PP ....Where Did It Go

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Re: PP ....Where Did It Go

Post by MachineGhost » Thu Apr 09, 2015 7:19 pm

buddtholomew wrote: 7/10 or 70% of the years stocks rise according to the latest estimates presented to me by several financial advisors. These advisers, when presented with the PP concept, question why any reasonable investor would decide to hold only 25% of their portfolio in this asset class and the balance in gold, cash and fixed income instruments?
That's a weak argument.  I would find it better propaganda to use a rolling 10-year period never had a loss argument or even that cockamamie 10 best days baloney.

But remember, HB said to focus on the career to generate wealth, not investments (savings).  Relying on investments (savings) to secure retirement is part of the fiction that keeps financial advisors in business.  Advisors are only for the deluded that they think are going to have a retirement with the 100K that they only think they need, even though only a very small minority of the population has even saved that much.  We're in a very exclusive, elite club around here.

** Although in reality, my view of financial advisors is they service wealthy but ignorant capital.  They just don't deal with the "little people" due to the economics of the business.  That will have to change in the future.  The roboadvisors are a great first step!
Last edited by MachineGhost on Thu Apr 09, 2015 7:23 pm, edited 1 time in total.
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Re: PP ....Where Did It Go

Post by sophie » Thu Apr 09, 2015 8:21 pm

Cortopassi wrote: Me, last 25 years:

Bonds?  Never invested before PP.  Not on radar.
Gold?  Started in 2009 in prep for the end of the world, never before in any fashion.
Cash?  Emergency fund only.  Money market at 5% was nice.  I long for those days.
Stocks?  Individual stocks and stock funds.  Mainly DODGX from 1995 to 2008.  It survived the tech bubble pretty well.  Got destroyed in 2008, and I sold near the lows.
Options?  Yeah, unfortunately I had a friend who showed me these.  Wish he never, ever did...

Never again.  I will make sure my kids follow some variant of PP.  Stress and time involved in stock trading has been the singlemost stupidest thing I've ever done in my life.

Mike
Good for you Mike.  I think a lot of us have these stories.  example:  I made a stupid stock purchase in my Roth IRA, following the advice of my uncle the Wall Street broker.  It's now a penny stock and I leave it in the Roth as a constant reminder to myself not to ever, ever do something so idiotic again.
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Re: PP ....Where Did It Go

Post by buddtholomew » Thu Apr 09, 2015 9:22 pm

Desert wrote:
buddtholomew wrote: 7/10 or 70% of the years stocks rise according to the latest estimates presented to me by several financial advisors. These advisers, when presented with the PP concept, question why any reasonable investor would decide to hold only 25% of their portfolio in this asset class and the balance in gold, cash and fixed income instruments?

Conflict of interest aside, the above is certainly a valid argument until you take investor psychology into consideration and have an awareness of historical equity declines that left even the most seasoned market participants selling at the lows (forced liquidation or panic).

I personally have come to terms with behavioral psychology pitfalls and realize that I too am not immune to buying and selling at the most in opportune times. I also realize that I have retirement goals that may require me to hold a significant portion of my portfolio in equities. To appease my concerns I arrived at the following compromise - one that I have shared before and seems to work for me. I started investing in 2008/9 and was introduced to the PP in 2011.

Retirement Accounts (BH with a small amount of gold)
65/30/5 equities/fixed income/gold with 5.6 years FI duration.
S&P500, Extended Market, INT Developed, INT SC, Emerging Markets, REITS and PM.

Taxable Accounts (HBPP 4x25)
Additional cash that serves as an emergency fund and reduces FI duration to 5.6 years.

