mary2029
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Post by mary2029 on Jun 17, 2020 9:49:00 GMT -5
Why are you using math against you? You are estimating that the market will go up 7% in the next 14 years, but don't want to borrow cheaper money at under 4%? Key word being "estimating". It's still a gamble. I have two funds at Fidelity right now. 18 years ago one was at 22K and one was at 10K. The 22K one is now 124K, but the 10K one is only at 16K. I lost my shirt in science and tech funds during the dot.com bubble burst. Yeah I THINK they will go up and I hope they do, kind of like I think and hope SS will be there.
A paid off house just seems like one aspect of retirement savings. Phil's house is paid off and I'll bet he's not 100% in stocks either.
I did do some more hunting online for mortgages last night to see if I could find a 30 year with no closing costs and they don't like my small loan amount at all. I was getting quotes for over 5%! With 3K closing costs! So...it's looking like my local CU might be the best deal after all. My biggest issue with a 30 year is that I know what is going to happen. I'm going to pay 3K in closing costs and then keep throwing the money at it come hell or high water to pay off the same as I was. People can harp on me about emotions and not being rational, but they are not the ones that have been dealing with almost complete OCD mental health issues around their mortgage for a long time. I seriously could tell you to the penny what I owe on it on any given day because every damn morning for the past decade or so when I go out to the barn to do chores the number just keeps repeating in my head over and over until I'm saying it out loud. I just want the peace that will come from it being gone entirely.
I get it. I grew up lower-middle class and have been worried about money all my life. It's ingrained behaviour. Nobody does know the future, we could be in another recession and it could take decades to come out of it. My point was instead of historical data of 10 to 11% returns, you are using 7%, you are excluding social security, you are excluding the increase in your future wages and you are thinking that today's $900 is the same as next decade's $900. So you are negating the pros and inflating the cons. You have been worried about the lack of child support for years and how you would support your livelihood. So, you cannot continue to go down your current path. I think you need to give yourself a break, go for the 15-year option and instead of throwing money at the house, throw it at a new account for the balloon balance. I think that will give you some stability, more options, and piece of mind. Good luck in whatever pathway you choose.
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jelloshots4all
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Post by jelloshots4all on Jun 17, 2020 10:09:01 GMT -5
I remember Phil, saying his wife did NOT want a mortgage on their home so he paid it off. He may be rich, who knows for sure, but I would never keep mortgages on everything. Couldn't live with it. As hubs said from our investments we are slated to take about $20k+ out per year until we are 100 and that's with earning nothing on those 401k's. Eventually that and SS would do. As we age we are eventually going to spend less. Right now our main spending is from the property acct on property. And I think part of that is just him wanting to keep busy. For me, I want him to stop so we can enjoy the income from them instead of dumping it back in. I never saw us still messing around with redoing one at our age. I'm going over today and caulk and stain, maybe mop. I cleaned the living room floor yesterday to just stop tracking dirt and stuff, going to vac the bedrooms and bathroom today. Tomorrow morning early, DH to see if they are going to fix his cataracts, I assume one eye. That will likely stop us working again for awhile, damn. Want to finish that place. I'm guessing he won't be able to mow or anything for at least a couple of weeks to keep debris out of it or them. CG when you finish your rental, you and hubs should work one cleaning out your house so you can sell it and move to town. That would keep him busy. And don't buy another as this one has taken you years to fix up.
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thyme4change
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Post by thyme4change on Jun 17, 2020 10:14:47 GMT -5
I'm sensing you already know what you want to do, so our advice is pointless unless it validates your decision. Maybe just typing it out and defending it solidified that for you.
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Deleted
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Post by Deleted on Jun 17, 2020 11:16:43 GMT -5
I'm sensing you already know what you want to do, so our advice is pointless unless it validates your decision. Maybe just typing it out and defending it solidified that for you. Yeah...I'm just afraid that with all the talk I've done about burning the house down that they'll easily pin it on me.
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Rukh O'Rorke
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Post by Rukh O'Rorke on Jun 17, 2020 11:19:08 GMT -5
Good point thyme, and sometimes that is a useful exercise. For all involved. MPL - whatcha gonna do?
