Last month (July):
Years left: 8.666666667
P = $798.18, I =$416.22, Escrow = 621.66
This month (August):
Years left: 8.5
P = $803.97, I =$410.44, Escrow = 621.66
One month’s savings from prepayment: $2.62
Hopefully by this time there’s a new addition to the family! If not, I hope ze comes out soon.
In any case… For DC 1 we’ve been putting away $500/month every month since ze was born. Ze has a pretty sizable kitty now, and is on track to be able to pay for the private school of hir choice should we keep this up (depending on the calculator we use and the assumptions we make). We’re hoping to be making enough money that we don’t qualify for financial aid.
The question is: What should we do for DC 2? We could do the same thing, ignoring inflation, and start putting away another $500/month. Then DC2 will also be on track, give or take, to pay for the private school of hir choice come college time.
The problem: What if DC1 decides to go some place that doesn’t cost hundreds of thousands of dollars? What if ze gets huge amounts of merit aid*? What if I move to a university that pays tuition costs? Basically, what if ze doesn’t liquidate hir 529 for school? Then we’ll want to be able to transfer it directly to DC2 (since we don’t really believe in paying for graduate school as much as we believe in paying for college), but if DC2′s 529 plan is also pretty full we might end up with more money in 529s than we actually need. We would then have to transfer it to some other relative, pay for our own kids’ graduate school, or take the money out at a penalty (in which case, why use the 529 in the first place?). None of those options are appealing.
However, there are several years between DC1 and DC2, so in theory if we saw DC1 costing less than predicted, we probably could just stop putting money away to DC2′s plan at that point. Right now putting $500/month away probably isn’t going to put us in any danger of oversaving in 529 plans. We, of course, may have to readjust once our work situation changes.
So I guess that’s what we’re gonna do. Put $500/month for each kid until we have some reason not to. After all, it’s the early savings that are going to benefit the most from the tax advantage since they’ll have more time to generate earnings.
*Currently it looks like there’s a way to take money out without penalty up to the amount of a merit scholarship, but there’s no guarantee that will still be the case in the future.