Save For Retirement or Pay for College – That is the Question!
For those with children preparing for college, the question of just how much to save for retirement and how much to save for college fees might be a looming issue.
TAKE THOSE TAX CREDITS – One way of “saving” on college expenses is to take advantage of every tax credit that is available.
For those with children already in college there is currently in place the American Opportunity Tax Credit which can help when tax season rolls around again, or for those who have filed for an extension this year.
The IRS provides information on their website about the American Opportunity Tax Credit. Check with your tax adviser to find out if your student qualifies.
A helpful IRS website with more information can be found at http://www.irs.gov/uac/American-Opportunity-Tax-Credit:-Questions-and-Answers. Make sure you are using the most recent information for your taxable year.
Some interesting information from that IRS Question and Answer website:
“Unlike the other education tax credits, the American opportunity tax credit includes expenses for course-related books, supplies and equipment that are not necessarily paid to the educational institution.”
“ It also differs from the Hope scholarship credit because it allows the credit to be claimed for four years of post-secondary education instead of two.”
“ For the American opportunity tax credit, qualified expenses have been expanded to include expenditures for course materials, as well as tuition and required fees. For this purpose, the term “course materials” means books, supplies and equipment needed for a course of study whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance.”
Again, remember that each situation is different. Consult with your tax professional about the American Opportunity Tax Credit.
KNOW THE COSTS – To calculate the costs of tuitions and fees for a four year college you might go to www.collegesavings.org to understand what your options are. There are other numerous websites to help you calculate the costs of a college degree.
GO AFTER THE MONEY! Check websites for other sources of funding, like little- known scholarship funds. Browse the website www.scholarships.com to find some of the scholarships on offer. In addition to more traditional scholarships, which might require strong essay skills combined with high grades – there are career specific scholarships on offer: study abroad scholarships, scholarships for women and minorities; and tech scholarships. And then there are the just plain “wacky” scholarships like the one involving asparagus. Yes, asparagus. Snagging scholarship funding is often a matter of research, dedication, time and perseverance. The funding is out there and encourage your high school student to go out and find it! College loans are not the only answer.
GRANDPARENTS – If you are fortunate enough to have a loving grandparent who wants to help with college expenses, make sure you discuss with them the various methods, for example a trust fund. The decision of HOW they will help financially can have an impact on the financial aid your child qualifies for.
What does all the above have to do with retirement, you might ask? Well, the more you can save on those tuition fees, the more you can continue to save for your retirement. It’s that simple. The best strategy is to balance your future retirement needs with potential college fees.
I would like to hear from those who have other ideas about balancing retirement savings and college fees.
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