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Rukh O'Rorke
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Post by Rukh O'Rorke on Jun 17, 2020 11:29:04 GMT -5
And as an aside - I know exactly how you feel. I have become very focused on my debt the last few years, and am chaffing on it. I know I need to refi to a 30 year and take out money to do a variety of fixes and updating. And it's killing me, and I haven't moved forward with it, and I need to. But my thought is instead to push really hard and pay off the debts (mortgage and student loans) as quickly as possible, and if the stocks performed at least middlingly and not crater - I could retire when mortgage is paid off.
I know I wouldn't have the money in the scenario to keep up the property. I need to do the grand fix up, and then plan from there. But - it hurts a little.
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jerseygirl
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Post by jerseygirl on Jun 17, 2020 12:45:21 GMT -5
I agree that getting rid of mortgage or most continuing debt is good. Refinancing would give you some breathing room while kids are still big expenses. But I’d never get a balloon payment. To me that’s really potential for big unknown problems happening same time as needing to come up with big bucks. Can’t count on refinancing - in 2008 lots of people lost their houses because balloon was due couldn’t refinance and job lost all at same time. Good luck with whatever you choose!!
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Deleted
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Post by Deleted on Jun 17, 2020 13:21:48 GMT -5
Nope. He got a great scholarship and grants and is going to a good school for engineering. He just got another one in the mail today!! We were not expecting anything more at all at this point, so it was quite a pleasant surprise.
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stillmovingforward
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Post by stillmovingforward on Jun 17, 2020 16:52:09 GMT -5
Makes up for the attitude last night 🤣
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phil5185
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Post by phil5185 on Jun 17, 2020 18:59:15 GMT -5
"""Key word being "estimating". It's still a gamble. I have two funds at Fidelity right now. 18 years ago one was at 22K and one was at 10K. The 22K one is now 124K, but the 10K one is only at 16K. I lost my shirt in science and tech funds during the dot.com bubble burst. Yeah I THINK they will go up and I hope they do, kind of like I think and hope SS will be there. ""
Maybe "gamble" is the key word? Prior to the invention of the IRA, 401k, financial planners, advisors, etc, most of us did an assessment of risk when we invested. For some it is from experience, observing - and for some it is statistical math - standard deviations, probabilities of success. It depends on the person's skill set - but never is it a 'gamble'. In your case, the 18 yrs of experience was 10% per yr for the $22K and less than 2% per yr for the $10k. The composite for your $32k was about 7.5% per yr. Not bad, pretty close to your goal.
"""A paid off house just seems like one aspect of retirement savings. Phil's house is paid off and I'll bet he's not 100% in stocks either. """
Correct, not 100% in stocks, about 60 /40 stocks/bonds now. But I'm in my 80's, when I was your age it was 100% stocks, lol.
I mix the SP500 (11% long-term average) with a bond index (about a 5% return). When my mix is 50/50, my return is about 8% per yr. When I want to increase my risk, I shift my 'mix. toward stocks, eg 75/25. I never compromise my two categories,(stocks & bonds). Ie, I never switch to junk bonds to increase my risk - and I never switch to high-flyer stocks to increase risk. Instead, I keep the two categories 'pure' and change only the top level - eg, 50/50, 75/25, etc.
And on investing borrowed money - I keep my loans "safe" and confine my risks to the investment side of the equation. The reason is - I never want the two sides to go into crisis at the same time. Eg, a balloon 'call' could force me into a refi at a bad time in the market. Same with a Var Rate loan. So I stick with 30 year fixed rate loans, no designer loans. And I still can't believe that young people are leaving those "3%, 30 FR notes" on the table, I would max those in a heartbeat.
