istock.com/XiXinXingWhen it comes to planning for retirement, most couples in their forties who have been married with one to four children at least are not even sure if they can get to a comfortable retirement.
This is because they are struggling to build up any sort of retirement asset base due to current family expenses. And one of the major expenses for parents, of course, is their kids’ College education.
Now when you start to add in the looming expense of getting four children through college on just a four-year degree, the costs are staggering and serve only to detract and diminish any plans for a healthy retirement.
It is believed that a person’s single largest expense is their home. That may be true but this expense can be spread out over thirty plus years.
Paying for college is an expense that is compacted into a tight time frame of 10 years or less.
As a parent, I know all about this. For my readers’ information, I do have two kids and both of them are done with their college education. My daughter is now a teacher at a nearby elementary public school and working part-time at an art and craft store.
With regards to my son, it’s been almost a year since he graduated and he’s still struggling to find a full-time job. He graduated Magna Cum Laude with a degree in Animation Art at a private college school. He’s been sending out those resumes on a regular basis but it has not been easy like we thought. I’m sure his situation is not unique and the same is true with a lot of fresh graduates out there. In fact, we personally know of quite a few.
He’s currently working part-time at a local grocery store. In the meantime, his student loans are all due and guess who’s helping him with the payment? Your guess is right on the money.
Now let’s look at some numbers of a college education
The average costs for a four-year degree are about $28,387 for a public college and about $59,341 for a private university. Of course, the reality is the graduation rate.
As of 2008, with very little improvement, the graduation rate for freshmen entering college that year for a four-year degree was only 60% and those took 6 years.
The other 40% are taking even longer to graduate.
So let’s do some math here with just the public schools without inflation. For your son or daughter’s four-year degree that took six years, the public education costs are about $170,322.
It is worse when they switch majors and even worse at a private institution. This is for just one child, let alone four children.
Now I will grant you that not all of this is paid immediately out of pocket. They are hopefully grants, scholarships, work-study, and employer-sponsored programs that help defer the costs.
Keep in mind that loans have to be paid back by someone. Meaning, you really might end up paying part or most of the student loans of your children. We can only all hope that they will find a job, a good paying job right after graduation. Although unemployment rate may be the lowest in a decade, there is no guarantee that a job is ready for them right after graduation.
The average scholarship per student per year at a public university for 2011-2012 was $6,270. Now let’s multiply this out for 4 years because the last two of the six years is difficult to get the additional scholarships. So your student gets a whopping $25,080 taken off of the $170,322 which means that either parents or students have to pay for this $145, 242. Again that is for only one child.
All of this will adversely affect the parent’s ability to also fund their own retirement. Do you see now why proper college planning is paramount to proper retirement planning?
Most parents do not understand the Free Application for Student Aid(FAFSA); do not understand which assets affect their own out of pocket contribution the government tells you have to use, what constitutes an independent student and so forth.
To properly understand how to navigate through the college planning waters, it would be advisable to contact a financial and insurance planner. One who specializes in college planning and fully understand the FAFSA. If you contact an advisor and their first pitch is a 529 plan, then leave.
A true well qualified financial college planner will be properly security and insurance licensed, understand asset reallocation. Should be willing to work with your student to find the best-fit career and college for your student before they start college.
They will do everything to help the student not have to keep changing majors. They will for a reasonable fee create a holistic college and retirement plan that will fit you and all of your family.
Without proper life design, college and retirement planning, parents can expect a mediocre retirement and saddle their students with huge student debt that will take years to recover from.
The key is to start planning early.To start your journey, I recommend you check out Happy Life Happy Career. It is a short read, can be obtained from Amazon or Kindle and give you the start of creating your life by design, understanding career choices and college planning.
Do not let time pass you by if you know that college is looming on the horizon for your family. Start as early as possible or as soon as your baby was born. Discuss your plans with your spouse.
Work as a team and make sure to set a goal. You must and should start your college planning now for a stress-free college and retirement experience!