Total Portfolio
50/40/10 equities/fixed income/gold

Each allocation is managed individually with its own set of rebalancing bands. As I reach retirement age, I expect to decrease equities and increase gold to more closely align with the 4x25 portfolio. The transition will be gradual as I currently feel I can have my cake and eat it too...
The psychology involved with holding different portfolios in different accounts is always interesting to me.  It's great that you do boil it down to what amounts to essentially a very traditional 50/50 portfolio with a slice of gold added.  I'm not sure why many feel led to think of their total portfolio as a collection of individual portfolios.  I care only about return and volatility of my household total investments.  It makes things so much simpler.
I value simplicity, but each allocation has a different investment horizon and is constructed with that perspective in mind. Both will merge into a single portfolio at retirement to resemble a 4x25 HBPP.
Last edited by buddtholomew on Thu Apr 09, 2015 9:25 pm, edited 1 time in total.
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Re: PP ....Where Did It Go

Post by ochotona » Fri Apr 10, 2015 6:37 am

You need different time horizons and portfolios because PP won't grow enough for a young person's purposes, except it's a better place to keep assets that may have to be spent sooner than at retirement. Then in your 50s 60s you drift more towards PP.
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Re: PP ....Where Did It Go

Post by barrett » Fri Apr 10, 2015 7:48 am

ochotona wrote: You need different time horizons and portfolios because PP won't grow enough for a young person's purposes, except it's a better place to keep assets that may have to be spent sooner than at retirement. Then in your 50s 60s you drift more towards PP.
What balance of assets will grow enough going forward? If the world economy becomes even more deflationary in the next 5-10 years, that could be terrible for stocks.
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Re: PP ....Where Did It Go

Post by Cortopassi » Fri Apr 10, 2015 8:16 am

Ochotona,

Yes, please tell me what balance of assets will grow!  And you should start your own fund if you know the answer...

My "investing" career started around 1990 when I got out of school.  Not making a lot of money, but not a lot of expenses either, so I was able to save a lot.  In the medium term, my salary peaked around 2003 at a very high flying tech company.  It took until last year for me to get back to the salary I had in 2003.  In the meantime look at the S&P during that timeframe which I know you are all very aware of.  In the 2000/2001 bubble I didn't really care too much, I was still in my early 30s and just one young girl at home so I didn't touch my investments.  In 2008, in my 40s, two girls at home, I seriously thought it was the end and bailed on everything, near the lows.  Of course that was stupid, but I would imagine it was relatively typical -- my retired father couldn't deal with it and as well sold everything near the lows fearing the worst.

The time since then, up until 2014 I spent mostly in gold and miners.  Another freaking stupid all eggs in one basket move and rollercoaster.

Since the PP, I have calmed down and accepted the fact that I cannot predict the future and when I try I am way more often wrong than right.  The biggest gainer in the PP since I started has been bonds.  What knowledgeable intelligent person would have ever figured US bonds, after multiple rounds of QE would still be flying so high?  I would bet not a lot.  At the same time, who would have bet gold would be crushed from 1900 to 1200 and tread water around this level for years.  Not many.  And that the stock market just rolls and rolls on with nary a correction.

Go ahead and try to predict what you should and shouldn't be in, what percentage changes fit your style better, etc.  My 25 years of trading experience tells me I always lose when I try that.  If the PP doesn't get an annual rate of return as good as some other vehicles, that's fine with me.  I certainly know it will get a better return than if I try to monkey with it or trade on my own.  And it should be relatively immune to huge drawdowns that have scared me out at exactly the wrong times before.
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Re: PP ....Where Did It Go

Post by hoost » Fri Apr 10, 2015 8:44 am

buddtholomew wrote: Total Portfolio
50/40/10 equities/fixed income/gold
This is actually what I target as well, although I do it across all accounts.  I also hold the fixed income (bonds) portion as a barbell rather than a bullet.  Meaning I shoot for roughly 20% cash/20% LT bonds, although I do have some intermediate bonds due to limited retirement account options, and I think my actual was somewhere around 25/15 or 30/10 last time I looked.

