Pay child's college tuition at detriment to retirement plans

[deedeetoo]

I'm going to sound totally selfish here, but NO WAY! I'm sorry, I love my kids and want nothing but the best for them. But by the time they're in college, I don't owe them a free ride at the expense of my own well being in my later years. We're older parents--I'm 50, DH is 53 and kids are 13 and 15--so this is going to be an issue very shortly. We have some put away in college funds for them, but nowhere near what they're probably going to need. We're hoping for the best with scholarships and grants. But then there will probably be some loans involved as well. This is life.

I'm also of the belief that if they've got some "skin in the game" so to speak, the college experience will be more valuable to them. If they have to pay for it, they're going to appreciate it and do their best. If we cover their expenses for four years, they may not be as invested.

I hear stories of people putting off retirement for years or parents working two jobs at our ages, just to put kids through college. They give up things and live very close to the vest, while the kids are attending $40,000 a year schools and not contributing at all. That just doesn't seem right to me. Call me self-centered, but I don't plan on struggling through my "golden" years for this to happen. And my kids already know we're going to help as much as we can, but it won't be easy, and they'll have to contribute in some way as well, so it won't be a surprise in a couple years!

We are very similar to you in age but a few years ahead. Dh is 60, I am 55 and kids are 17 and 14. I'm not sure if you've been following the other threads about paying for college, but your comment about a $40k/yr school makes me think that maybe you haven't been keeping up. College prices have been rising dramatically. Your signature says you live in MA. UMass Amherst is nearing $30k/yr. Most private schools in the Northeast are about $60k/yr. Kids can only borrow $5500 their freshman year without you cosigning. Of course your kids could go to one of the local state colleges or community colleges and live at home to lower costs.

As for the original question, we do not plan to sacrifice our retirement, nor do we expect to take out loans. We have saved for both retirement and college. We plan to retire in 8 years when our youngest finishes undergrad. Our DD will be applying to college soon and she has been given a budget for what we can afford. She will not be going to any full price $60k private school. She is applying to a couple that she really likes and where we hope her stats will get her some merit money, but she knows that if the merit money doesn't come in, then she can't go there. She does have several public options that she likes well-enough and that are in budget in case the dream schools don't come through.

 

[ronandannette]

No. I'm 45(ish) and DH is 61. Due to certain circumstances we're already behind the curve and have precious little time left to recover. We will contribute pay-as-you-go to the best of our ability but breaking an RRSP or taking equity out of the house is out of the question.

 

[Goofy_Disney_Dad]

No, I would not.

 

[mom2AidanAndEli]

We are very similar to you in age but a few years ahead. Dh is 60, I am 55 and kids are 17 and 14. I'm not sure if you've been following the other threads about paying for college, but your comment about a $40k/yr school makes me think that maybe you haven't been keeping up. College prices have been rising dramatically. Your signature says you live in MA. UMass Amherst is nearing $30k/yr. Most private schools in the Northeast are about $60k/yr. Kids can only borrow $5500 their freshman year without you cosigning. Of course your kids could go to one of the local state colleges or community colleges and live at home to lower costs.

As for the original question, we do not plan to sacrifice our retirement, nor do we expect to take out loans. We have saved for both retirement and college. We plan to retire in 8 years when our youngest finishes undergrad. Our DD will be applying to college soon and she has been given a budget for what we can afford. She will not be going to any full price $60k private school. She is applying to a couple that she really likes and where we hope her stats will get her some merit money, but she knows that if the merit money doesn't come in, then she can't go there. She does have several public options that she likes well-enough and that are in budget in case the dream schools don't come through.

Oh, I've been keeping up! UMass Amherst is one my son is already very interested in! I just threw $40,000 out there as a figure, knowing that in other areas of the country prices are very different for state schools. And even around here, that's more than enough for a state school (even UMass). It was really just arbitrary. Just saying that if Mom and Dad weren't shelling out $20,000, $30,000, $40,000, or more, a year for school, they could be living much more comfortably--not working two jobs, retiring when they should, enjoying their lives!

 

[undertheradar]

It should be a balance. Why do you have to choose between the two? Our kids get school paid for by us. The deal being that they pay us back 25% of cost, after they have a career going. School is too expensive to have kids taking on large debt load, just not the way we planned for our kids.

 

[Mickeyluver37]

I also don't think this is a black and white yes or no answer. I'm sure we are somehow "sacrificing" our retirement just simply by the fact that we have 4 kids, let alone their tuition costs. So, yes, I think we are. However, we still continue to contribute, and would NEVER take a 401k loan, so we aren't derailing our plans of having what we need in the bank by the time retirement age is here.

