Saving for college and retirement at the same time - KAIT-Jonesboro, AR-News, weather, sports

Saving for college and retirement

Jane Ludwig and her husband needed some help figuring out how to fund competing financial goals.

They want to save for retirement, but they also want to put their kids through a parochial school and hopefully pay for their college.

Nathan Bachrach worked on a financial plan. He put down on paper how much money they make, how much they have saved, and what it will take to pay for all of their goals.

"You could actually put both of your kids through private high school," said Bachrach. "That's good news, but the problem is college."

Putting everything on paper made it clear to the Ludwig's that they need about $15 ,000 more per year if they want to fund their own retirement, pay for private high school and pay for their children's college.

If they don't pay for their children's college, they are doing very well financially.

"If I stay on track, keep putting the 16 percent of my salary in the 401k, retirement will be okay, so that's comforting to me," said Jane Ludwig. 

Here are some things that you should have in your financial plan:

Have a budget, because all things flow from the monthly cash flow.

Think about savings and investing.

Think about taxes and insurance.

Bachrach found that the Ludwig's are uninsured. Bachrach recommends that parents with young children need to have enough life insurance to replace their income and cover expenses if they were to die. Since Jane and her husband both work, they should both have life insurance policies. He recommended a "term life," holding it just long enough for their kids to grow up and leave the home.

"But term insurance, it just, you pay all that money and then you don't die and it's, like, a waste," said Ludwig.

For most people, term life insurance is a much better deal than whole life insurance. Whole life insurance typically combines life insurance with some sort of investment vehicle.

One of the more difficult parts of building a financial plan is building a budget, is if the money going out exceeds the money coming in then you either cut costs or make more money.

For families like the Ludwig's, with cost that are fairly fixed, cutting back dramatically would be tough.

"I'd cut out going to eat, which we don't do anyway. Chris would give up his trips, but that's not going to generate eight or nine thousand dollars," said Jane Ludwig.

If the Ludwig's want to pay for their children's college, that's going to mean that someone needs to earn more money. That may mean that Jane Ludwig's husband may need to take an extra shift at the lab where he works. But now, the numbers don't add up to reach all of their goals on their existing income.

"If you try to do everything, you run out of money," said Bachrach.

When comes to paying for college, there are plenty of options. Next week Nathan Bachrach sits down with the Ludwig's to discuss the best strategy for covering at least some of the college cost for their two children.

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