For me, this helps avoid the desire to tinker with the portfolio when stocks are flying high...we'll see how hard it drops when the market tanks.
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Re: PP ....Where Did It Go

Post by dualstow » Fri Apr 10, 2015 8:53 am

Desert wrote:
buddtholomew wrote: I personally have come to terms with behavioral psychology pitfalls and realize that I too am not immune to buying and selling at the most in opportune times.
...
Each allocation is managed individually with its own set of rebalancing bands.
...
The psychology involved with holding different portfolios in different accounts is always interesting to me.  It's great that you do boil it down ...
I'm not sure why many feel led to think of their total portfolio as a collection of individual portfolios.  I care only about return and volatility of my household total investments.  It makes things so much simpler.
I think about total return from my total holdings because that of course is what ultimately counts. However, I definitely think about individual portfolios when it comes to execution and implementation. I have different kinds of bonds for income and how I trade them has nothing to do with my pp's rebalancing bands.

Perhaps I could generate enough supplemental income from putting everything into the pp (probably not), but I feel better holding a mix of munis and corporate bonds. As you and Budd both said, it's psychology.
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Re: PP ....Where Did It Go

Post by sophie » Fri Apr 10, 2015 9:14 am

Dualstow, how come you need bonds for income at this stage?

I've also been very attracted to the idea of investments that generate income - as who doesn't??  It feels good to see dividends and interest pile up.  But when tax time rolls around, I realize that it's just a way of converting a piece of my assets to a taxable event, so that a good chunk of the "income", instead of sticking around to become capital gains, disappears into the federal, state, or city coffers.  If anything, I was thinking about putting small cap funds into the taxable stock allocation to try to minimize dividends.

ochotona:  one of the reasons I moved to the PP was the simple act of sitting down with a calculator to figure out the return on my retirement investments over time.  These were mostly target retirement funds which were 90% stocks.  Since the late 1990s, my investment return was PITIFUL, in fact I'd barely managed to break even.  I laugh at the headlines that proclaim "record-breaking" levels for the Dow, because all that means is that the Dow has finally gained enough to make money in the years since the previous high.  I realized that, unlike all the back testing that looks at 30-50 years of the stock market, I personally can't wait that long.  The stock market's 9%+ returns do me little good if they don't happen on my schedule.  So it's not just about CAGR averaged over 50 years...volatility is important too, and I don't think it matters which decade you're in.  No one has a long enough working life to ride out the stock market without relying on a good bit of luck.
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Re: PP ....Where Did It Go

Post by ochotona » Fri Apr 10, 2015 9:41 am

Cortopassi wrote: Ochotona,

Yes, please tell me what balance of assets will grow!  And you should start your own fund if you know the answer...

In 2008, in my 40s, two girls at home, I seriously thought it was the end and bailed on everything, near the lows.  Of course that was stupid, but I would imagine it was relatively typical -- my retired father couldn't deal with it and as well sold everything near the lows fearing the worst.

The time since then, up until 2014 I spent mostly in gold and miners.  Another freaking stupid all eggs in one basket move and rollercoaster.

Go ahead and try to predict what you should and shouldn't be in, what percentage changes fit your style better, etc.  My 25 years of trading experience tells me I always lose when I try that.  If the PP doesn't get an annual rate of return as good as some other vehicles, that's fine with me.  I certainly know it will get a better return than if I try to monkey with it or trade on my own.  And it should be relatively immune to huge drawdowns that have scared me out at exactly the wrong times before.

Why you failed and had to recover through the use of the PP is very clear in your use of the words "predict" and "trading" above (and you are right, no one can really do that), and you didn't stick to a strategic plan when we all experienced the 2008 valley of death, and you overconcentrated risk in a single asset class at certain times (gold miners). I mean no disrespect, but these three types of mistakes are extremely common and well known and somewhat avoidable. Everyone learns by mistakes, but please don't call everything non-PP unsuitable. It's unsuitable for you.

