What are the advantages of keeping the money in the mutual funds and losing money every time we need it for school in 9 and 12 years?

Thoughts?
gatrhumpy is online now
Reply With Quote
Old 01-08-2018, 06:06 PM
#2
Registered Member

doopstr's Avatar

Join Date: Jan 2001
Location: Jersey
Age: 46
Posts: 22,600
Thanked 864 Times in 541 Posts
If your kids decide that they don't want to goto college, do you get the money back?
doopstr is offline
Reply With Quote
Old 01-09-2018, 04:49 AM
#3
Chapter Leader
(Northeast Florida)
Thread Starter
iTrader: (1)

gatrhumpy's Avatar

Join Date: Jun 2004
Age: 38
Posts: 32,020
Thanked 973 Times in 646 Posts
Everything I put in, yes, but not the gains. I am OK with that. However, my kids will be going to college. There is a HUUUUUUUUUUUUUUUUUGE difference in pay for someone who goes to college vs. someone who does not.
gatrhumpy is online now
Reply With Quote
Old 01-09-2018, 07:15 AM
#4
Registered Member

doopstr's Avatar

Join Date: Jan 2001
Location: Jersey
Age: 46
Posts: 22,600
Thanked 864 Times in 541 Posts
Originally Posted by gatrhumpy View Post
What are the advantages of keeping the money in the mutual funds and losing money every time we need it for school in 9 and 12 years?

Thoughts?
The other option is a 529 plan. Tax withdrawals are tax free as long as they are used for education. The only issue is if you got money left over then you pay tax plus a 10% penalty(on the gains) if you withdrawal for non education use. You could hold onto the money in the 529 and put it in your grandkids name to avoid the tax/penalty. There is also some provision that if your kid gets a scholarship you can withdrawal the money tax free but check with your FA on that. If you prepay does that hurt your kids chances of getting scholarship? If they get scholarship do you get your money back?

529 can also be used for room and board. So you could prepay the education now and then put some money in a 529 for room/board/books. I think you can even use 529 for laptop.

I see that as part of the new tax plan that 529 can be used for other private schooling now besides college, but I haven't dug into that.

Last edited by doopstr; 01-09-2018 at 07:23 AM.
doopstr is offline
Reply With Quote
Old 01-09-2018, 08:04 AM
#5
Registered Member

brian2's Avatar

Join Date: Oct 2002
Location: NJ
Posts: 3,707
Thanked 735 Times in 490 Posts
so far my thinking has been to remain more flexible with my savings rather than avoiding capital gains some time in the future.

If I was in FL with all the different options they have, I would probably have to take advantage to hedge against the rising cost of education.

What does this lump sum payment get you?
brian2 is offline
Reply With Quote
Old 01-09-2018, 08:53 AM
#6
Chapter Leader
(Northeast Florida)
Thread Starter
iTrader: (1)

gatrhumpy's Avatar

Join Date: Jun 2004
Age: 38
Posts: 32,020
Thanked 973 Times in 646 Posts
A guaranteed four year education (tuition, expenses, fees etc. but not room and board) at a Florida state university (most expensive option).

Pros:
1. Guaranteed education at 4 yr Florida university
2. If kids go elsewhere, money can be used at other universities. Max payout is limited to what they would have paid for a Florida university.
3. No capital gains taxes to pay each time I want to take money out of our mutual funds to pay for education expenses. Less paperwork.
4. Hedges against rising cost of education.
5. Mutual fund could lose money.
6. If proceed forward, can stop investing in kids' education if I wanted to. Extra $1000 a month in our pockets to do other things.

Cons:
1. Don't get to keep gains in Florida Prepaid investment plan. So what?
2. Mutual funds could out-perform the Florida Prepaid Investment Plans. So what?
gatrhumpy is online now
Reply With Quote
Old 01-09-2018, 08:55 AM
#7
Chapter Leader
(Northeast Florida)
Thread Starter
iTrader: (1)

gatrhumpy's Avatar

Join Date: Jun 2004
Age: 38
Posts: 32,020
Thanked 973 Times in 646 Posts
Originally Posted by doopstr View Post
The other option is a 529 plan. Tax withdrawals are tax free as long as they are used for education. The only issue is if you got money left over then you pay tax plus a 10% penalty(on the gains) if you withdrawal for non education use. You could hold onto the money in the 529 and put it in your grandkids name to avoid the tax/penalty. There is also some provision that if your kid gets a scholarship you can withdrawal the money tax free but check with your FA on that. If you prepay does that hurt your kids chances of getting scholarship? If they get scholarship do you get your money back?

529 can also be used for room and board. So you could prepay the education now and then put some money in a 529 for room/board/books. I think you can even use 529 for laptop.

I see that as part of the new tax plan that 529 can be used for other private schooling now besides college, but I haven't dug into that.
if my kids are blessed enough to get a scholarship, we would get the money back we put into it, no tax implications. We don't get to keep the gains.
gatrhumpy is online now
Reply With Quote
Old 01-09-2018, 09:02 AM
#8
Registered Member

brian2's Avatar

Join Date: Oct 2002
Location: NJ
Posts: 3,707
Thanked 735 Times in 490 Posts
Originally Posted by gatrhumpy View Post
A guaranteed four year education (tuition, expenses, fees etc. but not room and board) at a Florida state university (most expensive option).

