Retirement Guys: Two steps in college planningWritten by Nolan Baker Mark Clair | | firstname.lastname@example.org
Saving for retirement is a top concern for many families. Also at the top of that list for families with high school students is paying for upcoming college costs. A fine balancing act needs to be taken on how to best keep planning for retirement, while at the same time dealing with how to best pay for four or five years of college costs that can range from $20,000 to $55,000 a year. The retirement problem is that every dollar that goes toward paying for college is one less dollar that families will have for their retirement years. The solution is not just college planning, but planning on how to save on the actual cost of college.
Roughly 85 percent of occupations here in the United States will require some form of post high school education and training, according to the U.S. Department of Education. And the difference in median income between those who only have a high school diploma to those with a bachelor’s degree can be dramatic. The U.S. Census Bureau reports that the current high school graduate earns $21,079 per year while the average worker with a bachelor’s degree makes $40,166.
Planning for children’s college expenses should start at birth and go all through the college years. Yet, what we find is that due to the recent downturn in the economy and with how fast time goes by, many families with high school students are behind in having a solid college game plan in place. Thus, two steps should be taken to maximize the potential for families with high school students.
The college selection process is the first step. A student should look for eight to 10 colleges that are the right “fit” for what his or her future career plans are. It can be a mistake to choose a college because that is where family members went or where friends are going. Instead, the college selection process should be tailored to finding the right college that matches up with the child’s unique abilities and future goals. Don’t choose a college based solely on the “sticker price” of what the total cost is. Several steps can be taken to reduce the retail price of college. What seems like the more expensive college may actually be cheaper if strategic planning is implemented.
Financial aid is the second step in the college planning process. The term Expected Family Contribution (EFC) is the portion of income and assets parents are expected to contribute toward college expenses. The most common way this is determined is through the Free Application For Student Aid, also known as FAFSA. This is usually first established in a high school student’s senior year. Financial aid can often be awarded based upon merit aid and need based aid. Families can spend a majority of their time focused on finding private scholarships. Instead focus on tactical planning that can be done to reduce EFC, which is usually the biggest expense.
The solution is to seek out guidance by a professional who represents the high school student and the parents. Families should avoid being limited to specific advice from friends and family members or from conversation around the water cooler at work. These people probably have the right intent, but often lack specialized training and knowledge. Guidance counselors can be a great resource. Yet, remember they often have hundreds of students they are trying to help, all in a short period of time. The financial aid office at the college can be another wonderful tool. Yet, remember these people work for the colleges.
A family’s focus should be on finding the best colleges for the lowest out of pocket expenses. One of the best ways to accomplish this is to find an independent professional who specializes in college, can represent your family and guide you through the entire college planning process. To help improve the odds of the best outcome, get an analysis and plan done that includes personality and career assessments, college search programs, an estimate on EFC, financial aid projections and enhancing strategies and savings strategies for current and future investments.
For more information about The Retirement Guys, tune in every Saturday at 1 p.m. on 1370 WSPD or visit www.retirementguysnetwork.com. Securities and Investment Advisory Services are offered through NEXT Financial Group Inc., Member FINRA / SIPC. NEXT Financial Group, Inc. does not provide tax or legal advice. The Retirement Guys are not an affiliate of NEXT Financial Group. The office is at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537. (419) 842-0550
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