I don't try to trade or really predict much, except with my 5% of my portfolio "mad money", but I am cognizant of the concept of a glidepath and age-appropriate asset allocations. There are many glidepath formulations out there, but you have to pick one that you like a stick to it. Until I found PP, I was using a simple one, equity exposure = 120 - AGE, 10% cash, rest fixed income. 25% of equity non-US... pretty darned hot allocation at that. So then I learned that PP can give you quite good returns, much less volatility, which in my 50s starts to be important because I am planning for retirement, so sequence-of-returns risk comes to the forefront. So then, why be so hot in the allocation? It's much more risk for not a lot more return.

I was happy to convert ~60% of my retirement to PP, my global retirement allocation is now about 50% equity, so you could say that my glidepath formula changed from 120 - AGE to 105 - AGE, but with bigger slices of gold and cash than ever before. In another ten years... 100% PP, or very close to it. Age 70, no way will I not be 100% PP (except for Roths, below).

Why only ~60% PP now, not 100%? I did some scenario testing and worst-case 10 year rolling period CAGR thinking, and for me PP covers me in terms of living expenses until age 70, and if we have a bad event affecting the other portfolio, it will have "healed" by age 70 (15+ years from now), so there is a seamlessness to how the two parts hand-off. It's "buckets of money" thinking applied to PP vs. Conventional. But my family is very long-lived, either my wife or I are likely to reach age 100, so my total planning horizon reaches 45 years into the future. I don't think PP runs hot enough for that, which is why I'm ~40% Conventional at this time.

Also, we want to give our Roth IRAs to my heirs and my Church, so I never plan on eating those, their time horizon is when my kids are retired, which is a long time off considering one is still in High School, so our Roths can be "balls to the wall" risky, swing for the fences. My kids might live until the 2090s. Amazing to think of that.

Yes, I do run an investment fund... it's called my family. We have all kinds of assets, tax and other liabilities, insurance arrangements, present and future obligations. Not all of them have anything to do with PP, nor should they. They all interact in subtle ways that 99% of people don't understand, and PP is not the magic bullet to solve all the challenges we face. It's a tool, but you have to be educated, and have the right mindset most of all.
Last edited by ochotona on Fri Apr 10, 2015 9:44 am, edited 1 time in total.
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Re: PP ....Where Did It Go

Post by ochotona » Fri Apr 10, 2015 9:50 am

barrett wrote:
ochotona wrote: You need different time horizons and portfolios because PP won't grow enough for a young person's purposes, except it's a better place to keep assets that may have to be spent sooner than at retirement. Then in your 50s 60s you drift more towards PP.
What balance of assets will grow enough going forward? If the world economy becomes even more deflationary in the next 5-10 years, that could be terrible for stocks.
My planning horizons extends 45 years into the future... and beyond. I am not concerned about the next 10 years for the non-PP part of my portfolio.
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Re: PP ....Where Did It Go

Post by ochotona » Fri Apr 10, 2015 9:53 am

sophie wrote: ochotona:  one of the reasons I moved to the PP was the simple act of sitting down with a calculator to figure out the return on my retirement investments over time.  These were mostly target retirement funds which were 90% stocks.  Since the late 1990s, my investment return was PITIFUL, in fact I'd barely managed to break even.  I laugh at the headlines that proclaim "record-breaking" levels for the Dow, because all that means is that the Dow has finally gained enough to make money in the years since the previous high.  I realized that, unlike all the back testing that looks at 30-50 years of the stock market, I personally can't wait that long.  The stock market's 9%+ returns do me little good if they don't happen on my schedule.  So it's not just about CAGR averaged over 50 years...volatility is important too, and I don't think it matters which decade you're in.  No one has a long enough working life to ride out the stock market without relying on a good bit of luck.
Agreed! Sequence of returns risk! PP for all of the money you plan to eat in the next 15 years!
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Re: PP ....Where Did It Go

Post by Cortopassi » Fri Apr 10, 2015 9:54 am

Well said.  It is all a personal decision and comfort level.  It is unfortunate, for me, that it took nearly 25 years to figure it out!  The only saving grace from all this is my wife and I are fiscally conservative.  All the other pieces were in place -- house paid off, girl's college funds in great shape, no debt.  I only wish I followed that conservative path (PP or otherwise) with my retirement investments.
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Re: PP ....Where Did It Go

