“People will lend you money to go to college, but not to retire.”
Oh, and if worse comes to worst … If they need further living expenses beyond that point, they can tap the equity in their home through a reverse mortgage.
An excerpt from Book Five in “The Knowledge Path Series” dedicated to helping you find the place of your dreams in the Sierra Mountain resorts.
What keeps the couple up at night?
They can take care of what’s in front of them with their current lifestyle.
But, in less than a decade their son will be college bound and they’re afraid they’ll go broke shouldering his tuition and room and board.
And roughly seven years later dad will be retiring followed by mom a couple of years later.
Have they squirreled enough away for those two rainy days?
They can manage their current nut, but …?
No more television for you my mom used to say when I misbehaved.
In their case the couple willingly cut that $40 a month cable package out of their budget and bought insurance policies with it instead.
On top of their expected pensions, they agreed to sock away $10,000 a year into two Roth IRAs.
“Few people realize they can also use Roth accounts to pay for their children’s college expenses, given a few restrictions,” the planner said.
It’s one of those good news, bad news things.
Their son …
will probably need financial aid when he goes away to school and some colleges may provide less financial aid to families that have 529 accounts to cover higher-education expenses, the planner said.
Trade offs?
Certainly.
No easy choices for a couple used to carrying no debt except for their mortgage.
The planner got them to see their challenge from a different perspective.
“People will lend you money to go to college, but not to retire.”
Working out a diversified portfolio, giving standard planning returns and savings rates, and recommending Roth contributions of $10,000 a year, when the husband turns 65 the accumulated savings will reach $331,000 even after college expense.
The planner calculated the first year of college to run $16,000 and grow to $19,000 by his senior year.
What about retirement?
They can count on a pension for the husband of $77,000 a year and $7,300 in Social Security for his wife for a total of $84,300.
With reasonable withdrawals to make up for any short fall in retirement, the planner calculated their savings should last until both are in their mid-90s.
Oh, and if worse comes to worst …
If they need further living expenses beyond that point, they can tap the equity in their home through a reverse mortgage.
Completed in 2005, the house could be worth as much as $350,000 to $400,000 in 2010.
“This is our forever house,” the wife said. They even kept in mind the possibility of becoming infirm as they age. “We built it with one story so we can just roll in our wheelchairs,” she said.
Steps
(30) Review headlines and relevant news as far back as you can find online to surface each community’s unique pulse and identify information necessary to make your decision. Is there a “ticking time bomb” issue you may uncover that eliminates the resort from your bucket list? Search on topix.com.