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Personal Finance Advice and Education! (1 Viewer)
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-OZ-
Footballguy
We’ll sell most of our remaining next month. I had thought about buying another $15k with the 0.9% fixed in October but the rumors I’m hearing have the next fixed rate slightly over 1%. I already bought $5k in late September. We’ll put in a total of $20k this year unless we’re wrong and November has no fixed rate.
These are part of our house fund, targeted 5 years from now. Or if we decide to not buy the lake house they’ll just roll into retirement / secondary EF.
Chadstroma
Footballguy
Gawd..... I am trying to remember that last time I saw 5% CD's. It has been a long, long, long time.
Sand
Footballguy
I moved ~1/2 of my bond allocation to defined duration stuff - single bonds, CDs, IBonds, etc. These times are great to lock in steady cash. I have some 5.6+% AA corporates. Never thought I'd see rates like this in my lifetime. And, frankly, I don't expect it to last long. The country can't afford to pay interest on the debt at these rates. It will moderate sometime.
Runkle
Footballguy
CD rates I'm seeing suggest banks are predicting a pull back, I'm not sure if I agree. Fed could continue to raise or keep even for a while. Not sure I expect rates to go down any time soon, so, not really eager to lock up a long-term CD at less than 5%.
Sand
Footballguy
I'm seeing 1 yr. non callable CDs at 5.5% now. I agree with not wanting to lock in too low.
Nugget
Footballguy
Looks like the Nov - Apr variable rate will be 3.94%. We won't know the fixed for sure until Nov 1st, but my best guess is 1.3% fixed. For a combined 5.24%, I'll be purchasing the remainder of my 2023 allotment in Nov/Dec. I'll also buy another 10K between Jan - May in 2024. I'm currently holding cash in my brokerage - SWVXX 7 day yield is also right at 5.24%.
Juxtatarot
Footballguy
In recent decades, I-Bonds have normally beaten HYSAs/brokerage MMAs. Especially with the fixed portions being above zero, I personally think it makes a lot of sense long term to have some I-Bonds in your cash portfolio.
matttyl
Footballguy
Great talk on ibonds and cash above, but I have a question on something g else finance related…
My only kid is in 2nd grade, so 10 years till college. I like to plan ahead, have started putting $4k a year into a 529 (that’s the most I can deduct per year here in VA). Have no idea how college financing works, so started looking into it with your “expected family contribution.” Unless I’m missing something or entering information wrong, if you’re a dual income household with one child, any non retirement assets (like ibonds above) and the child has any assets in their name (again, like ibonds) it doesn’t take much for your EFC to be well over $30k a year (all in todays dollars, of course), meaning little to not ability to borrow for college?
I mean my plan is to fully fund their college expense (along with already set up help from grandparents), but if things don’t work out quite as well as planned we may have to borrow for some of it.
From what I’ve seen the idea is to get your AGI down as much as you can (maximize 401k and such), and spend down countable assets (though 529 plans are counted), but that will only get you so far. Am I missing something?
My only kid is in 2nd grade, so 10 years till college. I like to plan ahead, have started putting $4k a year into a 529 (that’s the most I can deduct per year here in VA). Have no idea how college financing works, so started looking into it with your “expected family contribution.” Unless I’m missing something or entering information wrong, if you’re a dual income household with one child, any non retirement assets (like ibonds above) and the child has any assets in their name (again, like ibonds) it doesn’t take much for your EFC to be well over $30k a year (all in todays dollars, of course), meaning little to not ability to borrow for college?
I mean my plan is to fully fund their college expense (along with already set up help from grandparents), but if things don’t work out quite as well as planned we may have to borrow for some of it.
From what I’ve seen the idea is to get your AGI down as much as you can (maximize 401k and such), and spend down countable assets (though 529 plans are counted), but that will only get you so far. Am I missing something?
Instinctive
Footballguy
I'm 10 years out of date but I recall my parents being royally pissed (and then I was at grad school time) that need-based places used formulas where me and another guy from the exact same place would have totally different EFCs, even with single income dads who both made about the same, because the other family drove like Mercedes cars and had a larger home and didn't save as much. The schools looked at us and were like "Savings? Why thank you, we'll take that."
Same in grad school - diligently saving throughout college and such hurt need-based aid - not even loans, but grants/scholarship money.
