How MOF Handles College Savings

Introduction

If you've added a college goal to your MoneyOnFIRE plan, you might be wondering: how does the engine actually handle it? How does it decide how much to save each month, which account to use, and — most importantly — how does it balance college against your own financial independence?

This article walks through the key decisions our engine makes when you include college as a goal, and explains the logic behind each one.

College is a Prerequisite for FI — Not a Competitor

When you add a college goal, the engine treats it as something that must be funded before it can declare financial independence. This is a deliberate design choice: if you've committed to funding your child's education, FI means being able to cover that commitment without needing to work.

In practice, this means the engine earmarks assets for college first, then checks whether your remaining assets are enough to sustain your retirement income. You only achieve FI when both conditions are met — your college goals are fully funded and your remaining portfolio can support your target withdrawal rate.

Think of it this way: your FI number isn't just "enough to retire on." It's "enough to retire on, after setting aside what your kids need for school."

Your Financial Stability Comes First

While college is treated as a prerequisite for FI, the engine never sacrifices your basic financial health to fund it. Every dollar flows through a strict priority order before any money reaches your 529:

1. Housing and household expenses — keeping a roof over your head
2. Minimum debt payments — staying current on obligations
3. Emergency fund — building your safety net
4. 401(k) employer match — capturing free money from your employer
5. High-interest debt payoff — eliminating expensive debt
6. 401(k) and IRA contributions — maximizing tax-advantaged retirement savings
7. 529 college savings — only after all of the above are handled

This ordering reflects a core principle: you can borrow for college, but you can't borrow for retirement. The engine ensures your employer match is never left on the table and your retirement accounts are fully funded before a single dollar goes into a 529. College is important — but not at the expense of your own financial security.

Calculating the True Cost

College costs aren't a single lump sum — they're a series of payments spread across multiple years. Our engine models this realistically by building a year-by-year payment schedule. Each year of college is inflated independently to the date it's actually due.

For example, if your child starts college in 12 years and attends for four years, the engine calculates four separate payments — each inflated by 12, 13, 14, and 15 years respectively. This is more accurate than simply inflating today's total cost to the start date, which would overestimate what you need.

Each month, the engine calculates the present-value gap — the difference between what your 529 currently holds and the present value of all remaining college payments. Your monthly contribution is sized to close that gap over the time you have left. If you have multiple children, contributions are split proportionally based on each child's funding gap, so the child who is most underfunded gets the largest share.

Choosing the Right 529 Plan

Not all 529 plans are created equal. The engine recommends a specific plan based on your state of residence and a straightforward cost-benefit analysis:

• No state income tax or no 529 deduction? The engine recommends Utah's my529 plan, widely regarded as one of the best plans available thanks to its low fees and strong investment options.
• Your state offers a tax deduction? The engine compares the value of your state's tax deduction against the fee difference versus Utah's plan. If the tax savings meaningfully exceed the higher fees, your home state plan wins. Otherwise, Utah's plan is still the better deal.
• Your state accepts any plan for the deduction? Some states (like Arizona, Kansas, and Pennsylvania) let you deduct contributions to any state's 529 plan. In that case, you get the best of both worlds — Utah's low fees and your state's tax break.

This analysis runs automatically based on your state, so you don't need to research plans yourself. The engine does the comparison and tells you which plan to use and why.

When the 529 Isn't Enough: The Taxable Backstop

Sometimes the math doesn't work out perfectly. Maybe you started saving late, or your income doesn't leave enough room to fully fund the 529 after higher-priority items. In these cases, the engine doesn't just throw up its hands — it looks for other sources.

If your 529 is underfunded but your taxable brokerage or RSU accounts have sufficient assets, the engine earmarks a portion of those accounts to cover the college shortfall. When payment time comes, it withdraws from the 529 first (tax-free), then pulls the remainder from taxable accounts.

This is a realistic fallback, but it comes at a cost: withdrawals from taxable accounts trigger capital gains taxes, making each dollar less efficient than a 529 dollar. The engine accounts for this tax impact in its calculations, and your plan summary will clearly show how much comes from each source — so you can see exactly what the shortfall costs you.

Importantly, the engine is also smart enough to not over-contribute to the 529 when it knows your taxable account can cover the gap. If you're well-funded in taxable and short on time, it may make more sense to use what you have rather than rushing contributions into a 529.

What Happens During College

The engine doesn't just plan to college — it simulates through it. When each year's tuition payment comes due, withdrawals happen automatically: first from the 529, then from taxable accounts if needed.

If you reach FI before your child finishes college, the engine continues simulating the remaining college years to ensure the earmarked funds are sufficient. Your plan summary shows the full trajectory — accumulation, withdrawals, and final balance — so you can see the complete picture.

What If You Over-Save?

A common worry with 529 plans is: what if I save too much? Markets might outperform expectations, your child might receive scholarships, or costs might come in lower than projected.

The engine handles this gracefully. Only the amount actually needed for college is earmarked — any excess in the 529 remains available and counts toward your FI assets. You won't be penalized in your FI calculation for being ahead on college savings.

When Goals Conflict

In some scenarios, you simply can't fully fund both goals — and the engine is honest about this. It's possible to see a result where you achieve FI but college is underfunded, or where college is fully funded but FI takes longer than expected.

Rather than hiding these trade-offs, the engine shows them clearly. If college is underfunded, your plan summary shows the exact shortfall. If funding college delays your FI date, you'll see that too. This transparency lets you make informed decisions — maybe you adjust your college cost assumptions, extend your timeline, or explore scenarios with different contribution levels.