Retirement Readiness

Paying for College: Prepare Financially to Send Your Kids to School

Where saving for college meets saving for retirement…

CHICAGO, Oct. 8, 2015 /PRNewswire/ — Paying for college forces many parents to stretch financially. While many start saving for college even before their children know their ABCs, parents who have children later in life can be faced with the double whammy of college expenses while also trying to save for retirement, according to The Mather Group (TMG), a Chicago-based independent investment advisory firm.

“We expect college costs to outpace inflation for the foreseeable future,” says Stewart Mather, CFP®, CIMA, head of firm. “We encourage parents and grandparents to start a college fund as soon as the child is born. That way, the savings can build gradually and earn interest for 18 years.”

The average cost per year to attend a private, non-profit college (tuition/fees, books, housing) is just over $42,000, according to the College Board, a non-profit association with 6,000 member educational institutions. The annual cost for an in-state student to attend a public institution is nearly $19,000.

Despite saving, most parents have to get creative when it comes to affording higher education by combining savings with other resources. The Mather Group offers these tips on the ins and outs of paying for college:

  • 529 Plan vs. other investment vehicles
    The best part of a 529 plan is that earnings in the plan grow free from federal tax (your state may offer tax breaks as well) and will not be taxed when the money is taken out to pay for college. On the other hand, if the money is not used for college you will be penalized 10 percent and forced to pay taxes on the earnings.
  • Scholarships may be available
    Getting great grades certainly helps kids qualify for scholarships, but average students can also qualify. Check out and to search broad data bases of scholarship opportunities.
  • Student loans are a necessity for many students
    We expect college costs to outpace inflation for the foreseeable future

    Federal student loans with their fixed interest rates are generally the best option. Explore federal student loans through the U.S Department of Education website.
  • Students can work part-time
    Working is part of the college experience for many students. According to U.S. government statistics, nearly 45 percent of full-time college students work while attending school. That additional money coming in can cover some housing and entertainment expenses.
  • Saving for retirement vs. college
    It’s key to fund your retirement plan first and the kids’ college costs second. Why? If you are in your 50s, you have a limited time to shore up your retirement account, which may have to provide your living expenses until you are 80 or older. Make your retirement savings a priority.
  • Obtaining residency
    Getting in-state tuition can save thousands of dollars. It often makes sense to take a “gap year” in order to establish proof of residency. Paying state income taxes, registering to vote, and changing your car’s registration to the new state can all help. Keep careful records to back-up your new residency.

“The key is to have a financial plan in place when you start your family to paint a clear picture of what it will take to achieve your financial goals,” Mather says. “An independent, fee-only investment advisor is the best choice because they are held to the highest fiduciary standard by law – their advice must always be in your best interest.”

The Mather Group is a fee-only registered investment adviser focused on guiding corporate executives and professionals into successful retirement. Services offered include investment management, retirement planning, tax and estate planning. The firm has offices in Oak Brook Terrace, IL and Houston, TX.