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tskeeter
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Post by tskeeter on Jun 17, 2020 19:13:21 GMT -5
MPL - can you explain a little bit on why your goal is 1.2m for retirement savings? I'm trying to figure out what my number is, my original target - I don't think I'm going to make it! Would need to work past 65 and I don't think I'm going to make it to 62! Rukh, After I retired I did some analysis to figure out how people could project what size nest egg they would need to maintain their lifestyle in retirement. First, I make the assumption that retirement spending for most folks will basically be 100% of what they spend the last year they work. I found that over my work life, my compensation increased at a compound rate of about 5% a year. This rate accounted for merit increases, cost of living adjustments, and promotional increases. So, if you take what you earned when you started in your career job and rolled that forward for every year you plan to work, you can approximate what you’ll be earning at the point you retire. This gives you the starting point for the next part of your calculation. Take your final year of earnings and deduct expenses that will go away when you retire. Things such as retirement contributions, mortgage payments, etc. Next, deduct the value of annual income you will get from sources such as SS, pensions, rental income, etc. Then add any new expenses. Things such as additional travel expenses, an allowance to help a developmentally challenged sibling, etc. Finally, divide your projected annual retirement spending by something between 2.5% and 3%. This gives you an approximation of the size your nest egg will need to be to maintain your lifestyle in retirement. This last step is a variation of the 4% rule. At a 3% first year withdrawal rate, I estimate that your retirement fund would support about 40 years in retirement. If you expect a longer retirement, use a smaller divisor.
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dondub
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Post by dondub on Jun 18, 2020 17:33:49 GMT -5
"""Key word being "estimating". It's still a gamble. I have two funds at Fidelity right now. 18 years ago one was at 22K and one was at 10K. The 22K one is now 124K, but the 10K one is only at 16K. I lost my shirt in science and tech funds during the dot.com bubble burst. Yeah I THINK they will go up and I hope they do, kind of like I think and hope SS will be there. ""
Maybe "gamble" is the key word? Prior to the invention of the IRA, 401k, financial planners, advisors, etc, most of us did an assessment of risk when we invested. For some it is from experience, observing - and for some it is statistical math - standard deviations, probabilities of success. It depends on the person's skill set - but never is it a 'gamble'. In your case, the 18 yrs of experience was 10% per yr for the $22K and less than 2% per yr for the $10k. The composite for your $32k was about 7.5% per yr. Not bad, pretty close to your goal.
"""A paid off house just seems like one aspect of retirement savings. Phil's house is paid off and I'll bet he's not 100% in stocks either. """
Correct, not 100% in stocks, about 60 /40 stocks/bonds now. But I'm in my 80's, when I was your age it was 100% stocks, lol.
I mix the SP500 (11% long-term average) with a bond index (about a 5% return). When my mix is 50/50, my return is about 8% per yr. When I want to increase my risk, I shift my 'mix. toward stocks, eg 75/25. I never compromise my two categories,(stocks & bonds). Ie, I never switch to junk bonds to increase my risk - and I never switch to high-flyer stocks to increase risk. Instead, I keep the two categories 'pure' and change only the top level - eg, 50/50, 75/25, etc.
And on investing borrowed money - I keep my loans "safe" and confine my risks to the investment side of the equation. The reason is - I never want the two sides to go into crisis at the same time. Eg, a balloon 'call' could force me into a refi at a bad time in the market. Same with a Var Rate loan. So I stick with 30 year fixed rate loans, no designer loans. And I still can't believe that young people are leaving those "3%, 30 FR notes" on the table, I would max those in a heartbeat.
Balloon calls on 30/5 and 30/7 went away last century. I sold a lot of those, especially to refiners that could answer the question “How Lind do you plan to stay in this home”?. They have had extendable term options for many years and no calls. Last year I tried to find a one year ARM figuring the rate would be well below my HELOC which I was paying down rapidly after doing a 1031 exchange. No such animal existed anymore. I searched far and wide. And I posit that anyone who has an adjustable right now that has reached the rate change deadline on their 5 or 7 year product will be pleasantly surprised that the rate will be declining.
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Deleted
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Post by Deleted on Jun 19, 2020 8:10:20 GMT -5
Good point thyme, and sometimes that is a useful exercise. For all involved. MPL - whatcha gonna do? I don't know. Sit and ponder more apparently. Luckily, I don't think there's any major urgency to make a decision. I've got enough savings to carry me for quite a while.
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gambler
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Post by gambler on Jun 19, 2020 15:22:27 GMT -5
Done, I am now a liberal Democrat. Going to show big decrease in wealth/ income for next few years. Might even get free stuff
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Deleted
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Post by Deleted on Jun 19, 2020 18:11:16 GMT -5
Done, I am now a liberal Democrat. Going to show big decrease in wealth/ income for next few years. Might even get free stuff I can't figure out if that was a dig on me or if you're in the wrong thread.
