Should we delay our retirement to help pay our daughter’s uni fees?
I’m trying to decide if we can afford to pay our daughter’s college tuition so she doesn’t graduate with huge debt. I think the solution is that I need to study longer, but I’m having a hard time figuring out how much longer I need to study. Is there an easy way to understand this?
Thanks for your interesting question. Of the various tools we can use to influence long-term financial security, working longer hours often has the greatest impact.
I start by estimating how much you’ll pay in college tuition for a simple math method. I then calculate your current annual surplus, that is, after subtracting normal living expenses from tax income.
Divide college costs by the annual excess and this will give you years of savings, which you can interpret as the extra years of work needed to cover those expenses. For example, $100,000 in college expenses and an annual surplus of $25,000 would mean four more years of work to make up for lost savings.
But this is so rude. Ideally, you would have some financial modeling done and a comparison of results with and without college tuition to understand your long-term perspective.
Assuming you have a source of funds (e.g. savings or a non-super investment), this benefit may just be some form of early inheritance, with the only consequence being a reduction in what they would otherwise receive when you pass away.
I find everything about retirement confusing and it scares me. I’m about to turn 67. I stopped working due to illness in August last year and now I receive my pension every month. My partner makes about $90,000 a year and has a few years until retirement. We have a small one bedroom apartment. We’re saving up to move into a two-bedroom unit and have saved $100,000. Unfortunately, we still do not have enough strength to take action. Can you give us advice on what we can do to achieve the best possible outcome for us?
Give some thought to your priorities. There are two goals here. First, you want to upgrade to a larger home. The other is that you want a secure retirement.
Based on what you’ve shared here, there seems to be a conflict between these two goals. If this is true, I think your starting point should be to decide as a couple which of these goals is most important.
If home improvement is your priority, you could potentially withdraw a lump sum from your retirement fund to boost your savings. Maybe your partner will work a few extra years to pay off a small mortgage.
Your home is ignored for income testing purposes for age pensions, so having more of your wealth in this asset increases your pension entitlement. You can also use the government’s Home Equity Access Scheme to convert the equity you have in this property into cash flow.
However, if your priority is instead lifestyle in retirement, for example travel, or you’re worried about using your savings over longer periods of time, then you’ll either stay in the same place or expand your property search until you find somewhere that fits your budget without needing to draw on your super savings.
Without knowing your super balances and full financial picture, I can’t say for sure here at all. But hopefully this gives you a starting point.
Paul Benson is a Certified Financial Planner. Guidance Financial Services. He is hosting Financial Autonomy podcast. Questions: paul@financialautonomy.com.au
- The advice given in this article is general in nature and is not intended to influence readers’ decisions about investments or financial products. They should always seek their own professional advice, taking into account their personal circumstances, before making any financial decisions.
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Paul Benson is a Certified Financial Planner and host of the Financial Autonomy podcast.
