|
|
|
Put Your Retirement First
This may seem like a selfish attitude, but there are some good reasons why you should shelter much of your money in a retirement account. First of all, when figuring financial aid eligibility, schools don't consider money placed in IRS-sanctioned retirement savings accounts part of your overall assets. That may change, however, now that the IRS allows penalty-free IRA withdrawals for some college expenses.
For now, your IRA money is not counted when it comes time to figure out how much you should be expected to contribute to the cost of tuition. Some schools, however, may look closely at the amount of money you contribute during the years your kids are in school and expect you to forego that amount for the college years.
The second reason you should keep saving for retirement is that you will need the money. You may find that if you rob your retirement account now to pay for your children's education, they will have to turn around and support you when you hit 65 — a situation no parent relishes.
The IRS allows all employees to contribute as much as 15% of their gross salary to a corporate 401(k) plan, or up to $10,500 a year. If you're only contributing 10% of your salary (or less), you are strongly encouraged to bump up this contribution as soon as possible until your kids reach college age. That will provide a bit of a cushion if, when the time comes, you find you must cut back or stop contributing to your retirement account during the years your kids are actually attending college. You also shelter that much more of your assets and income from the financial aid office.
| |
|