Post by ochotona » Fri Apr 10, 2015 10:20 am

Cortopassi wrote: Well said.  It is all a personal decision and comfort level.  It is unfortunate, for me, that it took nearly 25 years to figure it out!  The only saving grace from all this is my wife and I are fiscally conservative.  All the other pieces were in place -- house paid off, girl's college funds in great shape, no debt.  I only wish I followed that conservative path (PP or otherwise) with my retirement investments.
Congratulations, you're doing very well. Rule one of financial analysis is "ignore sunk costs". The emotional corollary to it is, "no regrets, ever". Today is t=0, and you need to figure out what you need to do on a point-forward basis to meet your goals. Work the problem with math, and don't get sidelined by emotions. And teach your kids about it, so they build on your wealth, and you become a multi-generational wealthy family.
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Re: PP ....Where Did It Go

Post by Pointedstick » Fri Apr 10, 2015 11:25 am

Cortopassi wrote: Well said.  It is all a personal decision and comfort level.  It is unfortunate, for me, that it took nearly 25 years to figure it out!  The only saving grace from all this is my wife and I are fiscally conservative.  All the other pieces were in place -- house paid off, girl's college funds in great shape, no debt.  I only wish I followed that conservative path (PP or otherwise) with my retirement investments.
Don't have a college fund. Every dollar you put in there is a dollar that the colleges will simply take. The less you have saved, the more financial aid and scholarships your daughters will get, and in any event IMHO any college that's so expensive that you have to save up to afford it is a bad deal. The best colleges (Harvard, Yale, etc) offer more or less free tuition to the children of non-rich parents, and the cheap state schools and 4th and 5th tier schools offer an education nearly as good, only lacking the elite student body, and for very little money. If you want to bankroll tuition at those places for your kids, it won't be hard at all. The big trap is 2nd and 3rd tier schools (especially the liberal arts varieties) that bill themselves as offering a Harvard-quality education, but for kids who can't get into Harvard (not said in those words of course :) )--these institutions are more or less scams in my opinion. You can tell them because they are all in the northeast, the buildings look new, they ooze elitism, their marketing literature implies that your child is a precious flower who they will take very good care of and expose to lots of interesting experiences rather than a mind to be molded and filled with useful information, and the yearly cost is $40k or higher.
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Re: PP ....Where Did It Go

Post by ochotona » Fri Apr 10, 2015 12:36 pm

Pointedstick wrote: Don't have a college fund. Every dollar you put in there is a dollar that the colleges will simply take. The less you have saved, the more financial aid and scholarships your daughters will get, and in any event IMHO any college that's so expensive that you have to save up to afford it is a bad deal. The best colleges (Harvard, Yale, etc) offer more or less free tuition to the children of non-rich parents, and the cheap state schools and 4th and 5th tier schools offer an education nearly as good, only lacking the elite student body, and for very little money. If you want to bankroll tuition at those places for your kids, it won't be hard at all. The big trap is 2nd and 3rd tier schools (especially the liberal arts varieties) that bill themselves as offering a Harvard-quality education, but for kids who can't get into Harvard (not said in those words of course :) )--these institutions are more or less scams in my opinion. You can tell them because they are all in the northeast, the buildings look new, they ooze elitism, their marketing literature implies that your child is a precious flower who they will take very good care of and expose to lots of interesting experiences rather than a mind to be molded and filled with useful information, and the yearly cost is $40k or higher.
OMG, that could be possible the worst advice given on college financing. One size does not fit all. I have sent two children through college debt free. My second is not going until Fall 2015, but 100% funded already, so I consider her college project "done".

Yes, if you put assets in the student's name, the FAFSA computation will grab most of it. So don't put it in the student's name. The 529 should be in the parent's name FBO the student ("For Benefit Of"). No Custodial accounts. I'm not sure about Education IRAs (Coverdells), have a small one, after the 529 came out I didn't see the point of the Coverdell any longer.