Pros:
1. Guaranteed education at 4 yr Florida university
2. If kids go elsewhere, money can be used at other universities. Max payout is limited to what they would have paid for a Florida university.
3. No capital gains taxes to pay each time I want to take money out of our mutual funds to pay for education expenses. Less paperwork.
4. Hedges against rising cost of education.
5. Mutual fund could lose money.
6. If proceed forward, can stop investing in kids' education if I wanted to. Extra $1000 a month in our pockets to do other things.

Cons:
1. Don't get to keep gains in Florida Prepaid investment plan. So what?
2. Mutual funds could out-perform the Florida Prepaid Investment Plans. So what?
my advice:

put your foot down

or hide it, and take whatever the consequences are at a later date.
brian2 is offline
Reply With Quote
Old 01-09-2018, 09:54 AM
#9
Moderator

thoiboi's Avatar

Join Date: Apr 2010
Location: SoCal, CA
Posts: 33,446
Thanked 5,316 Times in 4,250 Posts
Gatr, I can't see your kids NOT going to college.. You're a smart dude (at least you play one on the Internet), I'm sure the wife is smart too (else you probably wouldn't have married her); it sounds like a safe bet! Not having to pay into it and get $1K extra for a while could mean a nice rainy day fund or vacation fund!
thoiboi is offline
Reply With Quote
Old 01-09-2018, 10:46 AM
#10
Chapter Leader
(Northeast Florida)
Thread Starter
iTrader: (1)

gatrhumpy's Avatar

Join Date: Jun 2004
Age: 38
Posts: 32,020
Thanked 973 Times in 646 Posts
We already have a nice emergency fund and a rainy day fund. This would help bolster both, or at least do more things with money. Trips, vacations, etc.
gatrhumpy is online now
Reply With Quote
Old 01-09-2018, 10:47 AM
#11
Moderator

thoiboi's Avatar

Join Date: Apr 2010
Location: SoCal, CA
Posts: 33,446
Thanked 5,316 Times in 4,250 Posts
Originally Posted by gatrhumpy View Post
We already have a nice emergency fund and a rainy day fund. This would help bolster both, or at least do more things with money. Cars, cars, etc.

thoiboi is offline
Reply With Quote
Old 01-09-2018, 11:04 AM
#12
Chapter Leader
(Northeast Florida)
Thread Starter
iTrader: (1)

gatrhumpy's Avatar

Join Date: Jun 2004
Age: 38
Posts: 32,020
Thanked 973 Times in 646 Posts
Originally Posted by thoiboi View Post
My wife is pondering trying to get rid of the Traverse. Problem is I want to keep it and drive it until the wheels fall off. Which, BTW, we just bought new wheels, so that'll be a while!
gatrhumpy is online now
Reply With Quote
Old 01-09-2018, 11:08 AM
#13
Moderator

thoiboi's Avatar

Join Date: Apr 2010
Location: SoCal, CA
Posts: 33,446
Thanked 5,316 Times in 4,250 Posts
Originally Posted by gatrhumpy View Post
My wife is pondering trying to get rid of the Traverse. Problem is I want to keep it and drive it until the wheels fall off. Which, BTW, we just bought new wheels, so that'll be a while!

wheels would fall off if the LBJ failed too

or axles..
thoiboi is offline
Reply With Quote
Old 01-09-2018, 11:13 AM
#14
Chapter Leader
(Northeast Florida)
Thread Starter
iTrader: (1)

gatrhumpy's Avatar

Join Date: Jun 2004
Age: 38
Posts: 32,020
Thanked 973 Times in 646 Posts
I'm trying to SAAAAAAAAAAAAVE money, not place it into another outgoing bucket!
gatrhumpy is online now
Reply With Quote
Old 01-13-2018, 03:24 PM
#15
Senior Moderator
iTrader: (5)

KaMLuNg's Avatar

Join Date: Feb 2002
Age: 35
Posts: 15,291
Thanked 865 Times in 622 Posts
i'm still trying to understand how the 'if your kid doesn't go to a florida school' work...

so if you kid decides to come to NYU... and it would have costed $20k/yr in florida... will they give you $20k to put towards NYU tuition? and then you come up with the difference? what's your plan for the potential difference? keep that mutual fund going?
KaMLuNg is offline
Reply With Quote
Old 01-13-2018, 05:31 PM
#16
Registered Member

brian2's Avatar

Join Date: Oct 2002
Location: NJ
Posts: 3,707
Thanked 735 Times in 490 Posts
:lol: I would tell my kid, tough shit, you're going to a FL school.
brian2 is offline
Reply With Quote
Old 01-18-2018, 01:26 PM
#17
Senior Moderator

oo7spy's Avatar

Join Date: Dec 2010
Location: Austin, TX
Posts: 22,719
Thanked 3,921 Times in 2,842 Posts
My parents told me that. Go in-state or find your own funding.
oo7spy is offline
Reply With Quote
Old 01-18-2018, 01:56 PM
#18
Moderator

thoiboi's Avatar

Join Date: Apr 2010
Location: SoCal, CA
Posts: 33,446
Thanked 5,316 Times in 4,250 Posts
Originally Posted by gatrhumpy View Post
I'm trying to SAAAAAAAAAAAAVE money, not place it into another outgoing bucket!

