Over the next three years, our annual expenses are expected to surge due to college costs for our two children. Both are pursuing four-year degrees, with the possibility of attending private schools. I recently came across SBLOC (Securities-Based Line of Credit) as a potential strategy to manage the financial demands of these six years.
We don’t have a significant 529 account, as we’ve prioritized retirement savings over the years. For some time, we operated an LLC, which allowed us to save over $100k annually in tax-deferred accounts, but this limited our ability to contribute substantially to a 529 plan.
Our plan has always been to fund college expenses as they arise, meaning we anticipated reducing retirement savings during those years. However, with the option of an SBLOC, we may be able to maintain our retirement savings rate even during the high-expense college period. The idea is to borrow against the funds in our brokerage account to cover college costs and gradually pay off the balance while keeping the investments in the market.
I’m mindful of the risks, particularly the potential for a margin call, and we’d maintain a substantial money market buffer to mitigate this. Still, I see SBLOC as a more flexible and appealing option compared to a home equity loan. It enables us to maintain our savings rate and spread out the cost of college over a longer period.
I’d appreciate your thoughts on this approach, including any potential risks or blind spots I might be overlooking.
We don’t have a significant 529 account, as we’ve prioritized retirement savings over the years. For some time, we operated an LLC, which allowed us to save over $100k annually in tax-deferred accounts, but this limited our ability to contribute substantially to a 529 plan.
Our plan has always been to fund college expenses as they arise, meaning we anticipated reducing retirement savings during those years. However, with the option of an SBLOC, we may be able to maintain our retirement savings rate even during the high-expense college period. The idea is to borrow against the funds in our brokerage account to cover college costs and gradually pay off the balance while keeping the investments in the market.
I’m mindful of the risks, particularly the potential for a margin call, and we’d maintain a substantial money market buffer to mitigate this. Still, I see SBLOC as a more flexible and appealing option compared to a home equity loan. It enables us to maintain our savings rate and spread out the cost of college over a longer period.
I’d appreciate your thoughts on this approach, including any potential risks or blind spots I might be overlooking.
Statistics: Posted by doon — Mon Dec 16, 2024 8:52 am — Replies 4 — Views 149