There was a time when marrying young and having children right away was the norm.
But as North American life became increasingly frantic and expensive, more and more couples chose to delay marriage and children. If you’re among these mature parents you could be opening the door to your retirement years while your offspring are still in the nest and aiming at a university or college education.
Chances are you’ve already made progress accumulating savings and setting some aside for retirement. But you still need a plan to pay for that increasingly costly post-secondary education – and you should begin right away. Here a few tips to get you started.
Get registered to save – A Registered Education Savings Plan (RESP) is a terrific way to save for an education and to save on taxes, too. Though contributions are made with after-tax dollars, you do not pay tax on growth in an RESP until money is withdrawn. If the growth is paid to your child while attending an eligible post-secondary education program, you won’t pay taxes on the growth; your child will, and will likely be in a low tax bracket.
The government will also kick in some money. Through the Canada education savings grant program, the first $2,500 you contribute each year to your child’s RESP will receive a federal grant of at least 20 per cent of your contribution. With the recent removal of the annual maximum contribution limit and an increase in the lifetime maximum contribution amount to $50,000, it is now easier to accelerate contributions to an RESP.
Get a CLB to save – The Canadian Learning Bond can also help accelerate your education savings plan. It is available to children born in 2004 or later whose parents or primary caregivers are receiving the National Child Benefit Supplement.
Get flexible to save – With the education costs accelerating, it’s prudent to look beyond RESPs. The Tax Free Savings Account could be a good choice. Other options are trust accounts and life insurance.
Get retirement-ready – Develop a realistic retirement plan that includes the fact that your children may still be completing their education at that time. Your plan could include putting off extensive travel or exploring alternative work arrangements, like phased retirement, so you can spend more time with your children.
Talk to your professional advisor to learn more about education savings options and what you can do to help put your child through university while still enjoying your retirement.
Andy Erickson is the division director with Investors Group, Vernon. This article is provided for information purposes only. Please consult with a professional advisor before implementing a strategy.
