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Older Parents Face College-Debt Crunch

By George Erb, The Seattle Times (TNS)

SEATTLE — Higher education is a priority for this tight-knit Maple Valley family.

Walter Lowe and his wife, Annerose Lowe, are determined to help their five children earn college degrees and start their careers without taking on mounds of student debt.

But the Lowes are also older parents in their 50s and 60s. They have a six-figure mortgage, limited savings and a break-even cash flow that makes additional savings difficult.

How could they help their children pay for college without wrecking their retirements?

After examining the family’s values and finances, a volunteer financial planner steered the Lowes toward alternatives for paying for college and urged them to leave their retirement savings alone.

“We have to protect our retirement funds,” Walter Lowe said.

Middle-class families grappling with the rising cost of college often find solutions in borrowing. The result has been an explosion in student debt. In Washington state, 58 percent of students who graduated from four-year schools in 2013 carried an average debt of $24,418, according to The Institute for College Access & Success.

That’s not an outcome the Lowes want for their children.

Walter Lowe, 67, is the family breadwinner, earning about $60,000 a year as a full-time faculty member for the English department at Green River College. He supplements his income by working as an adjunct instructor at Green River. By teaching an average of six additional courses a year — three during the summer — he is able to increase his income by $15,000 to $20,000 a year.

Social Security also pays the Lowes $12,648 a year for their 16-year-old son. Walter Lowe signed up for a dependent, minor-children benefit by filing for Social Security at full retirement age, and then suspending his own benefit. The payments, however, will end when their son turns 18.

According to Zillow, the current market value of the family’s home is about $279,600. But the Lowes are about five years into a 30-year mortgage on the property, with an outstanding balance of $177,000.

Their youngest son is in high school and has college plans, while their youngest daughter is working part time at Starbucks and studying nursing at Green River. Their older son this summer landed a full-time job on a technology help desk. Another daughter is five months into a new job with a property-management company; she is currently using her income to pay down credit-card debt. Their oldest daughter is living out of state.

The family is also paying off an $8,500 car loan and $5,000 that the Lowes put on a credit card for their daughter Francine’s studies last year at a university in Florida.

The Lowes do not get a tuition break at Green River because of Walter Lowe’s job, but their children have lowered their expenses by studying at the college while living at home. Three of the Lowes’ children have Green River degrees.

For savings, Walter Lowe has accumulated about $573,000 in a work-related retirement account. But the Lowes have had to repeatedly tap their household savings account, mostly for home repairs. More than a year ago the account balance exceeded $20,000; today, the balance is about $7,000.

Money is tight. “There was no give or take anywhere,” said Diane Jochimsen of Arlington, a certified financial planner with Seattle-based KMS Financial Services.

She urged the Lowes to abandon any notion of either tapping or borrowing against Walter Lowe’s retirement account to pay for their children’s college educations.

“You can finance college,” Jochimsen said. “I don’t know any way to finance retirement. Would anybody give you a loan for retirement?”

A better path to a secure retirement is for Walter Lowe to keep putting money into his retirement savings plan, Jochimsen said. She also encouraged Annerose Lowe to find work when her children become independent, which would increase her Social Security benefit when she retires.

“I did not want them to be destitute when they’re older,” Jochimsen said.

Luckily, Walter Lowe loves his job and wants to keep working until he turns 74. Meanwhile, Annerose Lowe, 56, wants to become a certified home-care assistant after her children become independent.

Jochimsen next urged the family to pursue other ways of paying for college for their children. She suggested federal student aid as well as various scholarships, grants and loan programs.

Because of the Lowes’ close family ties, Jochimsen advised them to make college funding a group project, in which everyone participates in finding solutions.

“We are going to do that,” Annerose Lowe said. They are planning an initial family meeting that could become a monthly session.

The Lowes still need to look into alternatives for paying for college and keep building their retirement savings. But they also say that Jochimsen gave them a path to follow.

“We have a lot more confidence that we can navigate this,” Walter Lowe said.

(c)2015 The Seattle Times. Distributed by Tribune Content Agency, LLC.

Walter Lowe, 67, with wife Annerose, 56, and three of their five children: from left, Henry, 23; Elliott, 16; and Francine, 20; at their Maple Valley, Wash., home. (Sy Bean/Seattle Times/TNS)

Young Career Couple Advised To Wait On Big Expenses

By George Erb, The Seattle Times (TNS)

SEATTLE — Sometimes timing really is everything.