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gambler
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"the education of a man is never completed until he dies" Robert E. Lee
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Post by gambler on Jun 19, 2020 19:46:30 GMT -5
Wrong thread. Was just reading and talking to finance folks . Been moving stuff around in case just in case . Completed today and did not pay attention to were I was. Could wind up in jail that way
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countrygirl2
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Post by countrygirl2 on Jun 20, 2020 8:05:37 GMT -5
I worried about money all my life too. My folks did, they never had enough, they didn't have debt and certainly lived within their means. But for years till dad got older he was off a lot in construction work. In his 50's finally got better.
Hubs doesn't worry, he says we are fine and will be. But its just there, I am better but can't overcome it.
On remodeling this house, it was worse then I realized. And hubs keeps stopping to fix this and that on other things, so kept putting it on the back burner. I told him, this year, that thing is done. I think he honestly, just wants something to work on, well its not going to be that. It's nice enough if we had put on a new kitchen and bedroom, like I wanted, we could have moved there.
I remember in Texas we did a 2 story townhouse at the lake, I LOVED it out there. When he was gone, DD and I moved minimal stuff out there and lived there most of one summer. He threw a fit and made me put it up for rent. I LOVED it out there. We ate at the yacht club, enjoyed bicycling, using the pool, it was heaven. At least for a little while, sigh.
We are getting there on this one and I think that it will be done before he gets his eyes fixed. Then that will just delay us a couple of weeks, but hope it is.
Yes, I'm going to work on getting rid of stuff. All I want is our clothes, my canning stuff, for a few more years, and my sewing room stuff. We can reduce other stuff down.
Ok, going to be very hot today, so getting ready to go out and check the garden. See if I can save a gardenia tree that some critter dug out completely the other night. I saw it last night and think its likely ruined, sad.
Ok, got to get busy.
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busymom
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Post by busymom on Jun 20, 2020 11:57:05 GMT -5
I've got a feeling, countrygirl2, that if you outlive your DH, you'll be living someplace new. Just a hunch... Having kids in college always results in some unexpected expense, minnesotapaintlady. Whatever you decide, have a bit of cash you can raid for these situations.
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Ava
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Post by Ava on Jun 20, 2020 12:01:25 GMT -5
I know everybody has given you mostly similar advice and you don't want to take it. But if I were in your position, I would preserve cash flow right now and go with a 30 years mortgage. Doesn't mean you cannot pay it in less time, but it gives you more options if you face unexpected expenses.
In 2018 I bought my car. I had to get a loan for it, which I didn't want to do. I took the longest term they would give me, 60 months. Unless something unexpected happens I will pay it off in a year. It's the second time I've done this, taking the longer term available and paying a car in three years. In the meantime, I had more money available in case I needed it for car expenses, healthcare, house repairs, etc.
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Blonde Granny
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Post by Blonde Granny on Jun 20, 2020 12:09:39 GMT -5
BusyMom, Ive been a widow for 4.5 years now. I griped and groaned for years about living in this called Arkansas and was determined to leave this place the instant my DH died.
Well, I'm still here. Like it or not I've been able to make a life for myself. I have terrific friends (also widows) A great volunteer job (if the VA ever opens again). Terrific Drs. that take good care of me. House is paid for as is the car.
Due to VA death/disability benefits, I pay no real estate taxes or personal property taxes. House is 7 years old and well take can of. I am cautious with my spending and don't take money from investments.
My whole purpose is to say, most times we talk big and when push comes to shove, it's much easier to stay where I am and try to be grateful for the blessings I have rather than continue to bitch about them (even though I'm quite good at it.) One of my best friends it turns out is a Chaplain, and he usually points me back in the right direction when I lean to far either way.
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busymom
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Post by busymom on Jun 20, 2020 12:15:50 GMT -5
I've seen both sides, Blonde Granny. Some widows who have sold the family home as soon as their husband's funeral was over, and, I've also seen those who can't bear to part with the "family home". Just depends on the person, I guess. I've heard from financial advisors not to make any big changes the first year your husband is gone. Just sort of take things slow, as maybe you'll feel differently than you do the day after the funeral. As a side note, I sort of got a kick out of two ladies at our church. Both widows sold their homes quickly after their husbands funerals, and moved into the same senior apartment complex. Both told me they were sick of taking care of their houses, and want time for a bit more fun.
