Higher Education Funding Options

I recently read the article, "Tim Walz Withdrew $135,000 From His Retirement Account to Pay for His Daughter’s Education. Why You Shouldn’t Follow in His Footsteps." and thought I would share my thoughts with you on it. If you click on the above linked article heading and read the article in it's entirety, it discusses Tim Walz’s decision to withdraw $135,000 from his retirement account to fund his daughter’s college education. What a loving gesture from a parent to their child, would you say? He may have done the same for his son.

While the author criticizes this move, highlighting the risks of depleting retirement savings, it’s important to recognize that Walz’s unique financial situation includes pensions and benefits that most Americans lack. Teachers in many States have access to a manditory Defined-Benefit Plan and can also opt to contribute to a Defined-Contribution Plan, if offered; such as, a 403b plan. The State of Minnesota offers both types of plans for their teachers.

Defined-Benefit plan are part of "Three Legged Retirement Stool" as it was called in the Finacial industy and is almost extinct today. The Three Legged Retirement Stool included Defined-Benefit Plans, Personal Savings and Social Security. Most employers in the U.S. don't offer a Defined-Benefit Plan any more, but many offer a Defined Contribution Plan; such as, a 401k. Unfortunately, according to government statistics, only about 54.4% of American take advantage of a 401k or IRA account, the average savings at retirement is less than $100,000 and as of 2023 data, only 15% of companies or institutions offer a Defined-Benefit Program to their employees. So, as you can see, times have changed and now it's up to the employee to plan their own retirement without the help of their employer, in many cases.

Having been educators for many years, Mr. & Mrs. Walz know the value of a higher education. I would suspect that Mr. Walz and his wife didn't take this decision lightly and most likely discussed the options with a Financial Advisor. I would say that the title of the above mentioned article is a little harsh. I would have titled it a bit differently. "Tim Walz’s $135,000 Retirement Withdrawal for Daughter's College Education – Are There Better Options for Your Family?"

The good news is that the article agrees that for most of us, there are better options to fund education; such as scholarships, grants, government loans or dedicated savings plans like 529s or Permanent Life Insurance. Saving for your retirement is a very important part of your financial plan, there are better ways of funding your children's higher education.

If you are interested in what these funding options are, I would urge you to become educated on them. There is one particular option that most Financial Advisors don't discuss with their clients. We can share that option with you. I think that you will find it superior to many of the other options out there. I used this option for our two daughters college education and it was awesome.

Feel free to contact us for more information at Comprehensive Insurance Consultants, LLC. We are always happy to help!