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Author: cbs1956 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75794  
Subject: Roth change Date: 11/14/2003 3:36 PM
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Hi all, My husband and I (ages 47 and 48)have ~$25K total in Roth IRAs with Janus, and I'm thinking we should relocate those accounts to somewhere other than Janus. Then I got to thinking maybe we should use that money for college expenses for our kids. They are in high school now, and our current plan for financing college is selling stock purchased through our company stock purchase plan. We also both contribute the max to our 401Ks at work (~$65K current total), and my husband also has a retirement account (~$43K current total) from a previous job. Our employer also provides a small retirement account (~$20K current total). I've used several different retirement calculators to estimate what we'll need when we retire, but still feel like we're behind in saving for retirement. What do you think about applying the Roth IRA money for college in a couple of years? Thanks!

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Author: MissouriGup Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37836 of 75794
Subject: Re: Roth change Date: 11/14/2003 6:53 PM
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I'm thinking we should relocate those accounts to somewhere other than Janus.

I would if I were you (move to either Scottrade or Vanguard).

Then I got to thinking maybe we should use that money for college expenses for our kids.

I would hate to divert money away from retirement accounts. Do you have other options? Tighten the ole' belts up? Send the kids to a local community college for the 1st two years? We sent my stepson to our local community college for less than $3,000 a year.

Gup

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Author: MEG Three stars, 500 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37838 of 75794
Subject: Re: Roth change Date: 11/14/2003 8:11 PM
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Your retirement money is for you to retire with.
Don't use it for educational expenses. My sons all went to college without us touching retirement funds.
We appied for financial aide (loans in the childrens names).
Typically it came out to half in loans and we paid the other half out of our earnings.
We treated it like a car payment. Colleges have payment plans.
The boys did better in school and appreciated the education more because they had a stake in it(loans.)
You'll be able to do this also if you just watch your other expenses a little. we often laughed that we couldn't afford something because we had kids in school.
The 4 years passes very quickly. And when it's over you still have your retiremnet $$ and the appreciation that goes along with it.
You'll never be able to replace that money and it tax free growth.

MEG

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Author: yttire Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37840 of 75794
Subject: Re: Roth change Date: 11/14/2003 8:18 PM
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I second the opinion that you should not take from your retirement to pay for your kids educations. They can get loans. They should get loans. You will be unable to get loans to retire on.

If your finances do extremely well, help them pay down the loans in the future, but you don't have to commit to that out of the gate. Also, I would increase savings to your retirement, it sounds like you are uncomfortable with your savings at the moment. Head over to the budgeting board and come up with a budget, we'll help you trim it down to size ;)

Even if you were to want to pay for your kids education outright, you might be better off not paying for it immediately. Another way to think about it is the rate of return on the investment. If you are earning 8% on your investment, and the school gives a loan at 5%, you actually end up 3% ahead by TAKING the loan and not paying for the education in cash. Of course, this is assuming you get an 8% return, which may or may not be true. But if it were guaranteed, you would be better off making minimal payments on the loans and keeping the investments free to grow. Especially because last I checked, student loans interest was tax deductable, effectively reducing the interest rate.



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Author: cbs1956 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37849 of 75794
Subject: Re: Roth change Date: 11/15/2003 12:21 PM
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Thanks, I do need to move this money, and was just think of all the options. I would feel much more comfortable keeping it dedicated to retirement.

cbs 1956

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Author: Watty56 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 37852 of 75794
Subject: Re: Roth change Date: 11/15/2003 10:32 PM
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What do you think about applying the Roth IRA money for college in a couple of years?

Reading between the lines I suspect that you are planning on paying for the college with your future pay and dipping into the Roth IRA as needed. The pitfall with this though is if something should happen, like a layoff of disability, then you will not have the cash flow that you were depending on to pay to for college. You might want to reduce your current 401k contributions, that you employers doesn't match, and put the cash into a college savings account or iBonds which have some tax advantages. This will give you more of a safety margin if something unexpected should happen.

Greg


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