Friday, October 6, 2006
For What It's Worth: Retirement vs. College
It's an age-old debate -- saving for college versus saving for retirement. If you're like most parents, you put your children's needs first. But that might not be the best strategy for saving. Seven's Craig Stevens shows us For What It's Worth.
WSVN -- Whose future is more important: Your's or your kids?
When it comes to financing, Seven News financial expert Ken Wurtenberg says most parents make a costly mistake.
Andra Tucker: "Unfortunately, most parents think about their children first and themselves second."
It's unfortunate because all parents learn soon enough you can borrow money for college, but you can't borrow for retirement.
Andra Tucker: "Hi, Ken, how are you today?"
It's a mistake Andra Tucker made.
She was so determined to pay for her son's college education, she worked up to three jobs and borrowed against her 401-K.
Andra Tucker: "As Jerod was growing up from kindergarten on up, I always stressed to him the importance of getting good grades and the fact that his education wouldn't be complete without finishing college."
But, according to Ken, you should never touch your 401-K or your IRA.
Instead, save for retirement first then invest in your kid's college fund, and when the time comes, you can always apply for student loans.
Ken Wurtenberg: "I think one of the biggest fears people have as they get older is running out of money. I don't care if you're a multimillionaire or in a low income bracket, we all fear running out of money." It's a fear financial planning can withstand.
For college, consider the 529 and the Florida Pre-Paid Plan.
Ken Wurtenberg: "It accumulates, the funds are not deductible, but they accumulate in a deferred tax environment, tax-free and they grow."
As for retirement, consider the cost of inflation and only think of social security as a supplement.
So far, it's worked for Randolph and Kathryn Lacroix.
Randolph LaCroix: "There's a big misconception that you can live on less money when you retire, and that's not true, not true at all, if you want to maintain your style of living."
Another major consideration: Life expectancy. Make sure you have enough income to cover your desired lifestyle well into your 90s.
Randolph LaCroix: "An ideal retirement plan is that you outlive your money, and you have money to bequest to your beneficiaries and your heirs."
Andra's learned her lesson.
Her son will soon graduate from college, but she's already saving for retirement -- with the hopes of one day enjoying her golden years just like Randolph and Kathryn.
Randolph LaCroix: "Not that we're rich, but we're comfortable, so I'm happy with it."
Ken also advises looking into long-term care insurance, so a major medical problem doesn't deplete all of your assets.
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