Retire Early and Pay for College … is it Possible?

I have nine years. What will college cost in nine years? It’s a daunting thought and I try my best to avoid it. And think I must I live on Fantasy Island when I say I’m going to retire at the same time I’m sending my two kids off to college. I honestly don’t know if early retirement will be able to happen at the same time. (Loans are not an option – personal parenting goals.)
College is a wild card. Or maybe I want it to be a wild card because all my (limited) research shows tuition will about double and that’s scary. The Vanguard college tuition calculator provides a pretty basic estimate of anticipated costs. Low-ball estimate is that a four-year college education at $100,000 today will increase to $167,000 in nine years.

  • 529s: Today’s standard for college savings. Put it in post-tax, pull it out for education-related expenses without penalty. We have two, established by the kids’ grandfather when they were babies. Our nine-year-old has ~$12k today. We contribute $100/mo. At this savings rate, using a compound interest calculator, this will be almost $40k in 9 years. Maybe enough for one year if we stay at the same contribution rate.
    • We increased our college savings another $100/mo into each of our Roth IRAs. (No, we’re not at the point where we can max these out yet.) Withdrawing from a Roth prior to age 59.5 carries penalties, unless for a qualifying reason. Your child’s education is one.
    • And there’s this: “… most parents should max out their Roth first then look at funding a 529 plan.” With that, we will make a plan to max these out. I wonder if we can squeeze that into 2018?
  • Community College Transfer: I really like the idea of saving on tuition by going for two years at a community college then transferring to a four-year, but there seem to be more drawbacks than positives. Maybe this will shift to being a more common practice in the future, but I can’t plan on that.
  • Having recently moved from Seattle, I’m wondering … perhaps moving back to enjoy the mountains and sound, while taking advantage of UW’s Dual Enrollment would be worth considering. (Reason #458 we should move to Seattle.)
  • Scholarships? This Washington Post article is old, but it probably still stands close to the truth today: 19% of high GPA students receive academic scholarships and 0.7% receive athletic scholarships. This would be really great, but I can’t count on it.
    All PGA players start somewhere
  • Go Pro: Our younger son is eight and has declared that he will be a professional golfer. So be it.
  • Real Estate: Our obvious choice and we’re so so so thankful we have it, because I really don’t think we could achieve the savings rate we’d need to pay for college without loans. We have two rental homes in the crazy Seattle market. We’ve owned one, our ex-primary, for 11 years and the other for four years. Either of them would more than pay for both kids to go to college at today’s average tuition rates. We can’t predict what they’ll be worth in nine years. I don’t have a crystal ball. But this is what will pay for college and enable us to retire around the same time.

    ​I hope.

Spreading the FIRE

I’m starting with our wins of the week:

  • Filed our taxes via H&R Block and got fat federal and state returns (this probably means we need to adjust deductions)
  • Took federal return to pay off one card! WHOO!

Going for the Gold!

golden gardens

No one wants to stop spending. I haven’t found too many like-minded friends in my circle of friends. A co-worker is enthusiastically into FI, so it’s pretty awesome to share learnings and successes with each other. But among my close friends and family, it’s not spreading. I’m not exactly pushing it either. You have to be interested in learning and open to change. And breaking away from our consumer-driven culture isn’t something a lot people are interested in. People like to shop.
But, let’s pretend.
At this point, if asked, I would recommend the following books:

I haven’t read these, but they’re on my list:

Podcasts:

Blogs: I don’t read too many – just not enough time, but I like these:

We’re nine months in and these are all common names to me now. There’s such a wealth of free information foranyone that wants it. It’s like we all have the ability to stretch this super muscle, but we don’t. It doesn’t have to be complicated, there are several simple changes you can make that make a huge impact. Anyone can do it!

Why We Decided to Rent vs Sell

cross country driving adventures

We knew we’d return to the East Coast to be closer to family at some point. So, after 10 years of loving life in Seattle, we made the move back to the Philadelphia area.

The Seattle real estate market is insane. We lived in a 1,300 square foot single family home in a desirable neighborhood with great schools and close to downtown (i.e., short commute to Amazon). Prior to purchasing this house in 2006, we sold our Philadelphia home for a nice profit, affording us to pay off my student loans, buy two (used) cars and put 20% cash down on our new Seattle home. This was all without a thought of kids (which came only two short years later). Thankfully, the house worked for our family of four because we quickly realized we couldn’t afford a bigger house that wasn’t a fixer.

During our time in Seattle, we also purchased a smaller investment property in another neighborhood. We didn’t follow the “buy the worst house in the best neighborhood” rule, but we bought what we could afford and got newly renovated (low maintenance) house in a neighborhood we knew was “up and coming.” For three years, we acted as the property managers with no turnover and very few issues.

So, when it came time for us to move, we were torn: sell or rent? The Seattle market has seen such growth: was it a bubble and should we sell now (2016)? Or hold onto the properties with a nice monthly income, hope the long-term growth continues and accept there will be maintenance and management costs? We took a deep breath and decided to rent, turning over the property management to a company that takes 10% off the top of the first rental and 8% off the top of the second. This has proven well worth it! They take care of everything and are prompt to answer any questions of concerns.

In the two years since February 2016, property 1 (primary) has grown in value by 35% and property 2 (investment) has grown by 46%. This doesn’t account for the monthly rent which more than covers the mortgages. So, I didn’t do an entirely accurate comparison, but in the same time period, a $10k investment in VTSAX would have grown around 35%. Selling our properties would provide a much larger investment, so perhaps this would have been a wiser decision, but I like: 1) the passive monthly income and 2) having diversified assets.

