Good morning guys. I’m about to turn 29, my daughter just turned 1. My wife and I just signed our wills and we are trying to get some finances in order. I’d like to pick your brain a bit because most of y’all have “been there and done that.”

My first question is about college savings. I have put $250 a month in a savings account since she was born, I know it won’t pay for college completely, but hopefully with compounding interest, it’ll be a chunk. I know Dave Ramsey really likes ESA’s and another financial guy really pushes UTMA’s. I have been researching online and have found that there are 100 ways to save for college. I just want a fund that grows (without me micromanaging it), she can use for college/trade school, and if she chooses not to go to college she can withdraw when she is 25ish. Any suggestions? Things to look out for? Any words of advice?

Secondly, I will receive some city pension at retirement but they slash benefits every few years so who knows what I’ll actually receive when it comes time to retire. I currently invest $1000 a month into a high risk TIAA lifecycle in a 457. The tariff war seems to be hurting the market and the stock market seems to drop considerably during election cycles, would it be worth moving into a low risk position until after the 2020 election? Any other advice or suggestions for the 457?

Really I’m just “looking to my elders” for advice.

Thank you in advance!

Go check out Dave Ramsey’s website, click on a local endorsed advisor. We got one to get us straight. Simple easy understandable info in layman’s language.

Sounds like you have a good thought process. I have no idea what the high risk thing you invest in.
I like the concept of a quarter horse vs a high strung (high risk) race horse when it comes to investing.

A quarter horse is a hard worker, reliable, never lets you down. Something you can count on.

A race horse either wins big or looses big. Not something that will get you where you want to go in the long run.

Set up a Vanguard account. Put a 1/4 or what you currently invest in the high risk account. Five years from now you will put half in it. In 10 years you will put 100% of your investment monies in it.

You are doing the right thing.

And about 100% of your friends your age are buying things on credit that they think are cool things to have. Which should tell you that you guys are doing it right.

There's a million approaches. I'm not a financial guy, but talked to a few to develop my approach. I use Vanguard Target funds in 529 accounts. My kids are actually now starting to tap the funds and go off to school. I'm glad I have them. Remember to buy the high risk stuff if you are on a long term. Don't wait for them to be "doing better". You want to buy cheap. If it's cheaper next month than this, that's a good thing, not a bad thing.

College: 529 account. Have "presents" deposited there, also.

TIAA: you must be in education. Continue doing what you're doing. TIAA is superlative in the investing world.

Lastly, and most importantly, don't worry about the current economic events. You're too far away from retirement. The only consideration you have not stated is your current "cash" status: what do you have if the world turns upside down? Have at least six months of living cash available, if not 12.

quote:

Originally posted by craigcpa:
College: 529 account. Have "presents" deposited there, also.

TIAA: you must be in education. Continue doing what you're doing. TIAA is superlative in the investing world.

Lastly, and most importantly, don't worry about the current economic events. You're too far away from retirement. The only consideration you have not stated is your current "cash" status: what do you have if the world turns upside down? Have at least six months of living cash available, if not 12.

With a 529 do I have to select different investments?

I’m a LEO, I set up the 457 through the city. I’m not sure why they chose TIAA.

My wife and I have a 8-9 month “emergency fund” in a separate bank that we don’t normally use so that it is “out of sight, out of mind” and some liquid cash tucked away just in case.

We were both poor as dirt growing up, so we are both very financially conservative.

Two hundred per month in no load stock mutual fund paid for two college educations including advanced degrees at expensive private Universities. It is really rather simple.

The only money I would invest in the employer sponsored plan would be to receive the matching funds they also contribute. Otherwise, most of those plans that I've seen restrict your options and charge much larger management fees.
You need to be in a higher risk investment to get higher returns. You have a long window at your age so don't try to micromanage this or you'll get stressed out for nothing. Very few of the paid "experts" can consistently beat the market.

quote:

Originally posted by barsad0:

quote:

Originally posted by craigcpa:
College: 529 account. Have "presents" deposited there, also.

TIAA: you must be in education. Continue doing what you're doing. TIAA is superlative in the investing world.

