Planning for both college and retirement can be accomplished simultaneously without sacrificing one or the other. If you are a financial advisor who does work in both the college savings and retirement savings fields, it is imperative to guide your clients on a more personalized basis about what kind of investments they should be making.
Perhaps your client has already earned his college degree. He has worked in his particular industry for some time and has begun to think about how he can save money for retirement. At the same time, if he has a child or grandchild that is headed towards their college years, then perhaps he will also need to consider how to save for college to better help that child maximize his or her future.
There are numerous investment vehicles that can be used for your clients’ retirement purposes that are also beneficial to use to save for college purposes as well. For example, many people use annuities to save for their retirement goals. This can also be something that is used to start saving for college. Monies in annuities are tax-sheltered and can be pulled out to pay for or at least supplement the cost of college. The great aspect of utilizing annuities in this fashion is that these funds are usually not seen as assets when calculating qualifications for financial need for the students, and again, they offer wonderful tax advantages. You can help your clients gain more grants and scholarships for college on top of the benefits of the products themselves.
The second investment vehicle that can be utilized in a similar fashion to help pay or offset college expenses is life insurance. Monies in whole, universal and variable life policies are not equated as assets in college financial aid calculations, and all of these life insurance investments offer the flexibility of funds being pulled out tax-free any time they are needed. This offers tremendous advantages for both college and retirement planning. Once again, these are extra benefits your clients can receive simply by purchasing them at the right times.
Many financial advisors will tell clients to not put the goals for their children ahead of their own financial goals for retirement. As much as parents and grandparents seem hardwired to do anything and everything for their children, it can be backwards to put college savings for children ahead of both current and retirement savings goals of the parents. While your clients may be able to save enough for their children to go to college, they may be putting a big burden on themselves in the future if they have not saved enough for their own retirement.