A Parent’s Dilemma: College for the Kids v. My Retirement?

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If they haven’t buried their head in the sand (an occurrence I see more-and-more often), ignoring the college funding question altogether, most parents face this dilemma at some point in their lives – –

Do we pay (or help pay) for our kids’ education or do we protect and preserve a comfortable, affordable retirement for ourselves?

Most parents face this dilemma in the traditional, conventional manner, attacking the first issue they face – the college tuition bill. Then, they worry about retirement.

Typically, parents help pay for school by undermining their own financial security, zipping through savings, borrowing against equity, amassing burdensome parent loans, borrowing from retirement plans.

So, is saving for retirement more important than saving for your kids’ higher education?

From a traditional, conventional way of thinking, it may be.

Retirement assets will be Social Security income and whatever other resources parents can toss together (can anyone say Walmart greeter?!?). Once it’s time to retire, parents must be financially strong enough to cover rest-of-life expenses.

Contrary to popular belief, however, if parents can suspend their traditional, conventional way of thinking, both issues can be addressed concurrently.

Assuming parents can be rational about the absurdly high “sticker price” of a college education (a state of being that we do not take for granted!), a sustainable solution must be designed and implemented.

Parents must know with reasonable certainty that, with current resources, a planned rate of saving, and a reasonable allowance for growth, a sustainable means of covering both projected college expenses and projected cash flow needs in retirement may be available to them.

In short, a college planning campaign that provides possible solutions for both covering college expenses and providing a stream of income in retirement is absolutely needed.

Don’t risk burdening your children in retirement because you’ve followed the traditional, conventional way of thinking – paying for school first, then worrying about retirement.

Contact our Professional College Planners to schedule the first meeting in your family’s college planning campaign!

The Economic Importance of a College Education

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Quite often, we meet parents who, for a variety of reasons, but most specifically “sticker price,” either no longer believe or are no longer convinced that a college education is as important as it once may have been.

Many of those parents appeared hopeless, believing they had absolutely no way of covering their portion of the cost of their children’s education.

And, many of those parents were resigned to the “fact” that their children’s lives would not be better than their own.

So…

Just how important to a child’s success is a college education???

According to a September 20, 2017 column on townhall.com written by Terry Jeffrey, a major factor affecting income inequality is the level of education attained.

According to the Census Bureau’s Table FINC-01, families with a householder 25 or older:

Level of Education                                         Median Income

High school graduate, no college                 $     54,601

Some college, no degree                                $     66,859

Associate’s Degree                                          $     76,012

Bachelor’s Degree                                           $   105,271

Master’s Degree                                              $   124,302

Doctorate                                                         $   155,089

Professional Degree                                       $   166,662

It’s clear that median income directly correlates with the level of education received. Further, the difference in median income between a high school graduate and a graduate with a Bachelor’s Degree is just over $50,000 – not an insignificant sum!

While it’s possible for our children to survive economically with only a high school degree, might it not be in their best interests, the best interests of their future family, and the best interests of society to help them do more than just survive economically. Wouldn’t it be better for all concerned to help them thrive?

Contact our Professional College Planners for assistance in beginning your family’s college planning campaign.

Congress and Your Retirement Plan…

Your 401(k) may NOT be the Place to Save

When we work with families on their college planning campaigns, we focus not just on how to cover the cost-of-attendance, we also focus on preserving plans for retirement.

Most parents contribute to their employer-sponsored 401(k) retirement plan. Even when we show them a better way to save, they hesitate.

Most do so because they’ve been told from their first day of employment to save in their employer’s 401(k) plan. Many others do so because they’ve been enticed by their employer’s promise of “free money.”

While it may be highly advertised as the place to save, it’s likely those who suffered the market downturns in 1999-2001 and 2007-2009 might think otherwise.

Right now Congress is considering proposals to remove the tax advantages of your 401(k). They’re focused on the payroll tax deferred when you contribute salary to the plan. And, they’re considering a 15% tax every year on your annual gains.

Why would Congress consider taxing the growth of your plan?

In the words of famous bank robber Willie Sutton, “Because that’s where the money is!”

It’s estimated that the tax-deferred contributions made to 401(k) plans last year alone amounted to more than $90 Billion in potential tax revenue.

The government created 401(k) plans, IRAs, and 403(b) plans; they can and do change the rules any time they want.