The real trick is, the FAFSA really only "works" for what I call poor and low middle class people. If you are a smart person, and have a good income, the FAFSA will compute your EFC, your Expected Family Contribution, way higher than you would ever imagine it should be. FAFSA thinks you should put a second mortgage on your home, take out college loans, burn all of your kid's money, and a bunch of yours, to pay for their college.

My son got $14,000 a year in merit-based, not need-based scholarships. Those enabled him to go to the non-Ivy, 2nd tier private college of his choice. But the majority was me writing checks out of the 529 account. If I hadn't had the 529, he'd be $100,000 in debt with student loans, and he's still in grad school, and the family will get him to his Master's degree debt-free, too. Because our EFC was $55,000 at the time!!!

My daughter is getting $8,000 a year in merit-based aid, but she's going to a State school, so I have to write checks out of the 529 FBO Daughter and also out of another bank account set aside specially for her. If I hadn't saved her entire life for college, she'd be $75,000 in debt with student loans by 2019. Because our EFC this year was $97,000 !!! (see, too much PP success). Oh yrs, did I mention I'm currently unemployed? That won't factor into the FAFSA until early 2016 when I do my 2015 taxes.

If you're truly a poor family, and you have a very gifted child who is highly sought after because he/she is a vegan homosexual Native Whatever, then yes, don't save a dime, and let your student throw him/herself at the feet of the scholarship granting body. But don't be surprised if the "aid" ends up being a subsidized Stafford loan, and you don't see grandkids for 10 or 12 extra years because the noose of student debt strangles their ability to launch into life.
Last edited by ochotona on Fri Apr 10, 2015 12:39 pm, edited 1 time in total.
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Re: PP ....Where Did It Go

Post by Tyler » Fri Apr 10, 2015 1:11 pm

sophie wrote:  I realized that, unlike all the back testing that looks at 30-50 years of the stock market, I personally can't wait that long.  The stock market's 9%+ returns do me little good if they don't happen on my schedule.  So it's not just about CAGR averaged over 50 years...volatility is important too, and I don't think it matters which decade you're in.  No one has a long enough working life to ride out the stock market without relying on a good bit of luck.
Very well said.

I personally don't care for the usual advice to be risky with money when you're young and conservative when you're older.  The misconception that youth negates all risk because volatility smooths out over time is quite common (in reality risk and volatility are more or less constant, and long-term average returns simply mask them).  But it's the secondary assumption that more conservative investments cannot generate "enough" returns (to the point where piling on risk is the only reasonable solution) that is particularly interesting to me.  Investment brainwashing is powerful stuff, and the maximization mindset has a tendency to numb the senses to the point where people really lose perspective.

IMHO, wise investing is like eating right.  It's a long-term lifestyle, not a series of well-timed sugar binges and fad diets.  After years of trying to invest my way to a good retirement, I finally realized I'd be much better off letting a balanced portfolio do its thing while focusing on earning more and spending less.  You know -- turning my energy to things I actually controlled.  Not coincidentally, my financial picture changed dramatically for the better and my net worth grew by leaps and bounds. 

That said, it's important for everyone to build a financial plan they are comfortable with.  I don't begrudge anyone for having a different approach.  It's your life savings after all -- do what you think is right!  I just want to offer a different way to look at things.
Last edited by Tyler on Fri Apr 10, 2015 1:27 pm, edited 1 time in total.
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Re: PP ....Where Did It Go

Post by Cortopassi » Fri Apr 10, 2015 1:14 pm

The last two posts (ochotona and PS) are perfect examples of why a one size fits all PP is certainly not for everyone!

