How To Survive Planning For Retirement and College At The Same Time
Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder oXYGen Financial, Inc.
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For Baby Boomers and Gen X’ers the quandary that faces them smack in the face is the juggling act of planning to pay for their kids’ college education while also socking money away for retirement. Was it that 25 years ago this was an easy task or has the never ending spike in college education costs officially pressured parents in to the corner of their financial house? While these waters are tricky to navigate, here are my four smart money moves to stay on the balancing beam of this difficult financial routine.
1. Set Realistic Goals- This is probably the single most important step in the routine. You must sit your children down and be absolutely transparent around what is and what is not possible for your financial situation. Don’t get their hopes up to attend an out of state private college institution if you know that you cannot afford it or it will cost them an arm and leg for debt. You should also be realistic to yourself about exactly what it will take to make work optional for you and how long you truly believe you can work.
2. Do Your Homework- In this day and age, there are so many different programs that can offer you the opportunity to save on college costs. If you are spending more time at your kids’ soccer games and swimming in the pool than doing this research, it will be a big mistake come college application time. Find out what programs are available at a local, state, and national level. You should also do your homework on what you can do with your IRAs and 401(k) plans. Many 401(k) plans now offer self-directed brokerage accounts that will offer you many more choices than you have now. You should call me if you work for Time Warner, Home Depot, UPS, or any of the major companies so I can show you the details.
3. Remember You Can’t Borrow For Retirement- It’s incredibly deceptive to yourself to believe you’ll make peak income levels forever. Do not plan that you can make $200,000, $300,000, etc. forever. It’s important to keep in the back of your head that retirement comes first and kids’ college education comes second. If you reverse the two, you could put yourself in a precarious position of having to work longer or even worse having to pay off debt that you took out so your kids were happy.
4. Skip Private School- I know, everyone who reads this that has a child in private school will tell me why private school will get their kids into a better school and give them a better education. Education aside, over 10 years, a private school will run you $200,000 to $250,000 of after tax money. So, the big question is did it give your child a $250,000 head start? If you put the $250,000 away, you could easily have paid for a college education, but imagine putting that money away into a retirement fund and letting it sit there for 30 years. That cash would allow your child to have more money in retirement than any job they could get.
Over the next decade, this will be one of the most discussed and challenging decisions for families across America. Use these four guidelines to help you better balance the juggling act.
*Cost of private school based on current values at Marist School: http://www.marist.com/Page/Admissions/Tuition
Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.
Securities and Investment Advisory Services offered through NFP Advisor Services, LLC (NFPAS), Member FINRA/SIPC. oXYGen Financial is not affiliated with NFPAS. NFPAS does not provide legal or tax advice. Linked sites are provided as a courtesy.