Planning for your child's future college expenses. Vanguard 529

[James Park]

Just curious to see if any of you have contributed to an education IRA 529 plan for your child's future college expenses. I have heard that the 529 plans in Utah and Nevada area the best as you can select low fee Vanguard funds.

Thanks.

[Josh Dotzler]

Hi James,

While we don't use the 529 savings plan, my wife and I have generated the following savings plan for our kids.

• Buy one single family rental property for each kid within 2 years of birth- approximately $150,000 purchase price.
• Make sure the rental will at least break even on a 15 year note.
• In approximately 15 years do a cash out refinance and use those funds for car/college/wedding.
• Using the purchase price of the property and a 75% cash out refinance, we would be able to pull out about $112,500 for car/college/wedding/etc. This number should appreciate with inflation through the next 15-16 years.
• When we are ready to retire, the unit will be paid off again (or close to it). We will evaluate the property at that time and decide what to do with it.

We like this option the most because it requires a chunk of money up front, but after that (ideally) the savings and increase in value are all accounted for with rent payments from the tenant. While college costs are currently appreciating faster than inflation, this plan does account for typical inflation through the increase in value of the property.

**I operate a property management business and I'm a licensed Realtor so it makes cash flowing on a $150,000 home/15 year note a little easier**

Hope somebody finds this plan helpful! We've put a lot of thought into it.

Josh