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When Clients Put Kids' College Before Their Own Retirement

By Crucial Clips     March 18, 2015
The following text is a transcript of a portion of a speaker's presentation made at an industry conference or during an interview. This transcript solely represents the view of the individual who spoke, and not the view of Financial Advisor IQ or any other group.
Source: FA-IQ, Mar. 13, 2015 

CHRIS LATHAM, SENIOR REPORTER, FINANCIAL ADVISOR IQ: This is Chris Latham with Financial Advisor IQ. I’m speaking with Judith Ward, a CFP and a senior financial planner at T. Rowe Price. Judith, thank you for being here.


CHRIS LATHAM: Now, Judith, T. Rowe Price has done research recently into retirement savings and college costs, particularly some trade-offs that parents may be making for the sake of their children. And these parents are often financial advisors’ clients. Can you tell me a little bit about the research?

JUDITH WARD: Sure. It was a little surprising to me, as a financial planner, to see that 57% of parents said that they’re prioritizing saving for college costs over their own retirement. And another 53% were saying that they would be willing to dip into their retirement savings. And half said that they would be willing to work longer in order to help their kids go to school.

CHRIS LATHAM: Now since these parents are financial advisors’ clients often, what should financial advisors be saying to their clients about this potential trade-off?

JUDITH WARD: Yeah, I think this is a great opportunity for advisors to explain how important it is for them to take care of themselves first and to take care of their own retirement first. As you know, and as the advisors know, it’s really important. We have to fund our own retirement. So they’re at a great place to be able to help parents see that and help them save for retirement.

CHRIS LATHAM: Now that would be a great solution in the most ideal circumstances. But sometimes, there are going to be parents who just decide that they must put their children first. If that is the case, what can advisors do to make the best of that situation for everyone?

JUDITH WARD: I think the advisors — again — they have the opportunity to help take the emotion out of a lot of these decisions. I mean, a lot of the college decisions — they’re very emotional. And maybe help them kind of see different ways to fund college. Help them maybe fund retirement and college at the same time, because we certainly don’t want them to put off saving for retirement at the risk of not having enough for themselves to live on in retirement.

So advisors — they can really help them save for retirement and college at the same time. We particularly like a 529 account. It’s an account specifically designed for college savings. So I think advisors can really help these parents see the right options and the right way to save for retirement and college at the same time.

CHRIS LATHAM: Judith, thank you very much for being here.

JUDITH WARD: Thank you.