I have tried to take a middle road -- my girl's college funds are College Illinois prepaid tuitions.  I wanted the security (sure the program itself has turned out to be a questionable Ponzi scheme, but as long as it last a few more years...) of tuition being covered, WITHOUT me being the one making investment decisions -- I can make level headed decisions!  I don't even want to imagine what I might have done with the money in a 529 if it were under my control when 2008 hit, it is likely I would be in terrible shape!

So, state school, fully paid.  Out of state or private, will pay the going hourly rate charged at IL schools.  Did not seem possible to lose, as long as the program stays solvent.  If they decided not to go, I can pull the original money out without penalty.

And Tyler, that is a great response and analogy to eating!
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Re: PP ....Where Did It Go

Post by Pointedstick » Fri Apr 10, 2015 1:25 pm

ochotona wrote: OMG, that could be possible the worst advice given on college financing. One size does not fit all. I have sent two children through college debt free. My second is not going until Fall 2015, but 100% funded already, so I consider her college project "done".

Yes, if you put assets in the student's name, the FAFSA computation will grab most of it. So don't put it in the student's name. The 529 should be in the parent's name FBO the student ("For Benefit Of"). No Custodial accounts. I'm not sure about Education IRAs (Coverdells), have a small one, after the 529 came out I didn't see the point of the Coverdell any longer.

The real trick is, the FAFSA really only "works" for what I call poor and low middle class people. If you are a smart person, and have a good income, the FAFSA will compute your EFC, your Expected Family Contribution, way higher than you would ever imagine it should be. FAFSA thinks you should put a second mortgage on your home, take out college loans, burn all of your kid's money, and a bunch of yours, to pay for their college.

My son got $14,000 a year in merit-based, not need-based scholarships. Those enabled him to go to the non-Ivy, 2nd tier private college of his choice. But the majority was me writing checks out of the 529 account. If I hadn't had the 529, he'd be $100,000 in debt with student loans, and he's still in grad school, and the family will get him to his Master's degree debt-free, too. Because our EFC was $55,000 at the time!!!

My daughter is getting $8,000 a year in merit-based aid, but she's going to a State school, so I have to write checks out of the 529 FBO Daughter and also out of another bank account set aside specially for her. If I hadn't saved her entire life for college, she'd be $75,000 in debt with student loans by 2019. Because our EFC this year was $97,000 !!! (see, too much PP success). Oh yrs, did I mention I'm currently unemployed? That won't factor into the FAFSA until early 2016 when I do my 2015 taxes.

If you're truly a poor family, and you have a very gifted child who is highly sought after because he/she is a vegan homosexual Native Whatever, then yes, don't save a dime, and let your student throw him/herself at the feet of the scholarship granting body. But don't be surprised if the "aid" ends up being a subsidized Stafford loan, and you don't see grandkids for 10 or 12 extra years because the noose of student debt strangles their ability to launch into life.
Sure, that's all true if your kids attend really really expensive schools and you have a lot of money, making your EFC high, as you say. The FAFSA is definitely a twisted game that you have to learn to beat if you want to play that game, and it's truly awesome to have wealthy parents who've saved hundreds of thousands of dollars for your higher education expenses, allowing you to go anywhere you want and graduate debt free. Your kids should be very grateful!

But I have yet to see any evidence of a real advantage to the non-Ivy more expensive schools, on average. There's a whole other thread on this. The non-ivy private schools are just pointless money pits IMHO. The outcomes are like 0-5% better than the 50-90% cheaper schools. The major liberal cities of the USA are chock-full of bitter underemployed college grads from these schools.

You can save as much as you want and send your kids to a school of any cost and level of prestige, generally. The question is what's the marginal value of each additional dollar spent? I tend to think that value is very low past a certain point, and it mostly amounts to social signaling.
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Re: PP ....Where Did It Go

Post by Pointedstick » Fri Apr 10, 2015 1:30 pm

Cortopassi wrote: The last two posts (ochotona and PS) are perfect examples of why a one size fits all PP is certainly not for everyone!

