Is putting $$ into retirement (not college funds) wise for older parents?

[Anonymous]

My husband and I don't make a lot of money (HHI around $100,000), and we'll be over 60 by the time our kids reach college. There's no way we can cover the costs of college for our two kids--they will need financial aid.

Having been a financial aid kid in college myself, I know that the poorer the family looks, the more aid they will get. I also have the impression (based on limited Googling) that retirement funds don't count in financial aid calculations. (At least not for publics; some private colleges could be different.)

So my thought is that instead of putting our savings into a college fund or investment (eg rental property), we would be better off putting it all into retirement funds (up to the IRS's $16,000?/each max, which we are not doing now). Assuming we're still working, we can borrow from ourselves without penalty and pay ourselves back without having it add to our income.

Does this make any sense?

[Anonymous]

yes, you should fund your own retirement first. and don't borrow any more to fund their education than you can afford.

[Anonymous]

It does make sense, but more for the basic reason that if you don't have a lot of retirement savings already (which I am guessing is true given your HHI and the fact that you aren't maxing out your IRA) then it's more important to save for retirement than to save for college. Your kids can get aid/loans for college but no one will give you loans for retirement.

If think you might want to use some money for college, you might look into a Roth IRA-- you can probably each save $5500 per year in it, and those contributions (not the earnings on them) can later be withdrawn without penalty.

[Anonymous]

Suzie Orman says to take care of retirement before college funds. You are on the right path!

[Anonymous]

PP here. Thanks, posters. I should also mention that we own two houses (one primary residence, one investment) that are mostly paid off (over 400K in equity in each). If we don't have enough income to put the full $16,000 into regular retirement and $5500/year in a Roth IRA, should we consider refinancing so that we can use the money to max out our retirement? The mostly paid off houses will count in our financial aid calculation, right?

[Anonymous]

Anonymous wrote:PP here. Thanks, posters. I should also mention that we own two houses (one primary residence, one investment) that are mostly paid off (over 400K in equity in each). If we don't have enough income to put the full $16,000 into regular retirement and $5500/year in a Roth IRA, should we consider refinancing so that we can use the money to max out our retirement? The mostly paid off houses will count in our financial aid calculation, right?

I don't think your primary residence counts, but an investment residence would. You might want to check on the savingforcollege.com boards if you have questions how that will work.

[Anonymous]

The IRS limit is $17,500, not $16,000. You should max out your retirement savings first, as PPs have suggested.

[Anonymous]

And don't forget that once you hit 50 you can do catch up contributions of $5k a year

[Anonymous]

Yes.

[Anonymous]

I don't think it's fair to max out retirement and not save at all for college. I'm a single parent, age 51, and haven't been able to save nearly enough for either, but of my savings about 70% goes to retirement and 30% to college savings.

[Anonymous]

...PP, don't be upset then when you're college educated child does't help you out financially in your golden years.

[Anonymous]

Anonymous wrote:I don't think it's fair to max out retirement and not save at all for college. I'm a single parent, age 51, and haven't been able to save nearly enough for either, but of my savings about 70% goes to retirement and 30% to college savings.

I think you've missed the point here. If you will be of retirement age when your kids go to college then it can make sense to put all your savings into retirement because you will have more flexibility that way. You will be able to use those funds for either retirement or college when the time comes.

[Anonymous]

Anonymous wrote:Suzie Orman says to take care of retirement before college funds. You are on the right path!

Suze Orman is remedial personal finance for clueless white people. God, she's insipid.

[Anonymous]

It is very tempting to spend money on the kids college fund. But if you do not take care of yourself, you will be a burden to them. You can borrow for college, but you can't borrow for retirement. If you get much richer in retirement than you thought, you can always help pay off the kids student loans. I know a couple of people who have done that. The kids are much more grateful when they understand how much harder it is to save and pay debts than when you just give them a whole college eduaction. They are not really in a positon to understand how much you sacrificed. I am only now undrstanding that about my parents --they could have just spent it on themselves. But they saved and taught us to save.

[Anonymous]

Have you considered a prepaid college fund that you can make payments to so at least they will have 4 years of tuition (you still have to pay room/board, books and other fees)? That is what we did and also contribute to retirement.