Kids and your golden years

Marketplace Staff Aug 11, 2006

TEXT OF INTERVIEW

KAI RYSSDAL: We get a lot of mail from all of you, which is great. But what’s not so great are the money issues keeping you up at night, like saving for retirement and saving for your kid’s college education. Now imagine if you had to do both at the same time. That’s what some older parents face. They’re about to retire and the kids aren’t out of the house yet. The latest issue of Money Magazine looks at this dilemma. Ellen McGirt joins me once again. Hey Ellen.

ELLEN MCGIRT: How are you?

RYSSDAL: I’m all right but I have to tell you I’m a little depressed after reading this piece.

MCGIRT: Oh, dear.

RYSSDAL: What are you supposed to do with, you know, kids and retiring and how do you make it all work since we’re having kids older these days?

MCGIRT: I know, it’s a big trend. I think there’s been a record number of women between 40 and 44 having children, which I think is great, but the truth is you’re going to have to make some tough choices. And it’s really tough to say no to a kid at any age. But for someone who’s facing retirement with kids still in school making those money choices are essential to making sure you can survive in your retirement.

RYSSDAL: Let’s talk about maybe the biggest choice of all. You have to choose either to fund your retirement or to fund the kid’s college fund, the two big expenses sort of bracketing these families. What do you do?

MCGIRT: Favor those retirement plans. Remember there’s no loan you can take in retirement. Once you’re there, you are there. And even though we’re living longer and feeling healthier and most of us expect to work in retirement, that may not be an option. But there are lots of creative solutions for funding an education and you need to get realistic about it at an earlier age with your kids to make sure that you’re on track. And that means grants and loans. There’s some great government loans that are still available and also perhaps even looking at some cheaper schools, which still offer a great education.

RYSSDAL: That’s a really good point actually that there’s no loans you can take in retirement. I don’t think I’ve ever heard it put so plainly before. What about getting rid of debt sort of earlier than you might ordinarily? I mean, you know, a lot of us are content to carry some debt for a while. But if you’re in one of these situations you can’t really do that.

MCGIRT: That’s right. If you’re 44 years old and you’ve got a 2-year-old, you know do that math. You’re going to be still paying off a mortgage while you’re facing college bills. I don’t think so. Make that a priority earlier on with those car payments and those mortgages and get that down to as low a level. And that may mean skimping on other things like expensive family vacations and all the bells and whistles that we like to run up with our credit cards. But it’ll pay off in the long run. If you’re going into your senior years with a senior in high school you’ll be happy that you don’t have that debt hanging over your head.

RYSSDAL: There was a great tidbit in this piece that I was not aware of. If you retire and take social security benefits your unmarried children under the age of 18 can get some money from the government too.

MCGIRT: They can get half of what you get up to a certain level. And that can really make a difference.

RYSSDAL: You bet.

MCGIRT: If you’re making — maybe you’ve got a social security income of $18,000 that could turn into $32,000 if you’ve got two kids under age 18. Of course, hopefully they’re not married. And that’s a little known social security fact. And it’s something that a lot of retiring parents with young kids are going to be able to draw on. Which probably the social security administration would prefer we don’t tell anybody about but it’s a useful resource.

RYSSDAL: Well when you write the social security administration tell them you heard it here first or in Money Magazine with Ellen McGirt. Thanks Ellen.

MCGIRT: My pleasure.

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