Saving for retirement is a challenge. Figuring out how to pay for your kids’ college while trying to save for retirement is a much more difficult challenge.
College is a daunting and anxiety-inducing proposition for so many parents. It is one of the biggest pre-planned expenses in our lives and it often falls at an inopportune time; typically, children go to college around 10-15 years before their parents plan to retire. So, fitting it into the retirement plan is no easy task!
The good news is that there are plenty of online resources to help – especially when it comes to getting financially educated so that you can prepare as best as possible. Regarding online resources for college within your personal finances, there are four categories I would focus on:
- Financial calculators
- Access to advice
BIG DISCLAIMER: Because I am a registered representative affiliated with a Broker-Dealer, I am very limited in terms of my ability to recommend specific websites that provide financial calculators and financial advice. However, please know that there are plenty of quality websites that provide calculators and access to financial advice. Where possible, I will make recommendations in this article.
- Objective of this category: Acquire or reinforce a basic understanding of financial products and/or terms that can be used in a financial plan to help fund college.
- Example: Certain websites that will equip you with definitions and basic knowledge of financial products and traditional college funding vehicles. For example, you want to know more about a prepaid tuition plan. What is it and how does it work? What are its rules and tax implications? What are the underlying investments? Investopedia is a good place to start.
- Objective of this category: Understand the current landscape as it pertains to your financial landscape. Explore data such as tuition costs, current tax laws, economic/financial trends, and data analysis that may impact you.
- Examples: The 2017 Tax Cuts and Jobs Act changed some rules for the Section 529 plan. Several websites will compare 529 plans by state, and even rank them! Furthermore, these college-specific websites will help you understand data, which will provide you greater context than just financial product definitions. As I mentioned above, I cannot recommend one specifically, but all it takes is a simple search online.
- Financial Calculators
- Objective of this category: Find the online tools to test your own numbers and run different life scenarios.
- Explanation: I find that these calculators often help people get a visual for their financial planning questions—questions like, how much will my 529 plan be worth? Or, what will the cost of college be when my daughter graduates high school? Or, how much will it cost me if I wait a year to start saving?
- Please note: Calculators are meant to provide a visual and give further context. They are precise in math but not precise in reality. If you are a “do-it-yourselfer,” financial calculators should be used as one set of facts. They are inherently incomplete and so need to be corroborated with other research, planning, and contextual factors.
- Access to Advice
- Objective of this category: Find or get access to quality and expert positioned financial advice forcollege planning. If you are not a “do-it-yourselfer,” you will probably want to find quality financial advice from a good financial planner, especially one who has expertise in the realm of college planning.
- Tips: It is difficult to sift through all of the sites to find a quality advisor or CFP®. Here is a guide from within the industry on what to look out for when searching for financial advice or an advisor to work with for college planning:
- Years in business
- FINRA Broker Check
- Quality of website/ How much content on college is provided on their website?
- Organization(s) that the advisor is a part of (e.g. NAIFA)
- Fee/compensation structure (usually this info is not provided online, but I recommend that you ask on a first meeting. Be persistent to get a clear answer.)
- For the financial planning aspect of college planning, there are many online resources that you can utilize to give you a clearer picture of how to prepare and educate yourself.
- Think of the different resources to help you in terms of these categories:
- Definitions – to get a basic understanding
- Data – to get one level deeper and get analysis, trends, etc.
- Financial Calculators – to run your own numbers and test scenarios
- Access to advice – to find an expert professional
This concludes the seven-part article series on How to Utilize Online Resources for College Planning. We hope you have gotten value from this, and if you have questions, please ask!
Part 1: How to Research Scholarships
Part 4: Researching Student Loans