Why contribute your hard-earned money to a plan over which you have no control, where you have little if any access to your money, and where your money is subject to the fluctuations of the stock market?

In fact, Ted Benna, the man credited with being the “Father of the 401(k)” saves most of his money in a much safer place.

Here’s one uncomfortable truth – deferring taxes may not be a good thing. Many retirees are complaining they are actually in a higher tax bracket in retirement!

This is happening for two reasons:

  1. Required Minimum Distributions (RMDs) that retirees must take, whether they need to or not, begin around age 70½ and push them into higher tax brackets.
  2. Many people are surprised to learn that their income from various sources can cause up to 85% of their Social Security income to be taxable.

Furthermore, based on our aging population and ever-increasing national debt, where do you think taxes rates are heading?

If you defer taxes and you’re successful in growing your nest egg, you’ll be paying higher taxes on a bigger number.

Even if Congress doesn’t take away the tax benefits of saving in a government-sponsored retirement plan like a 401(k) or IRA this time, they could well be successful the next time they consider where to drum up the cash they desperately need to fund the government.

So, where do you put your money? Perhaps a financial vehicle where:

  1. The vehicle is a private, “unilateral” contract – that means the company can’t change the rules unless you agree to it.  That’s the law.
  2. You can use the equity in your plan whenever and however you wish – no questions asked.
  3. The value of the asset has increased every single year for more than 160 years – including during the Great Recession and the Great Depression.
  4. You contribute after-tax dollars and you can access both principal and gains with no taxes due.
  5. There are no Required Minimum Distributions to push you into a higher tax bracket … and the income you take is not included when the IRS determines how much tax you’ll pay on your Social Security income.
  6. The plan and its growth are generally not reported to the IRS, which also gives you privacy.

Perhaps now is a good time to contact one of our Professional College Planners for assistance in reaching more of your goals and dreams – without taking any unnecessary risks.

The College Debt Crisis – Worse than You Think!

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A recent article in the Boston Globe made a wide-range of very valuable points every parent should consider.

At least two of those points stood “head and shoulders” above the rest:

1.  Finding the right fit for families, both academically and financially, is extremely important.

2.   Sticking kids with a “mortgage-sized debt” for an undergraduate degree makes very little sense.

We know that families sometimes fall in love with a school that quite clearly is not a good fit financially.

They just don’t know or realize it – until they get the final award offer, when it’s probably too late to do anything about it.

We help families solve these issues; family-specific solutions are among many of the things we do for families that engage our services.

For the full story:

https://www.bostonglobe.com/magazine/2016/05/18/hopes-dreams-debt/fR60cKakwUlGok0jTlONTN/story.html?p1=AMP_Recirculation_Pos6

Narrow Down that List of Schools!

You’ve been doing your research…

You’ve discovered 20, 30, even 40 very attractive schools…

How do you determine which of those most deserve your time and attention?

Eliminate those that fall short – the schools that make your short list should be those that most closely match the criteria established before you began your search.

Perform side-by-side comparisons as you eliminate one after another.

If you don’t have enough information about a school, revisit its website, dive into its catalog, visit campuses, speak with school reps, and/or reach out to current and former students.

So, really… How do you compile a great list of schools?

  • Don’t take a “wait-and-see” approach. Applying to all schools on the initial list results in toms of stress, wasted time, rushed applications—and disappointing results.
  •  Allow your criteria to evolve. Priorities change as more is learned about schools and their cultures. (On-campus visits are real eye-openers.) Adjust your list as you identify the most important criteria.
  • Make sure you’ll get in somewhere great. A few of your schools should be very likely to admit you. This ensures admittance to schools you’ll be happy to attend.
  • Accept that all highly selective schools are reaches. Even with the best grades in the state, being accepted to highly-selective schools is never a given. Certainly, apply if those such schools appeal to you. But, also apply to some backup schools with admission rates above 20 percent.
  • Find “financial safeties.” Apply to schools you believe will be affordable, either because their cost of attendance is manageable or because you expect your net price to be reasonable. Look for schools where your grades and scores make you a highly desirable, above-average candidate—and thus more likely to get cost-reducing aid.

If you’re interested in finding the right schools at the right prices for your child, contact our Professional College Planners to schedule the first appointment in your family’s college planning campaign.