Backwards system.
matttyl
Footballguy
Yeah, that’s what it’s looking like. If I had $100k in a savings account I get hammered. If I shift that same $100k into paying down or paying off my mortgage (or buying the Mercedes in your example), we’d then qualify for financial aid. I thought a 529 would be a great way to save for his college, but that’s counted against you here. My son was given money when a relative dies, and that’s would very much be counted against him in this calculation.
I mean I guess it’s good that we wouldn’t qualify for needs based assistance, but with college possibly running $150-200k for a 4 year degree in 10 years, not sure I can get there while putting away money for my own retirement which I’m hoping to happen just a few years later.
I mean I guess it’s good that we wouldn’t qualify for needs based assistance, but with college possibly running $150-200k for a 4 year degree in 10 years, not sure I can get there while putting away money for my own retirement which I’m hoping to happen just a few years later.
NutterButter
Footballguy
I guess you're just talking about in state public schools right? We're well passed that otherwise right now at least as far as sticker price.
-OZ-
Footballguy
Yeah, even with 5 kids and a wife that gets paid basically minimum wage we’ve been basically ineligible for any real assistance for our first two. I won’t even try at this point.
It helps a LOT that college for our oldest runs about $5k / year (community college) and the second pays nothing (full tuition and lives at home this year). I’m not sure the other three will be as easy.
It helps a LOT that college for our oldest runs about $5k / year (community college) and the second pays nothing (full tuition and lives at home this year). I’m not sure the other three will be as easy.
matttyl
Footballguy
It’s about $30k a year average right now in Va. He’ll go in 10 years, so it may about double by then. Just not sure the best approach to hit that mark in that timeframe while trying to retire just a few years after he’s out of school.
NutterButter
Footballguy
No idea on the financials. I know we won't get a dime unless its an ivy or some other school with a huge endowment. You can always postpone retirement a couple of years. That would be enough to cover college right there (todays dollars). If your kid has great grades, you could be looking at a lot of money in merit aid. Its impossible to tell the real price of any college since the sticker prices are so inflated.
Instinctive
Footballguy
We're farther off (due to have two in the next ~12 months) but having these discussions. We both had our college choice heavily impacted by financials, so we're looking at our lives going a couple ways:
1. My wife and I make so much money that it doesn't matter really (can pay)
2. We retire so early or take jobs that pay a lot less by then so it doesn't matter really (aid)
3. We're in the middle ground so they have to get scholarships or take on some loans just like we did and we'll figure it out
We may also hide money with grandparents/trusts/etc a few years out to try and see if there's a way to set it up nicely for the system. Who knows.
Sand
Footballguy
From what I've seen folks in the know generally talk about slightly underfunding their college 529s as having a boatload in there after they finish (or don't go) isn't the best. This is mitigated a bit by the new one time rollover to an IRA (for the kid, not you!). Still, having 100k stuck in a 529 isn't the best place for it.
And yes, like everywhere else, the system punishes the prudent and rewards the spendthrifts.
Brony
Footballguy
I would think in the scenario with a high EFC, your kid could still get loans for school, just unsubsidized or private loans.
SFBayDuck
Footballguy
The roth rollover option is pretty cool (up to $35K). You can also use up to $10K to pay student loans. Buy your kid a new laptop right before graduation, save it for possible grad school, save it for a grandchild (imagine the compounding!), or make yourself the beneficiary and take some classes.
My kid, currently a junior in college, ended up getting some scholarships, more than we expected. And, most importantly, she thankfully chose an in-state public school. So far I've been able to get by touching very little of the 529 funds I saved. We have taken out some subsidized loans, about half of which is sitting in a HYSA as we didn't need it. But since loans and other aid are year by year, figured we might as well take them even when we didn't need the funds in case financial circumstances change (like a job loss while she's in school)/. And it's earning 5% now.
It's still unclear whether she'll go to grad school or not, so the plan is to hold on to most of what's in there through this year. If it becomes clear grad school isn't likely then I should have next year fully funded and could use the rest to pay off most of her loans (and we'd use the unused funds in the savings account to pay back the rest). Any leftover I'd probably roll into a Roth for her, as it wouldn't be a ton of money and she should (hopefully!) have the earned income to match in 2025.
I probably have to solve for making sure she doesn't have much in that savings account come FAFSA time for her senior year. Me paying taxes on that interest is better than losing some of her aid.
Orange&Blue
Footballguy
Sand
Footballguy
I'm not sure on timing, but the new rule is a once in a lifetime IRA rollover of a max 35k.
