Many Parents Risking Retirement Funds To Send Kids To College
PITTSBURGH (KDKA) -- It's a dilemma that many parents face - how to help fund a child's college education. But with tuition costs so high, financial advisors worry that parents may be risking their own retirement to help their kids.
One of the toughest challenges that parents face is how to pay for their children's college education.
"They've had to make some sacrifices in their business to have some savings for me to go to college," said Alec Jachwak, of Souderton, Pa.
"I'm sure my parents are going to work longer than they would like to," added Kate Bilash, of Rivervale, N.J.
Financial analysts worry that today's parents are risking their own retirement security in order to get their kids through college.
Financial advisor Bob Fragasso says many parents want to take money out of their 401K retirement funds.
"They're focused only on education of children, and therefore, fund that to the best degree possible and shortchange themselves towards retirement," said Fragasso. "That's a big problem."
Bill Wolfe, executive director of a non-profit, faced that problem when his children were ready for college.
Wolfe: "We put money into our 401K program and that was our savings."
KDKA's Jon Delano: "In other words, you were putting money into your retirement?"
Wolfe: "Into our retirement, right."
Delano: "And you didn't have any other money set aside for their college?"
Wolfe: "No, no."
Wolfe wanted to take money out of his 401K, even though there is a penalty to do that, to help his kids. But his financial advisor had a better idea.
"We took out a home equity loan to help support her college education," said Fragasso.
Use the equity in your home to pay for college - the interest on that is deductible.
In addition, says Fragasso, borrow against the cash value of life insurance policies, or better still, examine your spending habits.
"I could find probably a couple or several hundred dollars of month in most families that could go to education," Fragasso added.
Bottom line, sacrificing to help your kids in college is one thing, but jeopardizing a secure retirement is quite another.
RELATED LINKS:
PHEAA Warns Parents Of College-Bound Students To Be Wary Of Financial Aid Scams (2/6/13)
More Reports from Jon Delano
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