What to Do When You Turn 65 and Your Child Starts College

Last Updated May 1, 2009 10:40 AM EDT

Welcome to one parent's financial challenge. My husband's cousin is 58. In seven years his son will start college at the same time Robert plans to retire. He wants to know how he should prioritize his savings.

I can't think of too many parents who would want to be in Robert's shoes. After all, retirees are supposed to reduce their expenses, not take on the burden of paying a large college tuition bill. That said, I think Robert will be in good shape if he aggressively starts planning now.

First, there's no question what Robert's priority should be. He needs to focus his efforts on saving for retirement. After all, his son can take out loans to help pay for his education but Robert can't borrow for retirement.

Assuming Robert won't have enough money left over to foot the entire tuition bill, I'd like to see him start positioning his assets now in a way that will help his family qualify for the most financial aid. Sure, his son's college years are still a ways off, but now's the perfect time to start strategizing.

To get all the ins and outs on the financial aid process, I called Reecy Aresty, a financial aid consultant and author of How to Pay for College without Going Broke. Here's what he told me.

  • First, some good news. Schools pay attention to a parent's age. They won't ask a 65-year-old to contribute as much of his savings toward college tuition as a 45-year-old since they know the older parent is no longer working. Colleges typically ask families to contribute more than 5% of their assets toward the school's bill before financial aid kicks in. But someone who is 65 may be allowed to shield as much as $80,000 or $90,000 from the financial aid calculation, while as 45-year-old can only protect $46,000 or $47,000.
  • Third, Robert could consider investing in a tax-deferred annuity, since this vehicle would also shield his assets from the financial aid formula. (Be aware that variable annuities are included in the calculations.)
One final thought for Robert and anyone else trying to qualify for financial aid. If you don't get as much assistance as you think you deserve, contact the school and see if a financial aid officer can help you out.

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