Nugget
Footballguy
I think you have a pretty good handle on the scenario. From personal experience, my daughter is at KU and we had about a $10K gap between EFC and cost of attendance. We were offered subsidized, unsubsidized, and a Parent plus loan.
I think you are OK investing in the 529 at the level where you get the state deduction. In my situation, I would max out all retirement accounts before the 529. You may be able to cash-flow college later. I also would advocate for always taking the subsidized loan if offered.
Andrew74
Footballguy
Starts in 2024. Lifetime Roth conversion max of $35k is subject to annual IRA contribution limits. Recipient also has to have wage income.
matttyl
Footballguy
That’s pretty much what we’re doing. Maxing out 401s, ROTHs, and an HSA, then tossing $4k into the 529. The others all get (or will get) federal tax breaks while the 529 only state.
I guess my issue/question is that $4k a year (the limit on deductibility here in VA) into a 529 for 10-15 years even with decent returns won’t reach the kind of numbers we may be looking at. And then with two working parents, only one child, anything of substance counted as an asset, and having anything in the child’s name- you’re expected to pay the full amount on any of these EFC calculators.
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jm192
Footballguy
I avoided I-Bonds so far this year. Interested to see what they rates will be for November. If there's a stronger fixed rate, they're suddenly more attractive.
I'm not sure they'll surpass what HYSA's are giving, and the liquidity issues with I-bonds gives them another disadvantage.
I'm not sure they'll surpass what HYSA's are giving, and the liquidity issues with I-bonds gives them another disadvantage.
Orange&Blue
Footballguy
what hysa rates are you getting?
-OZ-
Footballguy
Yeah, I’m starting to rethink putting much in I bonds other than the retirement funds when we’re closer.
Trying to figure out the right move when a planned major expense is 5-7 years away. One that we’d sure like to hit but if missed wouldn’t be a huge deal. Thinking a 60/40 blend of VTI and BND or 5 year CDs might be ideal. Or maybe just 100% equities and risk not hitting. This would be different if not hitting the number would be a BIG deal.
Runkle
Footballguy
4.3%
gianmarco
Footballguy
-OZ-
Footballguy
same. Different place.Orange&Blue
Footballguy
???
sorry, i must have missed something. where you getting 5%?
NutterButter
Footballguy
Vanguard has a 5.3% mma
-OZ-
Footballguy
M1.???
sorry, i must have missed something. where you getting 5%?
It looks like CIT bank does too.
Craig_MiamiFL
Footballguy
Thoughts of money market type investments in work retirement accounts? (Currently paying 5%).
Currently with 50/50 split (Roth/traditional) in work retirement accounts. All index funds (age 35). Thinking of throwing in 15-20% allocation to money market type investments paying the 5%. (Then adjust accordingly based on rate / move the cash to index funds etc...)
TIA
Currently with 50/50 split (Roth/traditional) in work retirement accounts. All index funds (age 35). Thinking of throwing in 15-20% allocation to money market type investments paying the 5%. (Then adjust accordingly based on rate / move the cash to index funds etc...)
TIA
matttyl
Footballguy
So wife’s new car just came in, we’ll pick up later this week or weekend by the latest. Can’t quite just write a check for entire amount, but can if I sell what will end up being out extra car after this (been offered $14.5k from a different local dealer, which is fair and eliminates headache of selling it personally - but adds complexity/timing issue as I can’t take that amount off purchase price of new car).
Anyway, any negative repercussions of financing half and paying that amount off in full in 30 days (once check clears from dealer)? Or sell extra car and be a single car household for a few days?
Anyway, any negative repercussions of financing half and paying that amount off in full in 30 days (once check clears from dealer)? Or sell extra car and be a single car household for a few days?
Nugget
Footballguy
Is there any benefit in the sales tax on the new vehicle? In Kansas, you pay on the difference only if you trade into the dealer. In Missouri, you can sell the car to someone else and pay tax on the difference- not sure if there is a sequencing or timing component. I’d make sure to check your state rules.
Nugget
Footballguy
I try not to mess with my retirement accounts as every time I touch them I make it worse. I am in the process of moving CDs to MMFs as they redeem in my taxable accounts.
NutterButter
Footballguy
I'll let you know when I move some of my money to a safer investment. That's right when the 20% rally will take place.
matttyl
Footballguy
Not in Va, unfortunately
coopersdad
Footballguy
A couple of questions.....