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wvugurl26
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Post by wvugurl26 on Jun 20, 2020 12:57:58 GMT -5
My one grandma is still in the same house. She is in a good area, great neighbors, good friends, etc. My mom worries about the steps because it's 2 stories and a basement. Even if she suddenly needed a 1 level home, she has plenty of cash to buy it without selling the current home. It is meticulously maintained.
My other grandma moved 7 months after grandpa's death. She hated living in a rural area and had been over it for the 30+ years she lived there. One of my cousins bought the house, no real estate agents needed just a lawyer for paperwork. She's been in the current house for 12 years in November. No regrets on moving for her.
I think if you aren't certain what you want to do then taking your time is good advice.
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TheOtherMe
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Post by TheOtherMe on Jun 20, 2020 14:22:16 GMT -5
I have a cousin who has been widowed twice. Both times, she sold the house as quickly as possible. She is now renting because she doesn't want to take care of a yard and repairs. Have not heard how she likes being in an apartment.
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jerseygirl
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Post by jerseygirl on Jun 20, 2020 16:19:48 GMT -5
AN acquaintance in town has had 3 husbands , widowed twice and has kept the same house for all It’s an ok house but it’s on a nice lake
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Deleted
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Post by Deleted on Jun 20, 2020 22:16:58 GMT -5
I know everybody has given you mostly similar advice and you don't want to take it. The reason I'm resistant is that I know myself enough to know that I would just be paying 3K more on my mortgage.
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Deleted
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Post by Deleted on Jun 20, 2020 22:35:38 GMT -5
Having kids in college always results in some unexpected expense, minnesotapaintlady . Whatever you decide, have a bit of cash you can raid for these situations. Ironically, I'm thinking of having him take out the subsidized loans. I can pay up to 10K of student loans off with 529 funds as a qualified expense and he has quite a bit in an UTMA that can be used for anything.
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pulmonarymd
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Post by pulmonarymd on Jun 21, 2020 8:07:18 GMT -5
Having kids in college always results in some unexpected expense, minnesotapaintlady . Whatever you decide, have a bit of cash you can raid for these situations. Ironically, I'm thinking of having him take out the subsidized loans. I can pay up to 10K of student loans off with 529 funds as a qualified expense and he has quite a bit in an UTMA that can be used for anything. I don’t think the loan is bad, as it is in his name. Is the interest rate 6.8? I think prepaying anything related to school is your situation Is a bad idea. With the current economic situation and the state budgets, I would expect significant tuition hikes and cuts at all universities, especially state schools. That could lead to more stringent requirements to be met. Will he soon be eligible? More people may be eligible if these are need based, leading to more competition. They could cut course sections, number of professors. That could make it more difficult to graduate in 4 years, through no fault of his own. People on this site are prepare for the worst types. Tying up or spending your money early, without the resources to deal with it is a bad idea, IMHO. Murphy has a way of rearing his ugly head and laughs at well laid plans
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Deleted
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Post by Deleted on Jun 21, 2020 10:03:47 GMT -5
Ironically, I'm thinking of having him take out the subsidized loans. I can pay up to 10K of student loans off with 529 funds as a qualified expense and he has quite a bit in an UTMA that can be used for anything. I don’t think the loan is bad, as it is in his name. Is the interest rate 6.8? I think prepaying anything related to school is your situation Is a bad idea. With the current economic situation and the state budgets, I would expect significant tuition hikes and cuts at all universities, especially state schools. That could lead to more stringent requirements to be met. Will he soon be eligible? More people may be eligible if these are need based, leading to more competition. They could cut course sections, number of professors. That could make it more difficult to graduate in 4 years, through no fault of his own. People on this site are prepare for the worst types. Tying up or spending your money early, without the resources to deal with it is a bad idea, IMHO. Murphy has a way of rearing his ugly head and laughs at well laid plans Loan rates are 2.75% on Stafford loans. But really the rate doesn't mean much if they're getting paid off within 6 months of graduation on a subsidized. Believe it or not, I'm still on the fence on this one as well, although I'm leaning towards for sure doing the first two years. He can only take $3500 the first year and $4500 the second so it would be the same as just using the 529 minus the $80 origination fee.
eta: I always assume 5 years in the back of my head, so I'm not super concerned about that. I'll feel a lot better after this first year when I see how my son adapts to college, but right now he's the variable that worries me the most!
