USAA’s savings goals and 529 plan calculators

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USAA has offered their “savings goals” calculator since January, but they’ve recently expanded it for students & parents. They’ve released a very detailed education savings planning tool that greatly simplifies the data crunching and the fund selection.

The Education Savings Planner is part of their Goals Planning Tool at USAA.com/goals. It’s open to anyone with a USAA account. That means you have to have a customer account for their financial products, but you don’t have to be a member for their property & casualty insurance products. No military affiliation is needed to use the planning tools– anyone can sign up. Once you’ve opened a USAA account, you’re ready to use the planner.

Like USAA’s other financial independence tools, the first goal of the Education Savings Planner is usability. During the testing phase, USAA made sure that users were finishing the steps and could easily get help. The usability design advantage is that the software is very fast. You can’t tweak every little aspect of the process, but it clearly shows you what assumptions go into the results and what you’ll need to get started. The big advantage of the tool is that you can use it not just for four-year undergraduate degrees– it also helps you plan two-year degrees, graduate degrees, occupational training, or even private elementary/high schools.

As usual, I wish this planner had been available five years ago. Back then our Ohana Nords college-selection processes ran in parallel. Our high-school student would sort her criteria on the college-search websites and pick through the results for her top 5-10 schools. Then she’d drill through to each college’s website, which would usually tell her everything she wanted to know– right down to virtual campus tours, pictures of the hot guys dorm rooms, and applications packages. Whatever she wanted was usually just two mouse clicks away.

Then it was my turn.

Go ahead. Google your favorite college website, start a timer, and see how long it takes to find their prices. Just for fun– try to break it down by tuition, room & board, and textbooks/supplies. Now multiply that by your student’s list and see how long it takes you to figure out your retail college-shopping budget. You’re probably in a great mood by the time you’re ready to start figuring out how much you need to save.

It’s not any easier for new parents. You only have about 17 years left until your newborn starts college– how much will you need? What’s the average cost of a private or a state-run school? Where do you start your research?

Unlike many college calculators, USAA’s planning tool has a built-in expenses database. In a few mouse clicks, you’ll be able to choose the U.S. Department of Education average annual cost for a private four-year degree. ($32,790. Gulp.) You’ll quickly be able to compare that to the DOE’s average annual expense of a state-run school. ($15,014. Better.) Then you can cut through the averages to find the annual cost of for state residents at your local community college. A U.S. map pops up and three mouse clicks later, you learn that University of Hawaii’s West Oahu campus will only cost $5136/year for tuition & fees and another $1170/year for books & supplies. (Whew. Worst case, you can handle that.) These numbers come from Peterson’s database of college costs, updated annually and automatically in USAA’s planner.

Once you’ve worked through the process, it’s easy to dream big and see if you can afford that private out-of-state college on your military retirement. You can quickly change your criteria right on the results page and recalculate.

Today you have several different ways to save for an education, too: your own assets, a trust in the child’s name, or a 529 college savings plan. Again the planner asks if you’d like your savings to eventually become the student’s property (even if they decide not to use it for education) or whether you’d accept a few restrictions on its use.

Once you’ve picked your savings option, USAA’s planner moves on to your financial situation. You select a few ranges about your net worth, your income, and how aggressively you’re willing to invest. Pop-up graphics and help menus show you how your answers are handled by the planner so that you can understand how your choices affect the results. The choices update until you have your desired combinations. You can also easily connect with a financial rep who can see where you are in the process, talk you through your options, and follow along with you as you complete the planner. USAA designed the planner for over 90% of the customers to get through it on their own, but help is always at hand.

Your results screen projects your savings and costs. It also includes sliders and data boxes for you to change your savings rates and your expense estimates. You can even switch to another college right from the results screen, so you can work through your teen’s “dream sheet” without having to enter all your personal information each time.

USAA’s running a business, of course, so they make it very easy for you to take the next step. If you’ve already used one of their other planners (for retirement or some other goal) then USAA starts the education planner with optional pre-filled personal data. You can save each of your planner runs and quickly toggle among various “What if” scenarios. Once you’ve made your decision, the results page helpfully offers advice and investment suggestions along with a goal-tracking tool. One click later, you can open a 529 account and choose your recommended investments. You can even display your non-USAA accounts in your tracking tool so that you have a consolidated view of your progress on one website.

After I put the planner through its paces I interviewed Zack Gipson, USAA’s VP of Retirement and Wealth Planning. (We spoke a few months ago about USAA’s retirement planning tool.) Zack says that their design effort went into ease of use, since customers want a quick estimate that they can analyze in more detail later. Peterson’s college-costs database was an essential feature since users don’t want to leave the planning tool to track down other numbers– members will just stop using the tool and USAA never gets a chance to enroll a new customer. USAA’s team even researched decades of college inflation rates to come up with a rolling-average estimate of how much college costs would rise over the years of savings until your newborn would be ready to matriculate. The bad news is that college expenses have been rising at 7% annually for over a generation. Zack pointed out that the “good” news is this rate is unsustainable. USAA’s planner assumes the worst, but colleges are already starting to offer affordable packages of fee reductions, work-study programs, grants, and loans.

Zack wants to hear how the planner can be improved. For example, it currently assumes that you’ll raise your annul contributions every year by about three percent. If you started saving $100/month when your child was born, then next year you’d put aside $103/month. By the time they’re taking their driver’s license test, your contribution has risen to $160/month. That’s usually achievable, but the calculator results could show you a table of how much you’ll be contributing each year and how it’s expected to grow.

The planner can also be limited by Peterson’s database. It had good numbers for every college that our daughter was interested in (a long list) but the results get spotty when you dig into private high schools or graduate degrees. Zack says that half of the planner’s users are under the age of 34, so it’s helpful to have a tool for parents who are analyzing public or private schools for their kids while they’re also considering their own graduate degrees.

College planning has never been easier, and the tools have never been this good. When our daughter was born in 1992, our planning tool for her college savings was a Borland Quattro Pro spreadsheet running on an IBM PC XT desktop with an orange-on-black 13″ CRT monitor– next to my stack of hand-written notes about average college expenses and inflation rates. The World Wide Web was just a gleam in Berners-Lee’s eye, and 529s hadn’t even been invented yet. I’m astounded at how far we’ve come in only 20 years (parentally as well as technologically & financially) and I’m really looking forward to the evolution of USAA’s planning tools.

I can’t wait to see what Zack’s team comes up with next. When it’s ready, I’ll blog about it here.

 

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Early retirement and the kid’s college fund

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WHAT I DO: I help you reach financial independence. For free. I retired in 2002 after 20 years in the Navy's submarine force. I wrote "The Military Guide to Financial Independence and Retirement" to share the stories of over 50 other financially independent servicemembers, veterans, and families. All of my writing revenue is donated to military-friendly charities.

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