That was the case for Caitlin Littlefield and Nick Neverisky, both 30, engaged and earning about $63,000 a year combined.

They are at an age when the future stretches in front of them like a long boulevard. The Seattle couple’s goals include graduate school, rewarding careers, children, and a house, to say nothing of a trip to New Zealand and eventual retirement.

But the two were unsure about an affordable sequence of events that would make their dreams come true. Both completed their bachelor’s degrees just before the financial panic of 2008 and the Great Recession, which rattled their confidence in the future.

From the crash they learned, Neverisky said, that “success is not assured.”

A local chapter of the Financial Planning Association connected Littlefield and Neverisky with Len Skiena, a certified financial planner.

Skiena helped the couple crystallize their plans for the future and avoid financial potholes by staggering some of their more expensive life events, such as earning advanced degrees, having children, and buying a house.

“What we’re planning for is the life they want,” Skiena said.

Littlefield said Skiena brought the couple’s financial future into sharp focus. “Everything is much less nebulous now,” she said.

Like many young people in Seattle, Littlefield and Neverisky are relative newcomers, having moved from New England. Littlefield is working toward a doctorate in forest ecology at the University of Washington School of Environmental and Forest Sciences. She earns about $20,000 a year as a research assistant supplements her income with occasional catering jobs.

Neverisky earns about $43,000 a year as a project associate with Triangle Associates, a downtown Seattle consulting firm that provides environmental education, mediation, and public engagement.

Despite their uncertainty about the big picture, the couple are meticulous when it comes to their day-to-day household finances. They currently have about $14,000 in a checking account and about $6,900 in savings.

Littlefield and Neverisky are already saving for retirement, with about $5,500 in their 401(k) and Roth IRA accounts. Their debts add up to about $28,700. Two-thirds of their liabilities are student loans; the remaining debt is for a car.

After talking with the couple and running financial projections, Skiena was not concerned about their long-term outlook. He saw some red flags, however — not years in advance but within this decade.

“The really good thing is that they found out in time to do something about it.”

For example, Neverisky has toyed with the idea of earning an advanced degree. But Skiena’s projections showed the couple’s income and cash flow would suffer if Neverisky enrolled in a graduate program before Littlefield completes her degree and resumes her career.

If Neverisky waited to go back to school until after Littlefield graduates in 2018, the couple could avoid a potential pothole.

“By doing that, it gives her a chance to start making more money before Nick starts making less,” Skiena said.

Skiena advised the couple to keep their assets in cash now because they need the money for living expenses. Now is also not the time for the couple to buy securities that could lose value in a Wall Street downdraft.

Skiena also offered Littlefield and Neverisky some emotional support: Money will be tight for a few years, and it will be frustrating at times, he said. He told them to stay focused.

The couple’s first reaction to Skiena’s assessment was relief. “The haze is cleared,” Littlefield said. “I’m not that worried anymore.”

Since meeting with Skiena, Littlefield and Neverisky are also using a particular phrase far more often: “cash flow.” The term helps them think about their current and future finances.

Skiena is not the least bit worried about the couple running out of money, given their financial habits and their commitment to invest in their careers. Their big challenge is to get through the next five years.

“Once they reach the age of 35,” Skiena said, “they’ve reached the promised land.”

TIMING THE MARKET — SAY WHAT?

Developing a sound financial plan takes time and thought, but the real work comes later — when you have to stick with the plan.

Too many people stray from their individual financial plans when they are either spooked or seduced by passing market conditions, said Len Skiena, a Seattle-area certified financial planner.

Good financial plans compensate for market volatility, which is another reason to stay the course, Skiena says.

“Stay disciplined to it,” he said. “Don’t try to outthink it.”

Evidence that individual investors are too often stampeded into making poor decisions is especially abundant in the stock market.

Dalbar, the Boston-based research and auditing firm, has studied individual-investor behavior for 20 years. The findings are sobering: Individual investors consistently earn less than the market averages, as measured by the major indexes.

That’s because too many individual investors try to “time” the market’s peaks and lows, Skiena said. It’s a recipe not for beating the market, but for getting beaten.

(c)2015 The Seattle Times, Distributed by Tribune Content Agency, LLC

Photo: Images Money via Flickr