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Finances are weird


goldendesign

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The post on retirement gifts got me thinking about investments too.

Both the wife and I have the usual 401k(s) and each have a Roth. I use my companies stock options too. For our daughter we have multiple accounts in her name. A 529 for education, a savings account for her first car, and another investment account that's rotating CDs and short term Munis. Overall I think we're diversified and covered where we want to be with the exception of a rental property or two, that'll be in a few years we think. 

 

What I thought was weird was my daughters 529 should have enough in it to cover her wherever she wants to go in about 2 years, yet my student loans are on a 0.1% long term loan I don't plan to pay off in the next 15 years or so. So I'll have paid for my daughters before I paid mine off and even then it be close to when she actually leaves for college!

 

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When my niece and nephew got their first real job, we helped them set up a Roth IRA and invested the money  We invested the money in a target date fund because it had a lower minimum requirement. Once they got enough in there, I suggested they switch to  a broad equity index fund since they're at least 30 years from retirement.  We thought having the accounts set up would make it easier for them to contribute on their own in the future.

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43 minutes ago, Kirby said:

When my niece and nephew got their first real job, we helped them set up a Roth IRA and invested the money  We invested the money in a target date fund because it had a lower minimum requirement. Once they got enough in there, I suggested they switch to  a broad equity index fund since they're at least 30 years from retirement.  We thought having the accounts set up would make it easier for them to contribute on their own in the future.

Thoughtful and going far for them at this stage, Aunt Kirby.

 

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6 hours ago, goldendesign said:

The post on retirement gifts got me thinking about investments too.

Both the wife and I have the usual 401k(s) and each have a Roth. I use my companies stock options too. For our daughter we have multiple accounts in her name. A 529 for education, a savings account for her first car, and another investment account that's rotating CDs and short term Munis. Overall I think we're diversified and covered where we want to be with the exception of a rental property or two, that'll be in a few years we think. 

 

What I thought was weird was my daughters 529 should have enough in it to cover her wherever she wants to go in about 2 years, yet my student loans are on a 0.1% long term loan I don't plan to pay off in the next 15 years or so. So I'll have paid for my daughters before I paid mine off and even then it be close to when she actually leaves for college!

 

I have a good pension + Social Security and they take the safety place of bonds.  I keep enough bonds and CD's for emergencies and planned stuff and stick the rest into stocks and one stock fund. If my stocks fall by 50%, I'm still way ahead of where I'd be if my portfolio held my age in % bonds as is often advised. I also have a mortgage-free house and am good for the duration.

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21 hours ago, goldendesign said:

What I thought was weird was my daughters 529 should have enough in it to cover her wherever she wants to go in about 2 years, yet my student loans are on a 0.1% long term loan I don't plan to pay off in the next 15 years or so. So I'll have paid for my daughters before I paid mine off and even then it be close to when she actually leaves for college!

Is there a way to use that 529 money against your debt first? I think the tax relief side of a 529 is great, so folks should definitely be using them, but even at a great rate, it seems clearing away your debt, and letting your daughter "own" her own college debt (hopefully also at a ridiculously low rate), is the best path forward. 

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1 hour ago, Razors Edge said:

Is there a way to use that 529 money against your debt first? I think the tax relief side of a 529 is great, so folks should definitely be using them, but even at a great rate, it seems clearing away your debt, and letting your daughter "own" her own college debt (hopefully also at a ridiculously low rate), is the best path forward. 

There is NO tax relief for your income taxes for contributing to a 529 plan except that SOME the money in the plan grows tax free, depending on the state.  Federal Student Loans run from 2.75% to 5%.  Mortgage interest should be at least as low after deducting it from your income taxes.  My sister contributed a little to a 529 plan for her son, then decided it wasn't a big benefit for her, since researchers at Johns Hopkins Hospital are technically employees of Johns Hopkins University and their children get 4 years of free college tuition at Hopkins or 1/2 Hopkin's tuition at the college of their choice.  That works for retirees too.

My sister originally planned to pay-off her $250K remaining mortgage when she retired in September, but the stocks and funds in her retirement vehicles are growing so fast in comparison, she elected to not do so.  Her stocks have grown about $250K since she retired and they're mostly "safe" Abbott Labs (P/E 33) and AbbVie (P/E 10) that are not likely to take big hits when the current market bubble corrects.

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