 

[tvguy]

Unless you are very near retirement, FAFSA makes you add back into your income any money you put into a tax deferred retirement plan, so the SYSTEM considers it money available for your children's college education.
We did not have to alter our retirement savings. We cut money elsewhere, old cars, fewer and less expensive vacations, etc.
We had been in our house 22 years when our oldest hit college. We have a 15 year mortgage so house was paid for by then. The equity in our home was our backup in case college costs exceeded what we had saved.
Actually, we financed our kids college from savings, loans and about $1,000 a month from our paychecks....basically what had been our house payment was now used to pay for college expenses.

 

[disykat]

Absolutely not. I will, however, give up some vacations, new furniture, moving to a nicer home, etc.

We did what tvguy did, made a plan to pay off our house in time to free up that money for college expenses and had money saved for school by living frugally. We made it without loans since our kids worked and got some scholarships and I also went from part time to full time employment.

We're nearing the end of the college years for our kids and are starting to very intentionally ramp up the amount we put into our retirement, but we never decreased for college. We kept it steady, but also knew that when college was over that money would divert to bump up retirement investments.

I do have to add that, like leebee mentioned above, we did have some independent IRA money - separate from our work retirement accounts- that we had designated to raid if necessary. We didn't end up needing it, but IRAs can be a good way of saving for college if you haven't already got them maxed as part of your retirement plan. We would have done that over taking on debt.

Another thing to add is that we told our kids the limit and would not have gone over it. Basically, if our kids chose a school that cost over what a state school cost they would have had to have scholarships to cover the difference. They both ended up at state schools, but both had other offers that met the criteria.

 

[Art 1]

Would you sacrifice your retirement in order to pay your children(s) college tuition?

That's easy. Yes.

 

[mom2AidanAndEli]

That's easy. Yes.

Just really curious. Why? Some people have explained why they feel one way or another. I posted earlier that I feel very differently and explained some of my reasoning for it. I'm just really curious to hear the other side.

 

[piccolopat]

Interesting question, and one we investigated (recommended by a friend who is a financial planner) as DD approached college age. We didn't need to, but we contemplated borrowing against our retirement. I don't remember all the fine details, but apparently with some retirement accounts, you can borrow against them and it's considered a loan, with a repayment plan, interest rate, etc. You pay back the account just as you'd pay back a regular loan, but the interest that you are paying also goes into your account. In essence, you are paying the interest to yourself instead of to a bank. Now, you can argue that although you pay yourself interest, the principal doesn't earn as much interest as it's smaller than if you'd left the money in the account in the first place, but I think that'd depend on the rate that the account was earning. It also makes sense to look at how many years away from retirement you are; it's one thing to borrow this in your early 40s, another to do it in your late 50s (which is where DH and I are). SO, I guess I'd answer the OP with a resounding "maybe!"

Please also understand that if you take a loan against your 401k and then leave your job (voluntarily or not), the loan is usually due in full immediately. It is almost never a good idea to go this route.

 

[Colleen27]

To a certain extent, yes. We are a one income blue collar family and we're not saving nearly what the experts recommend we should for retirement. So in a sense a lot of our optional spending is coming at the expense of our retirement, and that includes the money we're spending on private schools now and will spend on college in the future. We'd be in a much better place in terms of retirement savings if we stuck that money in IRAs and DH's 401k instead of spending it on the kids' education, but giving them a good start in life is as important to us as having a good end ourselves. That said, we're not completely ignoring our retirement savings to stash more away in the college funds, nor will we raid those accounts for college expenses. We're shooting for balance and hoping we can strike a good one.

We've worked with the kids right from the start to help them realize what their options are and figure out ways to reach their goals without crazy amounts of debt. They're on two very different paths so far - one going to a vocational high school program that will give him a one year head start on the community college trade skills program he's interested in, the other attending a private school with her sights set on elite colleges that won't expect much from us if she can get in. We'll see how that works out in the next few years (I have a HS junior and freshman this year). By the time we're sending our youngest (2nd grade) off to college we should almost know what we're doing!

 

[sk!mom]

No. We paid our house off several years ago. College is being paid for with former mortgage money, savings, scholarships, and DD taking over her own fun and gas money. (through high school she had a monthly allowance from us to cover those things.)

In 4 years, I will be fully vested in my pension plan. We have continued DH's 401K and IRA contributions. We are sacrificing day to day things (meals out, cut off cable) and expensive vacations for at least 3 years of college but have no plans to dip into or slow down on retirement contributions. DH and I hope to continue working for at least 10-12 more years- we like our jobs. It is very freeing though to know that in 4 years, DD will be done with college and on her own and I will be able to retire whenever I want.

