What’s the best way to pay for college for my grandchildren?

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Q. I want to pay for college for my grandchildren. One starts in September and a second starts the next week. What’s the best way to do this? I have $150,000 in a brokerage account that’s mostly in cash and bonds, and I also have $675,000 in an IRA. I’m 60 and I haven’t started taking from the account, but I also recently retired so I don’t have a lot of new income.
— Still working

A. That’s a very generous proposition, and probably a costly one.

Before you can decide the best way to proceed, there are a lot of outstanding questions, including the cost of tuition, and a host of items related to your finances. Those include what the cost basis of the bonds are, whether you have a pension, what your projected Social Security benefits compared to your basic living expenses and whether or not you plan to work in retirement.

“Although it is a very nice gesture to pay for your grandchildren’s college, one really needs to prioritize their retirement and helping their family to make sure their resources are going to last,” said Douglas James, a certified financial planner with Saddle River Financial Group in Saddle River.

Typically, he said, the cash and bonds would cause less of a tax issue than an IRA withdrawal.

“However, if you plan on taking funds out over multiple years, a combination of the cash/bond and an amount from the IRA may make sense depending on other items that may be taxable,” he said. “Another resource could be home equity, in particular if you are planning on downsizing or selling it in the near future”

Given the high cost of education, he recommends you consult with a financial advisor to make sure you can afford to pay for the education and not burn through all of your retirement funds.

“Calculating your needs and wants in retirement can be a complicated juggling act,” James said. “The worst thing they can do is spend all their funds on the education of their grandchildren and then have to go back to work or be a burden on their family.”

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This story was originally published on June 15, 2022.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.