1ST
This past summer my mother fell ill, and in order to make sure that all her expenses were covered in the immediate term, I took out a small loan (20K) on my 401K. Since then my account has seen a decrease in value.
A couple of weeks ago, mom passed away, so I'm going to repay the loan. Am I thinking right in that I accidently did something smart..........sold high, and getting back in at a lower cost less the
$ dollar origination fee and the interest paid the last 2 months?
2ND
Will be getting a decent (not @chet) cash out from mom's retirement/money market/life insurance.
During her last weeks, we talked about doing the following (of which I don't think have any tax penalty consequences):
Paying off oldest son's engagement ring purchase still on his credit card.
Paying off oldest son's balance on his vehicle (loan under both our names)
Purchasing youngest son (soph in college) a new car that was promised if he got an athletic scholarship that paid 50% of his college costs
Setting up some type of college savings account for future grand kids (1 already here)
Putting aside enough in a liquid account to pay the remainder of #2's college costs
and finally for me.........getting fitted w/ new golf clubs to replace the one's that my dad and her purchased me in 1988 as a college graduationpresent (that I can still shoot sub 80 with).
What are my best options for saving for colleges, and where should I put the remainder to be safe?
I'm 58 and a bit low on my retirement savings (thanks to that 1/2 rule during divorce), so I could start by putting extra in there via payroll deductions............
I'm in finance/budgeting but a pretty noob when it comes to investing.
Any help advice would be appreciated.
1ST
This past summer my mother fell ill, and in order to make sure that all her expenses were covered in the immediate term, I took out a small loan (20K) on my 401K. Since then my account has seen a decrease in value.
A couple of weeks ago, mom passed away, so I'm going to repay the loan. Am I thinking right in that I accidently did something smart..........sold high, and getting back in at a lower cost less the
$ dollar origination fee and the interest paid the last 2 months?
2ND
Will be getting a decent (not @chet) cash out from mom's retirement/money market/life insurance.
During her last weeks, we talked about doing the following (of which I don't think have any tax penalty consequences):
Paying off oldest son's engagement ring purchase still on his credit card.
Paying off oldest son's balance on his vehicle (loan under both our names)
Purchasing youngest son (soph in college) a new car that was promised if he got an athletic scholarship that paid 50% of his college costs
Setting up some type of college savings account for future grand kids (1 already here)
Putting aside enough in a liquid account to pay the remainder of #2's college costs
and finally for me.........getting fitted w/ new golf clubs to replace the one's that my dad and her purchased me in 1988 as a college graduationpresent (that I can still shoot sub 80 with).
What are my best options for saving for colleges, and where should I put the remainder to be safe?
I'm 58 and a bit low on my retirement savings (thanks to that 1/2 rule during divorce), so I could start by putting extra in there via payroll deductions............
I'm in finance/budgeting but a pretty noob when it comes to investing.
Any help advice would be appreciated.
-OZ-
Footballguy
You’re 35. Unless you plan to retire in your 40s I’d stay full equities. But you know your risk tolerance better than me.
Sand
Footballguy
Sorry to hear about your mother. It does look like you timed the market well (well, maybe). All those items you note paying for sound reasonable. I'd put the grandkid item last, though. For the upcoming college costs it's hard to beat short term CDs right now. 5-5.5%. Time them out to mature when needed. I'd definitely prioritize your retirement in there somewhere - get all the matching monies and sock some away.
-OZ-
Footballguy
just saw officially announced on the treasury direct site. I’ll buy another $15k by the end of November.
matttyl
Footballguy
The 1.3% fixed rate would be my guess.
Juxtatarot
Footballguy
1.3% fixed component for up to 30 years plus tax deferred interest are two reasons.
And we think that's going to be a valuable rate over the long term? Genuine questions here, that just seems pretty low.
-OZ-
Footballguy
MMF / HYSA rates aren’t guaranteed.
Really this comes down to your timeline and goals. One of my goals over the next decade is to fund our first few years of retirement expenses in safe accounts which only goal is to slightly beat inflation. This checks that box although plenty more will have to go in over time. It might seem weird to say, but our retirement years 4-30 (and on?) are funded already. Assuming of course the markets don’t just completely tank over the next decade. Years 1-3 are not.
OTOH, it’s entirely possible these funds are used before that time as we assess along the way. but the 1.3% plus inflation will come in handy regardless if we use these funds for years 1-3 or a house.
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