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Money Talk : There are ways to help your kids pay for college without raiding your retirement savings

By Rodney A. Brooks

A few years back I was doing an interview for a radio station. A woman called in who had proudly put her daughter through an Ivy League college. The problem: She was in her 50s and saved nothing for retirement.

I told the woman who called the radio station that she still had options, but they were not great ones. She was probably going to have to retire later or plan on a standard of living in retirement that was less that what she was used to.

The fact is that we will do virtually anything for our kids, even to our own financial detriment. More than half of parents in one survey were willing to go into debt to put their children through college. We should certainly find a way to help our children go through college without coming out with mas- sive student debt. But borrowing from our retirement savings or not saving for retirement so you can pay tuition is a bad idea.

As many financial planners will tell you, you can take out a loan for college, but you can’t take out a loan for retirement. If you have nothing saved for retirement, your kids could very well end up taking care of you. As I say all the time, you can-not and should not depend on Social Security – the average monthly check is only about $1,500.


Black students generally graduate college with more debt than white students, and then have more trouble paying it off. This is especially true of students graduating from HBCUs. According to a Federal Reserve Survey on Consumer Finances, Black families not only pay higher rates for student loans, but they also owe more. According to an analysis of the Fed data by Student Loan Hero, 30.2% of Black families hold student loan debt, versus 20.0% of White families. Also, Black familiesn owe a median of $30,000, compared with $23,000 among families.

But there are ways to help your kids (or grandkids) pay for college without raiding your retirement savings or ending up with a bunch a debt. But they all involve planning. And one of the best is the 529 plan.

529 Plan

A 529 can be used it to pay for college or for private school tuition. Just about every state has a plan available.

There are two types of 529 plans: Prepaid tuition plans and college savings plans. In a prepaid plan you can pay part or all of the costs for an in-state public college. The college savings plans give you more flexibility. Much like a Roth 401(k) plan or Roth IRA, it is an investment account offers tax advantages to the savers. And you generally have several investment options. You may also qualify for a state tax benefit. And they can also be used in estate planning.


Tax advantages. Much like a Roth 401(k) plan or Roth IRA, it is an investment account offers tax advantages to the savers. You can deposit after-tax into the account, and then it grows tax free. You may also qualify for a state tax benefit.

Investment options. Depending on the state plan you select, you can invest your money in a variety of mutual funds. That means you can take on as much risk (and potential growth) as you have the stomach for, or you can stay conservative and safe, but with a slower growth and lower returns.

Friends and family can donate. You can give limited access to friends and families so they can independently donate to the child’s education. They can make donations in lieu of Christmas or birthday gifts, or just to help out.

The SECURE ACT expanded use of 529 plans. The SECURE Act of 2019 made it possible to save for. K-12 tuition, apprenticeships, trade schools and made it possible to use the funds for student loans.

You can open the account with as little as $25 dollars if you link it to a checking account and set up monthly contributions. In Texas you can enroll in the Texas College Savings Plan with this link.


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