Can you take out a loan in retirement?
The short answer is no
As parents we have the idea that we have to save enough to send our children to college.
Some families save on spending their college expenses at the expense of their own retirement plans. That's exactly what you do not want to do.
Do not waste time deciding, be sure to save for retirement now. Here are some tips on securing your retirement:
– If you can, pay the maximum amount for your retirement.
– There is no way to balance your retirement savings. If you do not contribute the maximum amount per year, you will not get another chance for these savings.
-There are certain limits to what you can include in each plan every year.
– When you reach the age of 50, you can raise the maximum amount by another $ 6,000.
– If you're part of an employer-sponsored plan, be sure to use every type of game the company offers. Employer Matching is "free money" in your retirement account.
-If you do not have an employer-sponsored plan, you may be eligible to contribute to an Individual Retirement Account (IRA) or Roth IRA
. By the time your kids are actually at school, you may be able to borrow from your 401 (k) retirement account to help with tuition.
Although not recommended for retirement planning, it is better than saving for college instead of saving for retirement. One of the benefits of borrowing from your retirement plan is that if you repay that loan, you will repay the interest to you. The rules that allow this are specific to your plan.
If you borrow from your 401 (k) to pay for college, your account's growth will be put on hold. When repaying, only your original balance will be restored, not the missed income.
Warning: If you cancel before repaying the loan, you must report the loan as income on your tax return.
It is important to work with a financial adviser or a certified financial planner. Even if you believe that everything is clear, financial planners are trained to help you recognize and plan for hidden uncertainties.
So, what happens if you do not have enough to maximize your retirement and college savings? Save for retirement. Your children can apply for scholarships, scholarships and student loans.
Your children are eligible for student loans if they were unable to save enough to go to university. You must ensure that you are able to maximize your retirement BEFORE you start saving for your children.
Students with student loans usually save less for retirement at the beginning of their careers, but have a much longer savings horizon.
As parents, our horizon for retirement is probably less than half the time our children need to save. It will be easier for them to make up for retirement while repaying their college loans.
Remember, the college is optional. A great way to control college expenses is to start with community college before moving to a four-year university. Tuition fees can also be paid by students, parents or grandparents. Retirement should not be optional, so you must first focus on retirement.
With or without children, saving for your retirement should be the primary focus.
Tami Sipos is CPA and CFO of a privately owned company in Inland Southern California. She has been working with families on tax and financial planning for more than 20 years. Reach it at [email protected]