College Planning for Older Parents and Grandparents

One of the most difficult realities facing families today is the realization that saving for college is just not going to be a possibility.

Kids Have Big Dreams You Know!

Why? Once someone realizes that he will need over $250,000 to secure himself in addition to social security, and once people realize that they need to save a significant sum for medical contingencies and health costs, it becomes obvious that the money needed to fund a 4 year private college is impossible.

The Rescue

However, with that said, parents and grandparents can help out with corollary and ancillary expenses such as housing, food, fees, travel abroad expenses and other things that financial aid may not support. And people do often want the flexibility in case things change (inheritance, selling primary residence, etc) and they can help their children.

If that’s the case, how are some ways that people can save directly or in a contingent sense for college costs? ideas depend on your age. Let’s say you are a grandmother and you want to help with college expenses. Your choices might include gifting money to your grandchildren or to your children for your grandchildren.

However, you might be better off keeping the money in your own name. Why? Because paying tuition expenses directly will not count against gift tax limits and that money would not be counted against your grandchild or kids for financial aid purposes. The money also stays out of the liability risk spectrum of others. Maybe you have proper liability insurance (or you should!) and your kids do not – that cash might be safer staying with you right now.

If you’re an older parent with a young child, you could also consider saving for

Where will your child study?

college by increasing retirement plan contributions. If you’ll be over age 59 1/2 when your child reaches 18+, then you could touch retirement money without penalty.

If your child is young and you want the flexibility to use savings for private high school, then you might want to consider an Education Savings Account (formerly the Coverdell) which offers that flexibility.

The bottom line is that if you have the inclination to save for your child’s college expenses, then take the time to review the options which offer pros and cons depending on:

  • your age
  • your child’s age
  • the amount you can save
  • your tax bracket
  • your assets and income
Take the time yourself or with a professional planner on this before committing money to a plan long term.
if you’re a do-it-yourselfer, SavingforCollege.com offers a nice site with helpful tips on college planning topics. Otherwise, feel free to give us a call – 781.393.0021 or request an appointment online here: Contact Form - thanks for reading.