Several years ago, a CPA called my office to ask for my help with one of his clients who was a professional with a well-paying career but just hadn’t put a priority on saving for college for his daughter.  The senior in high school was making her final decision about where to go to school. She had gotten into a number of prestigious colleges with prices to match.  Cost was never a conversation that her father ever had with her.  He was shocked by the prices of the schools she was accepted to and the student was resisting considering a more reasonably priced school.  Situations like this are all too common and heart breaking.  The student felt she had done the academic work and had her heart set on a certain school when she got in.  Parents and children can do battle over these kinds of situations.  Parents need to help their senior understand the realities of paying for college.

Not starting the process early enough is the biggest obstacle.  It’s not just a matter of saving enough or early enough. It’s about having the money conversation early enough and understanding the real cost of college early on. Adults in the household and their student need to participate in the money conversation.  How much is the student willing to help through work-study, scholarships they earn or loans?  How much are you able and willing to contribute?

Parents and students need to be on common ground.  Unless you both have an understanding of how much it will cost, how much you have to spend, and how to access tax credits, scholarships, loans etc., as well as life after graduation, you may be in for battle.

What do we advise?

Parents need to get an understanding of how college funding works and of the costs in today’s market.  The sticker price of a school is not necessarily what you’ll pay if you are informed. Don’t visit a college in the junior year, let your child fall in love with it, and then discover that dream school will cost $60,000 (or more)! You’ll need to do some prior homework.  Go to the college’s website to discover what their costs and financial aid policies are likely to be.  Use their “net cost calculator”  or ask for your Free Money Report on this website.  Learn how scholarships work, read blogs for tips, attend webinars and college fairs.  Getting educated means being prepared.  Share your knowledge with your student and discussing cost is a must.  Parents and students need to be on the same page for the college search to go smoother.  Understand that a $60,000 school will not magically turn into the price of an in-state public school.

One strategy that has helped some families is having the student will willing to be a resident assistant(RA).  These highly sought after positions can cut the cost of college by 10 to 15 thousand dollars per year by providing housing and sometimes a meal plan. RA positions are available in years two, three and four.  This can cut the cost of college by thousands over four years and bring the cost within reach for a dream school if the student is willing to make a commitment.

What about the “name brand” of a college.  Is it worth spending $50,000 on an exclusive university vs $20,000 on a state school?  Cost doesn’t necessarily insure a good fit for your student.  The strength of a school’s specific program that your child is interested in has got to provide a strong return investment.

If it’s April and you have acceptance letters it’s time for a decision.  Hopefully you’ve had the money talk with you child and it will come down to comparing the award letters side by side to see which ones fit your budget. So, if you have saved for college, learned how to find colleges you can afford and understand the what can be done to make this process easier you’ll be prepared rather than shocked. You can’t start in April of the senior year to get the most out of being able to reduce student loan debt.  A good starting point that you can share with others also searching for colleges is the Free Money Report on this website.

Your student has gotten into the school of his or her choice but your financial aid offer is less than you had hoped for.  This is an all too common scenario. There are some steps that you can take to try to increase need based aid.  Here is what parents can do when appealing a financial aid offer:

1. Contact individual schools regarding what their procedure is for appealing an award.  Some might prefer that you complete an online form while others might want a letter.
2. The more specific you can be regarding your circumstance, the better.  For example, explain any financial setbacks.  And mention, if relevant, that the money needs to stretch for more than one child.
3. Let schools know if a parent has lost a job or has had hours cut.  Ideally, you will have a letter from an employer stating the salary cut back.
4. Also, mention other extenuating circumstance.  For instance, because of the coronavirus crisis, you may now be supporting other relatives.
5. To support all your reasons for more aid, provide as much documentation as you can, including copies of bank statements and medical bills.
6. What you shouldn’t do is include in the letter how special your child is and how the college would be lucky to have her/him.  And don’t use the term negotiate.  Financial aid staffers hate that.  You can, however, mention briefly why this institution is a great fit for your teenager.
7. Another approach is to play schools off each other. If you have better offers from colleges, contact the school your child really wants to attend and explain this reality.  State that your child really wants to attend this college, but finances are tight and other schools have been more generous.  Offer to scan your child’s No. 1 institution and competing offers.  Also, try this with other schools on your child’s list.
8. It is also definitely possible to negotiate merit awards (non-need-based aid) at many schools.  Colleges that will be inclined to bump up the offer will be institutions that are not meeting their freshman deposit goals.

