One of the most common concerns parents have is how they plan to afford continuing education. Unfortunately, many parents are nearing retirement when their children are entering college. As a retired parent, you want your child to succeed and are prepared to tighten your financial resources to provide them with a college education.
College Tuition – Create a College Savings Plan
While you may consider this “financial stretch” to be temporary, the choices you make will directly impact your life during your retirement years.
Channeling all your retirement funds towards your child’s college education may clear the tuition bill, but you’ll end up facing financial consequences down the road. So, how do you ensure you have enough money to cater to your retirement needs and your kid’s college education? Whether your children are edging towards a creative career or are interested in science and math. Here are five ways you can provide support and fund college tuition without jeopardizing your future:
The last thing you should do as a retiree. Is to mortgage your retirement and future to pay for your kids’ college education. You may have done a good job trying to set aside funds for college, but if you have multiple kids. Chances are some of your children may not be funded much. It’s important that you create a college savings plan for your child as soon as you anticipate that they’ll need help paying for their college tuition.
How to Pay College Tuition
Start a college plan as soon as possible. Investing in a 529 plan is one of the most popular ways to build college savings while reaping tax benefits. The benefits and guidelines attached to state-sponsored savings plans vary across States. Take time to research and find out what your State offers before investing in one.
Whether you have two or twenty years before you need to pay average college tuition. Investing in a 529 plan can help you prepare and get ahead of the game. If some of your relatives are financially stable, encourage them to make gifts. Contribute to the 529 college savings plan you’ve set up rather than spending hundreds of dollars on some toys for your kid. When the time comes to fund a college education, you can go ahead and withdraw the money for tuition.
Consider a Reverse Mortgage
If you’re at least 62 years old and have substantive equity in your home. You can take out a reverse mortgage to fund your kid’s college tuition using a reputable service like All Reverse Mortgage. Unlike a traditional mortgage, a reverse mortgage allows you to tap into the equity you’ve built up. Over the years and turn it into a loan for yourself. You can take the funds as a line of credit, series of regular payments, a lump sum, or a combination. The amount you receive depends on your age, current interest rate, and the property’s appraised value.
For many retired parents, taping home equity could provide them with a way to pay for college education costs. Make ends meet, and cover other financial goals. Make sure you speak with a financial expert before making any decisions. Taking out a reverse mortgage and discussing your qualifications with HUD’s new financial assessment with a loan officer.
Apply for College Tuition Grants
Grants can help fund college education costs for students with extraordinary financial commitments and demonstrated financial need. As a senior citizen and retired parent, you can contact your student’s college— specifically the financial aid office— and find out if they have institution-specific grant programs for students (whose parents are senior citizens) based on family circumstances.
Another way to fund college education costs is to apply for federal financial aid by completing the Free Application for Federal Student Aid (FAFSA). Since you’re a senior citizen parent, your age is likely to affect your child’s eligibility for federal financial aid, especially if they’re independent students and don’t need to submit your financial and income information on the FAFSA. As such, they may demonstrate a greater financial need and get federal grants for their college education.
Consider Tapping into IRAs
A Roth IRA is a retirement account that allows you to make contributions with after-tax dollars. Unlike traditional IRA deposits, you pay taxes on the dollars you contribute to your account with this individual retirement account and don’t pay income tax when withdrawing the money from the account. Your goal may have been to save for retirement with a Roth IRA, but that doesn’t mean you can’t tap into it for college education costs or any other purpose.
One of the benefits of a Roth IRA is that the money grows tax-free and you can make contributions at any age, as long as you have earned income.
Encourage Your Kid to Participate in a Work-Study Program
According to a recent study, students who channel their own earnings or “do something” contributing to their college education costs have higher GPAs and do better than those who don’t. One way to get your child to have some sense of personal responsibility towards their education is to participate in work-study programs.
Work-study programs are almost like part-time jobs, only that the student’s earnings are channeled towards average college tuition costs. Eligibility is often determined based on a student’s financial circumstances.