get rid of both kids


use college money to go on vacations

profit.
thoiboi is offline
Reply With Quote
Old 01-18-2018, 07:35 PM
#19
Chapter Leader
(Northeast Florida)
Thread Starter
iTrader: (1)

gatrhumpy's Avatar

Join Date: Jun 2004
Age: 38
Posts: 32,020
Thanked 973 Times in 646 Posts
Originally Posted by KaMLuNg View Post
i'm still trying to understand how the 'if your kid doesn't go to a florida school' work...

so if you kid decides to come to NYU... and it would have costed $20k/yr in florida... will they give you $20k to put towards NYU tuition? and then you come up with the difference? what's your plan for the potential difference? keep that mutual fund going?
Student loans I guess. I want my kids to pay into their education, not get a free ride from me. If they do elsewhere, then that is their choice. But they have to know that they have to come up with the difference. Having the kids buy into their education changes things for them for the better.
gatrhumpy is online now
Reply With Quote
Old 01-18-2018, 07:36 PM
#20
Chapter Leader
(Northeast Florida)
Thread Starter
iTrader: (1)

gatrhumpy's Avatar

Join Date: Jun 2004
Age: 38
Posts: 32,020
Thanked 973 Times in 646 Posts
Originally Posted by thoiboi View Post
get rid of both kids


use college money to go on vacations

profit.
I'll sell them to you for $34.50 each.
gatrhumpy is online now
Reply With Quote
Old 01-19-2018, 08:10 AM
#21
Senior Moderator

oo7spy's Avatar

Join Date: Dec 2010
Location: Austin, TX
Posts: 22,719
Thanked 3,921 Times in 2,842 Posts
Originally Posted by gatrhumpy View Post
Student loans I guess. I want my kids to pay into their education, not get a free ride from me. If they do elsewhere, then that is their choice. But they have to know that they have to come up with the difference. Having the kids buy into their education changes things for them for the better.
To be honest, I didn’t pay a dime of my tuition. My “fund” ran out by the end of my second year. My mom picked up tuition, and I picked up living on my own. By the end of college I believe the only thing she still assisted me with was half of my comprehensive car insurance premium.

I guess if it’s an either/or, it can come out in the wash, but tuition isn’t a normal living expense. Working 80+ hours the two weeks during finals (graduation time working in a restaurant) will teach anyone the values I think you’re looking for. I don’t see how leaving them with debt (if it’s avoidable) is beneficial to them. They can accrue debt quickly enough with a car and house which will actually benefit them going forward.
oo7spy is offline
Reply With Quote
Old 01-19-2018, 08:10 AM
#22
Moderator

thoiboi's Avatar

Join Date: Apr 2010
Location: SoCal, CA
Posts: 33,446
Thanked 5,316 Times in 4,250 Posts
Originally Posted by gatrhumpy View Post
I'll sell them to you for $34.50 each.

DO I LOOK LIKE I'M MADE OF MONEY?!?!
thoiboi is offline
Reply With Quote
Old 01-19-2018, 08:41 AM
#23
Senior Moderator

oo7spy's Avatar

Join Date: Dec 2010
Location: Austin, TX
Posts: 22,719
Thanked 3,921 Times in 2,842 Posts
I’ll pay you to take mine!





oo7spy is offline
Reply With Quote
Old 01-19-2018, 11:45 AM
#24
Steve
iTrader: (7)

BreezyTL's Avatar

Join Date: Jan 2013
Location: SE Wisco
Age: 30
Posts: 2,314
Thanked 363 Times in 287 Posts
Damn, wish my parents gave me money for my schooling... still paying out the ass for the next 3-4 years!


I do agree that you should have the kids pay for a portion so they see it is their money being spent on their education. They may take it more serious seeing they could be wasting their own hard earned money.
BreezyTL is offline
Reply With Quote
Old 01-19-2018, 12:06 PM
#25
Moderator

thoiboi's Avatar

Join Date: Apr 2010
Location: SoCal, CA
Posts: 33,446
Thanked 5,316 Times in 4,250 Posts
yeah.. my parents couldn't afford to pay for me either
thoiboi is offline
Reply With Quote
Related Topics
Thread
Thread Starter
Forum
Replies
Last Post
DanTL-S
Second Generation TL (1999-2003)
11
05-08-2013 04:59 PM
Gnate
Ramblings
16
10-24-2008 04:22 PM
hornyleprechaun
Money & Investing
26
12-29-2007 11:41 PM
M TYPE X
Ramblings
45
07-26-2005 08:22 PM
MikeyB_TLS
Ramblings
53
04-22-2004 11:01 AM



Quick Reply: Prepaid College Tuition Plans


Contact Us Terms of Service



We are a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for us to earn fees by linking to Amazon.com and affiliated sites.