All of balex's Comments + Replies
This post describes part of the cost of college as a "100% [marginal] tax on your post-tax income". Have you seen other financial-planning and -optimization resources mention this and deduce things from it (whether in an EA context, as you have done, or not)?
There are lots of financial planning resources online (including at places you frequent like lesswrong), and many of them discuss saving for college. But it seems like people generally appear to have missed a minus sign on the utility of saving for college (in certain situations, as you des...
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3y
I haven't seen other resources that talk about the cost of college this way, but I also don't spend much time looking at financial planning advice?
The approach in this post is only relevant to a pretty small fraction of people:
* Your children need to be likely enough to be admitted to the kind of institution that commits to meeting 100% of demonstrated financial need, or otherwise has a similar "100% effective tax rate" that it's worth considering.
* You need to not be very interested in saving money for your own future use. The CSS Profile suggesting 5%/y for parental assets means that with three kids at 4y each you might be asked for 60% of assets. (Note that the CSS profile does ask about parental retirement accounts, and some schools do consider those assets).
* Your earnings need to be low enough just before and during college, either because your career has never been highly lucrative or because you are willing to change your line of work for that time period.
I think this is likely enough that a 529 plan or similar does not make sense for our family, but I'm planning to revisit when my kids are getting close to high school (and I have a better sense of their academic standing) before considering a career change.
Thanks for your response.
I think it's slightly more general than you suggest, because the "tax" is so high. For example, if you're trying to decide whether to buy a larger house or invest the difference in a 529 plan, it could be a better idea to buy a larger house.
I went to one of these schools, and my parents noted at the time that under the right circumstances, they might have saved money by buying a fancy car "instead of" saving for my college.