Developing A Funding Plan

Dear Parent, 

When developing a funding plan for retirement and college simultaneously, long-term solutions for each plan are developed.  When thinking only in terms of funding college, and not retirement, you may be forced to consider conservative short-term investments to meet immediate college funding needs.  These conservative short-term investments may produce lower yields during college years and the years immediately proceeding the college years.  If taking a holistic long-term approach to funding college and retirement concurrently, you can invest in higher yielding investments because of the longer time frame.  You will not be forced to invest in conservative low yielding, short-term investments for college that could have a significant negative effect on your future retirement funds. 

Since there are many attractive loan programs available to you and your children to fund college, you are not forced to use conservative short-term investments or liquidate long-term investments to pay for college costs. 

To make funding education and retirement a non-issue, you must consider how to:

• Maximize cash flow in order to invest funds in education and retirement accounts
• Utilize the numerous education tax incentives provided by the IRS to reduce taxes and produce “tax scholarships”
• Qualify for merit and need-based financial aid offered by colleges

Other questions that you need to consider are: 

• How old will you be when your last child graduates from college?
• How are you going to fund your retirement after paying for college?
• Have you developed a financial game plan to fund these two major events?

Since, like many parents, you may have assumed that funding your children’s education is a challenge separate from funding your own retirement, you may not have realized that the real crisis facing you is a current cash flow problem and a future retirement shortfall.  Saving for college and saving for retirement are somewhat mutually exclusive.  You cannot use the same dollars twice.

College funding and retirement both involve income and asset planning.  Proper financial planning for retirement may seem like a major task, and it certainly is.  But then, nearly 30% of one’s lifetime may be spent after retirement, and doesn’t 30% of your life deserve adequate planning?  Does this prevent you from saving for education costs and your retirement at the same time?  The answer is absolutely not!

The amount saved for college is dependent on the adequacy of your retirement plan.  If you are on track to meet your retirement goals, you can then start investing for your children’s education costs.

If you are unsure where to start or how to proceed, I would be happy to assist you.  College is one of your single biggest investments.  College funding laws and strategies change each year.  A qualified professional college financial advisor can maximize your eligibility for financial aid and education tax incentives, keep you informed, give you direction, answer your questions, and complete the paperwork in a timely manner.

Remember though, that financial planning comes right down to you as an individual.  No one will do the planning for you.  You must do it yourself.  Planning is a process that should be ongoing.  You should review your plan frequently to determine how well you are meeting your plan’s objectives and to revise those objectives in light of your real life situation. 

Setting financial goals may seem an intimidating process, but it doesn’t have to be.  All it takes is some simple steps.  If you have not already…what’s holding you back from creating a financial plan?  Don’t let it go any longer.  As you head into a new year…start it off with creating a financial plan for you and your family.  I am available to help you with the process!

Until next month…Best Wishes…and Happy New Year!