Back to School: How Parents Can Approach Tuition & Retirement

Parents planning for retirement while seeing their growing children off to college have a unique financial road ahead of them. Retirement and college are costly endeavors, and it’s ideal to have a bundle saved up for both. But is that even possible?

Your clients may approach you with questions about helping their kids pay for higher learning while ensuring their own financial stability throughout retirement. Depending on their circumstances, they may not have to choose between one or the other. How can they approach tuition and retirement?

Don’t Sacrifice Retirement

Start with an important foundation for your clients: Don’t wipe out retirement savings to pay for college.

Your clients have worked too hard to see their retirement funds grow wings and fly away to an expensive university. If they don’t want to keep working well into their seventies (or even eighties) to afford living, they’ll need a strategy to set themselves up for a secure retirement. That, however, doesn’t mean they can’t help their children at all.

Paying for Tuition

Students can fund their education in a number of ways — including the students paying for portions of it themselves by working a part-time job while in college. Scholarships, student loans, savings accounts and 529 plans are among the other common options available. Parents and their children can use just about any mixture of some or all of these options to pay for college — without resorting to sacrificing retirement funds. 

We took a deeper dive into how parents can plan for college expenses, which may be of further assistance to you and your clients.

Paying for Retirement

Numerous avenues exist for paying for retirement, though saving up can be trickier since this is meant to be enjoyed in the future. Whereas a student’s college career happens over the course of several years relatively early in their lives and is then paid off for a time afterward, retirement finances are put away now in the hopes they can be used in the distant future. It’s not always easy to think that far ahead. 

We won’t go through an exhaustive list of ways your clients can finance their retirement, but to refresh, some of those options include:

  • Employer-sponsored 401(k)
  • Personal savings accounts
  • Stock market investments
  • Annuities

Social Security also plays a role, but those benefits only provide a portion of what someone was making while employed.1 Your clients can’t count on Social Security alone to send them through their golden years comfortably.

Saving for Retirement and College

With careful planning, it’s possible for parents to help pay for their children’s education while making sure they have enough for themselves when they finally retire, too. Planning — that’s the key word. This isn’t “fly by the seat of your pants” territory. 

Questions you can ask your clients include:

  • Are you currently participating in your employer’s 401(k) or similar retirement plan?
  • Do you have a nest egg already in progress?
  • Have you considered other options to fund your retirement, like annuities?
  • When do you plan to retire?
  • How many years until your children go to college?
  • Do you and your children already have schools in mind and know the price?
  • Have you considered or begun the process of applying for financial aid?
  • Will your children be working while in college?
  • Are there any major financial gifts to your children from other relatives in the pipeline?

That’s just a start, but don’t be afraid to respectfully dig into the nitty-gritty. Talk to your clients about where they are financially and what plans they have for their children’s education. This isn’t the time for sugarcoating. Be honest, because they’ll need to see the hard numbers.

Planning for Changes and Volatility

Given that the only constant in the universe is change, you may need to prepare your clients for some rough waters no matter their strategy for tackling tuition and retirement expenses. These are particularly volatile times, so the markets may continue to ride a rollercoaster, and student loans remain a hot-button issue in politics. These factors may make it the right time to start talking with clients about introducing risk control options into their portfolios.

Have you brought up annuities to your clients yet? We have resources to help you and your clients rethink retirement approaches, including through certain annuity products. Click the link below to access your copy of Rethinking Retirement Planning today. 

Rethinking Retirement Planning white paper


Marshall Heitzman
Written by: Marshall Heitzman, CFP®, ChFC, FLMI, CPCU, BFA™

Marshall is TruStage's Advanced Planning Expert and has more than 25 years of experience in the insurance and financial services industry. He consults Financial Professionals on advanced retirement planning concepts for retirement and wealth management clients.

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