Lastly, and most importantly, don't worry about the current economic events. You're too far away from retirement. The only consideration you have not stated is your current "cash" status: what do you have if the world turns upside down? Have at least six months of living cash available, if not 12.

With a 529 do I have to select different investments?

I’m a LEO, I set up the 457 through the city. I’m not sure why they chose TIAA.

My wife and I have a 8-9 month “emergency fund” in a separate bank that we don’t normally use so that it is “out of sight, out of mind” and some liquid cash tucked away just in case.

We were both poor as dirt growing up, so we are both very financially conservative.

Are your investments on the "CREF" side? Entirely different functions. The TIAA side is a much better investment option, imho.

I believe Vanguard offers 529 options, as does TIAA. Either of these two are very good custodians for offering investment vehicles for your college needs. As stated above, you're still young, so don't sting yourself by being too conservative.

Both TIAA and Vanguard have options based on WHEN you anticipate using the money. Both for your retirement and the 529.

quote:

her of these two are very good custodians for offering investment vehicles for your college needs. As stated above, you're still young, so don't sting yourself by being too conservative.

Both TIAA and Vanguard have options based on WHEN you anticipate using the money. Both for your retirement and the 529.

It's 100% in the:
TIAA-CREF Lifecycle 2055 Fund - Institutional Class

Should I move it to something different?

quote:

Originally posted by barsad0:

quote:

her of these two are very good custodians for offering investment vehicles for your college needs. As stated above, you're still young, so don't sting yourself by being too conservative.

Both TIAA and Vanguard have options based on WHEN you anticipate using the money. Both for your retirement and the 529.

It's 100% in the:
TIAA-CREF Lifecycle 2055 Fund - Institutional Class

Should I move it to something different?

Personal decision.

Be wary of taking financial advice from anyone you do not know, especially on the internet.

I don't know the specific investment you are in, but the company is solid.

TIAA offers you a free investment consultation. I would suggest using it.

I don't recommend 529 plans for college savings since you are limited to two option changes per year by law. If you want to do a 529 check out my529 (formerly Utah Educational Savings Plan). They allow options that you can set up yourself or use one of their multiple "canned" options. The investment funds are pretty diverse. It is one of three Morningstar gold rated plans due to their low fees and excellent customer service. Full Disclosure: I have written a bunch of software systems for them but did not use them for my kids college savings.

As far as retirement I'm in a 401k that has a lot of investment options. I also have a brokerage account that I contribute to bi-monthly. You want a broad range of investment options.

As a 37YO with an 18 month old, you are doing WAY more for college than I am or plan to do.
If he wants to go to college, he will figure it out. I did. I will very likely be in a much better position to help him than my parents were me, but I'll still make him work for it.

I'm unskilled on investing, but my 401k method is to take the 10-year annualized results of my overall investments & keep it >8%. If I do that, I'll have 2-mil+ at age 60, without figuring salary increases (or my wifes 401k). I'm at 12-13% over the last 10 years, which still included the hit in 2008.
Vanguard tells me I'm 'on track' for retirement & we just switched to them last year, so I must be close on my thinking.

For children I would check out what 529 plan makes the most sense in TX.

https://www.savingforcollege.com/college-savings-101

For retirement one should look 1st at what 401k(type) options are available at work. Look at investment options, expenses, & matches. Starting with ‘pre-tax’ $$ puts one ahead from the start. There are some places of employment with bland offerings, most will have viable options.

At your age(s), you can be rather aggressive with allocation mixes. I wouldn’t be jumping in & out of stocks based on emotions. Find a mix that suits you.

After work options(& 529 plans) are explored, consider a Roth(Traditional if required with income)IRA. It’s so much better later to have the bulk of savings inside tax advantaged accounts.

The same plan never works for everyone, adjustments need to be made. I’m a Vanguard fanboy when one is looking for an investment company.

Personal retirement savings trumps college saving for most. I’d still start some level of a 529 plan though.

I have no advice on the college saving, I have no experience in that. My thought would be to set myself up first, to have such a high net worth in 25 years that I could cover college expenses easily.