 

[LisaR]

I would not sacrifice our retirement money for my children's education, however, I would make sure that I am really doing everything humanly possible to save something for them. If that meant getting rid of cable, having a "dumb" phone or no cell phone, almost never eating out, camping if we really must go on vacation, skipping Starbucks, driving an older vehicle, packing a lunch everyday, etc. I would.

 

[ten6mom]

My financial advisor told me to fund my retirement first.

 

[mom2AidanAndEli]

I would not sacrifice our retirement money for my children's education, however, I would make sure that I am really doing everything humanly possible to save something for them. If that meant getting rid of cable, having a "dumb" phone or no cell phone, almost never eating out, camping if we really must go on vacation, skipping Starbucks, driving an older vehicle, packing a lunch everyday, etc. I would.

I'm finding this discussion very interesting! And I hope you don't mind me asking this (actually it's for anyone who feels this way, but yours was the last one I saw!).

If you're willing to give up all those things for the kids' education, are they willing to do the same? Do they go without all those things as well? If your teenager works, is everything they earn put away towards college or they out having fun? Do they get to keep some of their paycheck and splurge on coffee or going out with friends? I can't imagine many teenagers these days giving up their phones to pay tuition bills! Or not going out with friends on Saturday night.

Not a judgment at all--just honest curiosity!! See, if I were willing to sacrifice to that extent (which I'll admit I'm not!), I would expect them to as well. And I wonder if parents who are doing things like make those same demands on their children.

 

[Colleen27]

If you're willing to give up all those things for the kids' education, are they willing to do the same? Do they go without all those things as well? If your teenager works, is everything they earn put away towards college or they out having fun? Do they get to keep some of their paycheck and splurge on coffee or going out with friends? I can't imagine many teenagers these days giving up their phones to pay tuition bills! Or not going out with friends on Saturday night.

Not a judgment at all--just honest curiosity!! See, if I were willing to sacrifice to that extent (which I'll admit I'm not!), I would expect them to as well. And I wonder if parents who are doing things like make those same demands on their children.

I wonder the same thing. Most of the people I know IRL who say that they'd sacrifice to that degree don't actually have to, which makes it largely a statement of principle rather than one of action so I've never really seen it play out. I know that if I were giving up so many of the little pleasures in life for the sake of my kids' education I'd expect an equal amount of sacrifice from them. I don't think I could live for years without vacations, cable, eating out, etc. while paying for their resume-building extracurricular activities and letting them spend their money on movies and fast food and a smartphone all those other things I was denying myself.

 

[The Mystery Machine]

I'm finding this discussion very interesting! And I hope you don't mind me asking this (actually it's for anyone who feels this way, but yours was the last one I saw!).

If you're willing to give up all those things for the kids' education, are they willing to do the same? Do they go without all those things as well? If your teenager works, is everything they earn put away towards college or they out having fun? Do they get to keep some of their paycheck and splurge on coffee or going out with friends? I can't imagine many teenagers these days giving up their phones to pay tuition bills! Or not going out with friends on Saturday night.

Not a judgment at all--just honest curiosity!! See, if I were willing to sacrifice to that extent (which I'll admit I'm not!), I would expect them to as well. And I wonder if parents who are doing things like make those same demands on their children.

I can't speak for anyone else but my own children. My children know the sacrifices. All of their friend's go on tons a vacations, have designer labels, etc. and they do not.

My 18yodd did use her grad. money for a senior road trip with friends however that was the first time she splurged. She also researched how to get scholarship money and credits toward her degrees and worked hard in school. She is frugal and thinks about her spending.

She does not have a job yet. She has/had medial issues to tangle with. Her mouth alone is a college education by the time we are done with it in 2 yrs.

Then there is my oldest dd who is 24. She had to drop out of college due to medical issues. She is going to be having heart surgery soon (again).

It is a matter of circumstances and perspective from where I sit.

 

[Bec3b1g]

We were willing to pay for college at a detriment (not sure if that's the word I would use) to our retirement plans. We have a very aggressive retirement plan, though. We own our own business and part of that retirement plan is gifting the kids the business and walking away from it. If we would have needed to shift things around for them or need to retain some equity stake in the business in order to make up the college money, I don't feel we would have compromised our retirement much. I would have been willing to down-size our house too. But I recognize our situation is unique. I'm willing to pay for my kids to get a good education so they can take over the day to day running of the business and I can sit back and relax

 

[tvguy]

My financial advisor told me to fund my retirement first.

Yes, most financial advisers say fund retirement first, and BORROW for your kid's college tuition if you can't afford to do both. And never ever ever ever borrow from your retirement.