The biggest speed bump that lies in wait for parents on the road to retirement is paying for college.  The very utterance of the word “tuition” can strike fear in the hearts of even the most savvy retirement savers.  While much attention has been paid to the financial planning for college, many parents still can’t actually pay for college and have to use alternatives to assist them with that tuition bill.  One strategy is to have your child take on all or part of the debt themselves by taking out student loans.  This may not sound like the “nicest” thing to do, but sometimes it can instill a greater sense of value in the education if they are paying for it themselves.  Before you have your child do this though, you should all sit down with a financial adviser to discuss the implications of saddling your child with the debt and make sure they understand the repayment of those loans.

When it comes to applying for financial aid, you really need to understand what can be counted as a liability on the FAFSA form.  Many parents are unaware that cash value life insurance and annuities  of any kind are not counted as assets on the form.  This means that shifting assets can become very important to the amount of financial aid you qualify for.  This means that parents who have more than $100,000 in taxable liquid assets that they do not want to declare can move the money into an annuity, allowing it to grow tax free until retirement and improve the parents’ implied financial need for the FAFSA form.  Therefor, this strategy can help in financial planning for retirement as well as the financial needs for college.

Shifting funds from a custodial account to a 529 plan can improve financial aid chances as well.  The College Cost Savings Act of 2007 stipulates that 529 plans that are owned by a third party do not count as assets on the FAFSA.  Finally, gifting appreciated assets that you may have will allow for a step-up in cost basis when the student sells the assets and will reduce your declarable assets.  You should speak with a financial planner to determine if these strategies will work for you in the given time frame.