Retirement Money “OR” College Funding?

oxygen-maskThere are times where I am counseling a family on getting their child through college and I find that the parents have not given adequate attention to their retirement and monthly cash flow needs.  Frequently I see money originally intended for retirement being redirected to help fund the child’s education. Not a good idea!  I want to address this now.

It might be of assistance to employ a metaphor. In plane flight, we are accustomed to the short “speeches” given by stewards before take off. We’re asked to keep our seat belts on, the exits are pointed out to us, and we’re told where to locate various safety equipment.

We are also given a brief demonstration about oxygen masks, and we are always told “put yours on first, and then help any children you have with you…”

When I first was a passenger on an airline and did not understand the reasoning of this, I was surprised. I thought, “How selfish!” When my mother explained the rationale, that it was better judgement for the adult to get the mask on first, as the adult could then help the child, and, as the child first served would not likely be as capable of helping the parent in turn, nor in helping any others, it all made sense.

The metaphor here is that, if you use your finances to help your child out as a priority over your own retirement requirements, you’ve put the oxygen mask on your child first. Your child’s going to survive; but you might not!  Henry Brock, a wealth strategist I much admire talks about this in the following video, with an emphasis on retirement and our spouses. The entire video is valuable; however, I’ve cued it to the most pertinent portion for this blog post:

Yes, our children are our future, and such a pleasure to be able to contribute to that! By all means, do all that you can to assist them!

But not at your own expense. As we get older, the opportunities for new income will, for most of us, seem to diminish. As an example, as a rule, opportunities to be employed get more scarce as we enter out fifties and sixties. If an older job applicant is in competition for a position with a younger applicant, typically the younger person, all else being equal, will win the job.

So, if you’ve managed any sort of a nest egg, think of yourself first; put your oxygen mask on. And then, if there is any nest egg “left over”, carefully determine how to best utilize it to help your family and loved ones.

You’ve probably done a good enough job with your children or grandchildren that they’ll be able to confront and handle life’s problems and opportunities without your financial backing. There are still children making it go right to attend good colleges even with little or no parental support. It’s a tougher row to hoe, undoubtedly, but still doable.

But, if you finance your children or grandchildren with your retirement money, and you find yourself in later years without adequate monies to live reasonably well, will that bring joy to these children, no matter how well educated you have enabled them to become?

A crying child, wearing an oxygen mask, gazing, helplessly, at a suffocating adult is not a pleasant thing to consider for anyone!

But, take heart! It really shouldn’t be an “either/or” type of dilemma. It’s better to be a “win-win”, of course. Before you throw in the towel on your retirement prospects or in regards to financially helping out family with college expenses, you should consult a reputable advisor to review your financial circumstances.

I think that you’ll find that he’s reached for the oxygen mask even before you did – and he’ll do his best to help both you and your child out.

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