No one, much less a parent, wants to see a young college graduate weighed down by the burden of student loans. And if those student loans weren’t bad enough, some college students open credit card accounts as a right-of-passage of sorts into adulthood. Although a credit card provides students and young adults the opportunity to enter a new world of financial responsibilities, they can also cause those students to end up even further in debt by the time they graduate.
One of the biggest concerns of today’s parents is how to save for both their retirement and their children’s college education. One survey found that 75 percent of parents of teenagers say they plan to use their retirement nest egg to help pay for their kids’ college expenses.
[CLICK HERE to read the article, “Paying for College with Retirement Funds? Don’t.” at AARP, July 30, 2013.]
When determining whether parents should place their children’s finances above their own, the prevailing advice to parents is usually to “put yourself first.” One advisor equates this recommendation with that of a flight attendant’s instructions for onboard oxygen masks – secure your own before you help your children. The idea here is that if you don’t first have your own financial house in order, it may be difficult to take on the additional task of providing assistance to your children.
Although a parent’s natural instincts are to put a child’s needs first, it’s important in this scenario to consider yourself as a safety net for your child. If you have developed an appropriate retirement strategy, you may be more capable of providing financial assistance to your children even if they are rooted in early debt caused by student loans.
[CLICK HERE to view the video, “Money Misconceptions: Which of the two is a higher priority,” from Charles Schwab, March 19, 2014.]
The fact remains that there are many resources your child may be able to utilize for college funding, such as scholarships, grants, and student loans, and he or she may have a much longer timeline to pay them off.
[CLICK HERE to read the article, “Income-Based Repayment,” at FinAid.org, accessed March 28, 2014.]
Recently, President Obama proposed incentives to help students manage loan debt, such as increasing the maximum Pell Grant by $100 per student, making permanent the American Opportunity Tax Credit, and providing $6 billion for job-training programs at community colleges. The proposed incentives are expected to face opposition in Congress.
[CLICK HERE to read the article, “Obama’s Budget Proposes Incentives for Student Success,” at The Chronicle for Higher Education, March 5, 2014.]
Meanwhile, many parents may have to decide how to divide their savings efforts between the rising cost of college and the rising cost of living they may face in retirement – including unknown expenses like health care, housing, and long-term care.
If we can help you establish your priorities and create a financial strategy to help you potentially achieve both of these goals, please contact us.
Our firm assists retirees and pre-retirees in the creation of retirement strategies that include the use of insurance products.
The information and opinions contained herein are provided by third parties and have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. It is given for informational purposes only and is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. All clients are encouraged to consult qualified tax, legal and investment professionals before making any decisions about their personal situation.
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Source: Woods Blog Old