Nest Egg Protection and College Costs

I’m reminded a future retirees personal economy is often times threatened by underfunded or unfunded liabilities, as I slide back into my hammock hung between two ancient pines. The river roars past me making its way south to the Rio Grande. Great rivers form the earth’s circulatory system revealing Mother Earths health and well – being. Rivers also provide us answers to our questions. All too often rivers prompt us to ask better questions. How many of us have underfunded our children’s college costs?

Turning on my side I ask my question directly to the river. Are college costs a threat to my nest egg?  Spring rolls around slowly in the Rockies. Thin ice sheets cling to the banks of the river awaiting the inevitable. Canadian Geese are the first to return to the river valley followed by Blue Jays, and Ravens. Their chatter was sorely missed. Voles re-emerge scampering about. A few birds nest early, establish their presence vocally; then perform regular fly bye’s to protect their perimeter.

One important aspect of retirement planning is identifying underfunded and unfunded liabilities. Multi-generational liabilities taking care of others has a huge impact one’s retirement. College costs can be a threat to one’s nest egg. Typically a parent spends $200,00 raising one child but this does not include college costs. We all love our children and want to do the very best we can for them. As of late much attention has been focused on young people starting off their lives with significant amounts of debt. If your child is studying to be a doctor, lawyer or engineer then this is a no brainer. This debt is an investment worth making with a solid return. Other career pursuits may require a careful review to determine what constitutes a reasonable investment and return. In some cases living at home and completing the first two years of one’s degree at a Public 2 – year college may be warranted. Scholarships, Grants and working part-time are core components of a students college experience today. Getting good grades and working part-time are true indicators of a child’s future success and demonstrates commitment to their education and future career.

Given today’s slim financial margin of error, parents in retirement are forced to make tough decisions. One’s reminded when they fly in the event of an emergency to put the oxygen mask on themselves first then their child. One needs to take care of oneself first then their child. It is critical one be realistic about the actual costs of college at the time of their child’s enrollment. 

According to the College board annual costs are as follows:

Public 2 – year college

Tuition fees                     $2, 960

Room & Board                $7,400

Pubic 4 – year college 

Tuition fees                     $8,240

Room & Board                $8,890

Private 4 – year college 

Tuition fees                     $28,500

Room & Board                $10,090

For example funding college costs to get a B.A degree for one student at private 4 year college today is 154,360 vs. a public – 4 year college at 68,520. The question then becomes what will the actual costs be when one’s child enrolls in college? If it’s 20 years from today it likely to be in the neighborhood of $600,000 at a private 4 year college and $340,000 at a public – 4 year college maybe even higher. It becomes pretty clear if one’s not saving a minimum of $200 – 250 a month for 18 years one has an underfunded college costs plan. I recommend you check historical returns on your account to see if you are on target with your college saving goals. Please factor in scholarships, grants, and student contributions. I encourage you to be reasonable regarding what you can and can’t do for your child’s college education.

Assuming you have paid off all of your debt with the exception of your mortgage, are saving 15% of your income for retirement then you may wish to investigate the following programs:

ESA – Education Savings Account, tax free, very flexible

529 College Savings Program with mutual funds you pick up front, tax deferred until enrollment, flexible

529 Pre-paid allows you to pay today’s tuition costs but could pose a problem down the road, somewhat flexible

Nellie May and Sallie May college student loans, very flexible, last resort

FASA – Applications Scholarships typically Jan. 1, be sure to check on current assets reporting requirements

Staring intently into crystal clear, braided pocket water, I smile, recalling how yesterday I was getting lost in what I love doing. I genuinely enjoy being as busy as I want to be creatively. It turns out not underfunding my children’s college costs was key to everybody’s happiness and financial security. Turns out identifying unfunded or underfunded liabilities early on is key to nest egg, protection.

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About Roger O'Keefe

My background is in education and finance. I'm a published author and photographer, former radio talk show host, and creative retirement planning expert. My work is a love of labor, I do not sell any products of any kind. I've appeared as a guest on more than 50 national and local television and radio shows. With a Masters in education, I'm a licensed educator and author of the “Future Bright Program” and the California State Department of Education “Teacher Appreciation Program.” I'm a member of the American Association of Retired Persons and the National Care Planning Council NCPC. I'm currently writing my second book and reside in the Rocky Mountains of Colorado. My mission is to reshape retirement planning one person at a time. Please visit my website www.creativeretirementplanning.net and take advantage of the many complimentary online seminars, resources, and retirement planning tools.
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