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pulmonarymd
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Post by pulmonarymd on Jun 21, 2020 10:25:54 GMT -5
I don’t think the loan is bad, as it is in his name. Is the interest rate 6.8? I think prepaying anything related to school is your situation Is a bad idea. With the current economic situation and the state budgets, I would expect significant tuition hikes and cuts at all universities, especially state schools. That could lead to more stringent requirements to be met. Will he soon be eligible? More people may be eligible if these are need based, leading to more competition. They could cut course sections, number of professors. That could make it more difficult to graduate in 4 years, through no fault of his own. People on this site are prepare for the worst types. Tying up or spending your money early, without the resources to deal with it is a bad idea, IMHO. Murphy has a way of rearing his ugly head and laughs at well laid plans Loan rates are 2.75% on Stafford loans. But really the rate doesn't mean much if they're getting paid off within 6 months of graduation on a subsidized. Believe it or not, I'm still on the fence on this one as well, although I'm leaning towards for sure doing the first two years. He can only take $3500 the first year and $4500 the second so it would be the same as just using the 529 minus the $80 origination fee.
eta: I always assume 5 years in the back of my head, so I'm not super concerned about that. I'll feel a lot better after this first year when I see how my son adapts to college, but right now he's the variable that worries me the most!
I understand that concern completely. The main concern I would have at a state school is the ability to get the class you need at the time you need it. One of mine was an out of state student at a state school. He and one other friend were the only ones to graduate in 4 years out of his group, and the friend was also from elsewhere. I would have a major concern about course selection and availability given what state budgets look like, especially in such a specialized area as engineering. Cutting non-tenured faculty can put a huge hole n the curriculum. It doesn’t matter to most Public schools if you don’t graduate in 4 years. Also, I would make sure the advising is adequate. One reason my son’s friend didn’t graduate on time is that the didn’t get enough direction on what they needed to do to get a degree. Just more things to keep in mind. Depending on the type of student your son is, of course
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teen persuasion
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Post by teen persuasion on Jun 21, 2020 10:38:58 GMT -5
Having kids in college always results in some unexpected expense, minnesotapaintlady . Whatever you decide, have a bit of cash you can raid for these situations. Ironically, I'm thinking of having him take out the subsidized loans. I can pay up to 10K of student loans off with 529 funds as a qualified expense and he has quite a bit in an UTMA that can be used for anything. I was thinking about this option the other day - I don't know what all grants/scholarships/529 college money you have lined up to pay the college expenses, but do you have $4k annually planned to pay from your pocket (that is, not the others I mentioned) to be eligible for AOTC? Loan proceeds would count as "from your pocket". My kids always had loans as part of their aid packages, in addition to grants and scholarships, but no 529 money. Every year we do this tax song and dance where the child claims some part of their scholarships as taxable income on their tax return, so that at least $4k of tuition is "paid for" not by scholarships/grants but other $, presumably loan $ (but it's all fungible). Normally the default is to assume scholarships/grants are used for tuition first (which makes those $ nontaxable), and R & B second (which makes those $ taxable). Usually we could fit the taxable scholarship income inside the standard deduction, so it wasn't taxable federally (or much), but it usually did incur state taxes (almost no state standard for dependents). As long as the AOTC credit was greater than the tax cost, we'd do it, and pay for the kid's tax. Unfortunately, for your planned AGI, the AOTC will really only be the $1k refundable portion of the $2.5k max. You probably won't owe any tax due to low taxable and lots of nonrefundable credits you are already getting (like us). Then again, maybe your HOH status affects the numbers differently. It's driving me crazy that I have all these nonrefundable tax credits going to waste (could use them to Roth convert for free) because I'm trying to optimize FAFSA EFC = 0 and EITC. As soon as I'm beyond those windows, and could optimize for Roth conversions, those nonrefundable credits disappear, because they are almost all tied to having children/dependents! Or they are impossible to use (retirement Saver's credit - at 50% credit: the tax < credit, but for incomes where tax > (max)credit: credit rate drops to 20% or less).
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