I have tried to take a middle road -- my girl's college funds are College Illinois prepaid tuitions.  I wanted the security (sure the program itself has turned out to be a questionable Ponzi scheme, but as long as it last a few more years...) of tuition being covered, WITHOUT me being the one making investment decisions -- I can make level headed decisions!  I don't even want to imagine what I might have done with the money in a 529 if it were under my control when 2008 hit, it is likely I would be in terrible shape!

So, state school, fully paid.  Out of state or private, will pay the going hourly rate charged at IL schools.  Did not seem possible to lose, as long as the program stays solvent.  If they decided not to go, I can pull the original money out without penalty.

And Tyler, that is a great response and analogy to eating!
That's a great option. the U of I is an amazing school. I grew up in the shadow of UIUC and know a lot of profs and grads. It's hard to go wrong there, even though I decided not to attend for silly reasons. Feel free to message me if you want any info about it.
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Re: PP ....Where Did It Go

Post by Cortopassi » Fri Apr 10, 2015 1:41 pm

Thanks, PS.  I graduated in 89 from Champaign with a BSEE.
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Re: PP ....Where Did It Go

Post by ochotona » Fri Apr 10, 2015 1:44 pm

Ivy League schools are not worth it; my wife and I both went to Brown; but even in-state schools in Texas are easily $25,000 a year. My entire college education at Brown a generation ago was $39,000. Taking account of inflation $95,000.

University of Texas is as expensive now, in real terms, as Brown University was in 1979-1983 !!!

There really is no, "Oh, I'll just skip the Ivies, and then everything will be much more affordable". No such thing. Nothing is affordable right now, except for community college.

The parents have to save money, unless you're poor, then don't bother.
Last edited by ochotona on Fri Apr 10, 2015 1:46 pm, edited 1 time in total.
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Re: PP ....Where Did It Go

Post by Pointedstick » Fri Apr 10, 2015 2:06 pm

It's not about skipping the ivies, it's about finding a good deal. If UoT is $25k a year that doesn't seem like a great deal, but it also in the range where a student can offset a significant fraction of the cost (if not all of it) by working.

But the rate of college tuition cost inflation is so ridiculous that something has to give soon. I guess that's cold comfort if you have a bright 17 year-old right now though. :( I calculated the expected costs of sending my son to a decent place in 16 years and came up with something like 200 or 300k at the current rate of tuition inflation. For that price, I'll set him up with a PP of his own or buy him a small business to run. There comes a time when you just have to throw up your hands and say, "this price is ridiculous, I'm doing something else. There has to be a better way!"

IMHO.
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Re: PP ....Where Did It Go

Post by Cortopassi » Fri Apr 10, 2015 2:13 pm

I believe I got a great engineering education at U of I.  Went from the top of my class in high school to squarely average at U of I.  Very challenging.

I do agree, that after getting that first job and experience, the name of the school you attended carries little weight (at least when I was in management interviewing people).

As for the cost of tuition, I got into the College Illinois program for 8 semesters, lump sum, in 2004, for $24,000, so tuition and fees in 2004 were roughly $6000 a year.

If I wanted to do the same lump sum right now it is over $80k.  Yes, something has to give.
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Re: PP ....Where Did It Go

Post by ochotona » Fri Apr 10, 2015 2:24 pm

Pointedstick wrote: It's not about skipping the ivies, it's about finding a good deal. If UoT is $25k a year that doesn't seem like a great deal, but it also in the range where a student can offset a significant fraction of the cost (if not all of it) by working.
I think those days are gone, except for part-time students who will take 6 - 8 years for a Bachelor's degree.

I'm not saying Univ of Texas at $25k is a great deal, but it absolutely sets the economic floor. Univ of Houston, which gets sneered at by some, though it has come a long way, and is now Tier 1 costs.... $25k.

My son got an excellent merit-based scholarship package to Austin College in Texas, and our out-of-pocket was... $25k.

The set of all very good and excellent schools in a state that charge less than the in-state flagship public university tuition is... the empty set.

Either that, or absolutely I stink as a consumer, but ah, no.
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