I would also start a Roth IRA for yourself and your spouse, if you have one. Keep it simple as possible. I just moved my overly complicated Roth with 7 mutual funds to Vanguard, liquidated them and went with 3 low cost index funds covering the total U.S stock market, total U.S bonds and total international. If you want to read up on simple and effective investing, get a copy of "The Bogleheads Guide to Investing".

Don't try to time the market, it's not about that. Time in the market is more important. So no matter what happens with stock market losses, keep investing monthly. Aim to invest at least 15% of your pretax annual income, ideally 25-30%.

Another vote for getting a 529 set up for each child.

Even if it doesn't cover the 'full' amount by the time they reach college age - its great to have $20-$30k available to help get them off to school. It really takes a dent out that's for sure...

My broad advice on retirement is to have a multi-pronged approach - SS, personal, pension, etc so that if you have a downturn in one area -- you don't have all the eggs in one basket.

You don't want to be the guy in 35 years who put EVERYTHING into the PD pension fund only to have the city / county, etc renege on the obligations. Lots of pension funds are poorly funded and may leave future beneficiaries at some risk. (yes technically there is govt. pension insurance but I wouldn't want to trust everything to that...)

I have a lot of personal $$ at Vanguard - they are a great firm to invest with. TIAA is known to be high quality also from what I have read.

Keep at it - read about John Bogle. Its really simple:

Live within your means
Healthy lifestyle
Minimize Debt
Pay yourself first (automatic investing)
Minimize fees
Diversify (stocks / cash / real estate)

Creating a net worth for yourself - starting from scratch - over a million dollars is not impossible given time / patience and regular investing.

Good luck -


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Listen to Sig209. Get a Bogle book and read it (several times). He would tell you the stock market in the short term is a voting machine, but in the long run an adding machine. Don't sweat the day to day market quotes, they don't matter. Stay invested always. Savings accounts at banks are just for money you need at a moments notice (think new gun), not for important stuff. Just my $.02. Congrats on the little one, our grandson is 15 months and we are contributing to his 529.

I work in investments, but not as an advisor, so I cannot give investment advice. These are just some random thoughts. A Roth IRA may be a better vehicle for college savings than a 529 due to the additional flexibility. If you do not qualify for a Roth due to the income limitations, look up "Backdoor Roth". It is always good to dump money into retirement accounts as they can't count it against you on the FAFSA, but with a Roth you can always take out your initial contributions penalty and tax free. Also, if it comes down to it, you can take out loans for college, but not for your retirement.

You are 28 years old and doing this?
Kudos, pal.

Craig

basrsad0 - My 2 cents:

Sounds to me like you are doing it right.

The TIAA-CREF Lifecycle 2055 Fund in your 457 is NOT aggressive. The fund invests in an appropriate mix of the US and non-US stocks, bonds, etc., for a particular time horizon, or target retirement date. The investment mix is aggressive right now because you are in your younger years. It automatically becomes more conservative as its target date approaches. This is standard and an easy, hands-off method. The issue is that this is designed with your retirement age in mind, and not the age at which you will start withdrawing for daughter. So, you could end up having the fund being heavy in stocks, and the market down, at the time you need to withdraw some $ for daughter's college. Since college is pay as you go, I wouldn't worry about it too much.

The TIAA fund net expenses (the amount your returns will be reduced by administrative expenses) is 0.45%. This is very reasonable. The Federal Government's equivalent life cycle fund net expenses are 0.40%, so you are not getting ripped off there.

As to savings - as the $ builds up, buy 1-2 year CD's. You get a better return than a savings account.

The tax advantages to saving via a 529 college savings plan are substantial, but my issue is the loss of those advantages AND additional penalty if the money is not used for qualifying educational expenses. For example, if the beneficiary does not go to college/vocational school for whatever reason (like, joins the military instead). So, my preference is to save/invest outside of a 529 plan.

If you want to learn about it all, I highly recommend you go to bogleheads.org and browse the wiki as well as forum. It's a group founded by followers of John Bogle (founder of Vanguard funds). If you want to searh what they say about a topic, type your key words in google followed by a space and then site:bogleheads.org