Financial planning is a lifelong endeavor, but people often seek out investment advice that doesn’t fit their current stage in life. When it comes to saving for retirement, most Americans invest and manage those savings for six decades or longer. It’s important to consider how your resources and risk tolerance change as you move through different life stages. Saving for your retirement looks very different at age 30 compared to age 60. As financial advisors, we strive to help our clients develop retirement savings plans that are appropriate to the changing circumstances they face at every age. Here are some areas that we consider when giving age-appropriate retirement advice.

Ideal Asset Allocation by Age
In the past, investment experts advocated the “100 Rule,” which called for subtracting your age from 100 to determine how much of your assets should be invested in stocks. For example, this rule called for 25-year olds to hold 75% of assets in stocks or “riskier” investments and 25% in bonds, CDs, equities or other low-risk investments. Now this has been updated to the “110 or 120 Rule” because Americans are living longer, making it extremely important to generate enough money to last throughout retirement. While this rule is useful for general guidance, it’s important to look at your particular situation and develop a more nuanced investment mix that is more closely aligned with your retirement savings goals and risk comfort level.

In Your 20s: Balance Saving and Investing
Your earning ability is at its lowest in your 20s, but the power of compound interest makes this decade the best time to invest. Many professionals recommend that people in their 20s invest a majority of their retirement savings in stocks rather than bonds or savings accounts. A 2016 investment analysis by NerdWallet found that a 25-year old with a $40,456 salary who invested 15% a year exclusively in the stock market would likely end up with as much as $3.3 million more than if they kept their money in savings accounts. Regardless of how you invest your retirement savings, you should strive to balance your approach with paying off outstanding debt (student loans, credit cards) and saving for an emergency fund.

In Your 30s: Invest Aggressively in Stocks
Take full advantage of your employer’s contribution by investing 10 to 15% of your salary in your office retirement plan in your 30s. Investing in a home or rental property is a good idea, provided you will be able to keep the real estate for at least five years. When you compare long-term investment returns on stocks and bonds, stocks vastly outperform cash and bond investments over time. You have decades to potentially make up any temporary losses in the stock market, so invest as aggressively in equities as your risk comfort level allows.   

In your 40s: Maximize Your Retirement Contributions

By the time you reach your 40s, you need to be saving as much as possible for your retirement. Now is the time to max out your retirement contributions by investing the full $18,500 allowed each year. Investing in a tax-advantaged Roth IRA in addition to your 401(k) or 403(b) will help boost your retirement savings. It’s the right time to start investing in some lower-risk bonds too unless you have been neglecting your retirement savings plan. A financial advisor can help determine the ideal investment mix to achieve your savings goals while maintaining an acceptable risk level.

In Your 50s and 60s: Start Preparing for Retirement
If you need to build emergency funds to meet unexpected medical expenses and other costs in retirement, mature investors are allowed to start making catch-up contributions to tax-free savings accounts in the year they turn 50. In 2018, you can save up to $24,500 in a 401(k) and up to $6,500 in an IRA each year.

When you are in your last decades of saving for retirement, it is time to start rebalancing your portfolio. Consider moving some of your funds into bonds and money markets. A financial advisor can help you compile a comprehensive financial profile, assessing all your funding sources to figure out your ideal investment mix to provide income throughout your retirement.

We suggest using the above recommendations as starting points to saving for retirement throughout the different life stages. However, regardless of age, everyone can benefit from a personalized retirement plan. As financial professionals, we are available to help you figure out the ideal asset allocation for your retirement savings plan at your stage of life. Please contact us for a complimentary consultation.

Sources:

Friedberg, B. (2018, May 21) Here’s How You Should Invest at Every Age. [Blog post]. Retrieved from https://www.thebalance.com/how-to-invest-at-every-age-4148023

Leary, E. (2007, November). Best Investing Moves at Every Age. [Blog post]. Retrieved from https://www.kiplinger.com/article/investing/T052-C000-S002-best-investing-moves-at-every-age.html

Kumok, Z. (2017, Jan. 7) Are Your Investments Right for Your Age?. [Blog post]. Retrieved from https://www.investopedia.com/articles/investing/090915/are-your-investments-right-your-age.asp

Frankel, M. (2017, May 28). Here’s How to Determine Your Ideal Asset Allocation Strategy. [Blog post]. Retrieved from https://www.fool.com/retirement/2017/05/28/heres-how-to-determine-your-ideal-asset-allocation.aspx