The Plan for Property 1:

  • Keep it for the passive income during retirements, or
  • Move back! Right now, we’re thinking about retiring in WA.
  • We also keep in mind that if we sell by 2020, we can avoid paying capital gains tax for having lived there for two of the prior five years.

​We definitely have an emotional tie to this house and neighborhood and simply don’t want to sell it. At least we recognize this!

The Plan for Property 2:

  • Keep it for passive income in retirement, or
  • Sell it to pay for college for two kids in 10+ years, while collecting monthly rent. But, with this, comes real estate market risks and increasing maintenance costs as the property ages.

And, of course, the ever-present threat of an earthquake in the PacificNW that could reduce both properties to a pile of rubble.

The Nightly Rental Option: I recently looked at what nightly vacation rentals would look like for each of these houses, but our steady monthly rent exceeds the estimates. 

We purchased our big, old, inefficient home in the Philly ‘burbs, but the market here is not nearly has hot, so it’s not so exciting to think about. With some improvements coming to the neighborhood that will increase walkability and overall appeal, I’m sure we’ll sell it for more than we bought it, but if you consider the real costs of home ownership, I can’t confidently say we’ll see a profit.

Either way, we’re in a great place with these investments and will keep them for now. I’m not sure what would change that. I’m afraid that if we sell and funnel the profit into investment accounts, we’d be putting all of our eggs in one basket. It’s all about balance!

(Failing) to Save on Heat

Blogging in a sweater and slippers … not quite as chilly as Our Next Life’s 55 degrees, so it’s definitely not our “selectively hardcore.”
We keep our house around 62-64, which isn’t warm! We’re in the Philly ‘burbs and it’s been a very cold winter, so our oil bill was a ridiculous $417 this past month. We could add another layer and lower it, but there’s the beer. We had to move the fermentation from the basement to living room because it can’t go below 62. So, there we go. My very good excuse.

I’m not going to entertain an energy assessment … I know this old house is not well insulated. I think we’ll have to chip away at a few cost-saving measure:

IMG_5188
Warm kitty
  • Convert to gas? No. That’s a minimum of $8,000 just to bring the line to our house; appliances not included.
  • Add a zone? No. An HVAC contractor advised against this because it’s cost prohibitive.
  • Storm windows closed? Yes. And caulked around frames. Although I’m not sure they make much of a difference in this drafty house.
  • Thermostat programmed? Yes. Steady at 62.
  • Furnace maintenance and filter change? Yes, annually.
  • Change providers? Our provider’s rates have increased to$3.09 … I have to shop around!
  • Replace furnace? Yea, yea. It’s probably 30 years old and really inefficient. That would be about $5,000. Our A/C is also old; I wonder if there would be an efficiencies in having them replaced at the same time.
  • Improve insulation? Yes, I’m sure this can and should be done. Add it to the list.
  • Convert fireplace to wood stove?  Probably not. I like them, but I can’t see DH making the switch.

So, immediately, I think we should shop around. Long-term, we have to spend a lot to save a lot? There has to be other ways … I would love, love, love to change from oil. Perhaps I’ll run a breakeven for gas conversion.
Either way, the beer stays at 62.

Save Over $800 per year by Changing Wireless Plans

I had no idea. There are wireless plans available that use the same network as the major carriers, but under different names and for a fraction of the cost. It’s like the generic, store brands of wireless plans. Of course, I learned about this on an ChooseFI podcast then learned more through the ChooseFI Facebook group. (I’m a shameless ChooseFI cheerleader.) Since the Facebook group isn’t public, here’s another resource for information about cheap wireless plan options available.

I compared the costs of several of the discount carriers and chose to go with MintSIM because it was one of the cheapest that fit my usage. (Side note: They have great branding with simple, easy-to-understand information and instructions.) I have my own iPhone, but when I got the SIM card, I couldn’t activate it. I didn’t realize that my phone was locked and I had to wait another 30 days to unlock it. It was locked because I had recently changed jobs and the liability of the phone went from my employer to me. Despite my best effort to understand the fine print and not be locked into a contract, I failed to realize that the change resulted in my phone being locked for 60 days.

It was all downhill from there.

Their customer service hours are basically the hours I (and most of the workforce) work and I simply don’t have an hour in my workday to do this. They do have after-hours support, but not for what I needed: SIM reactivation. And when you call, you don’t get MintSIM directly. Anyhow, the agents I did speak with were great and I was able to get the same one twice (per my request) which is amazing. They just couldn’t reactivate my SIM. Each time, they said it was good and I should try again in 24 hours, but no. It didn’t work. After three calls over three weeks and no success, I asked for my money back. That was the only good part of my experience with them. I got my money back no problem.

I am now on Total Wireless (who uses the Verizon network) and love it. I haven’t had a need to call support, so I can’t compare that service, but it was easy to purchase and activate. It’s $35 per month for one line with unlimited talk and text and 5GB of data. I used a promo code and got $10 off my first month. I was using 12GB a month when I had unlimited data, so I wasn’t sure how I would survive on a data diet. I have 13 days remaining in my first month and haven’t used even half my 5GB data yet. It was easy: I turned off cellular data for everything and then turned it back on per app, as needed. And when I can, I always connect to wireless.

Some day, I’d love to go with Project FI, but the iPhone is (not yet) compatible.

By the end of January, DH will make the switch from Verizon to Total Wireless. A shared plan of our two lines is $60 per month, savings us over $800 per year after we both switch.