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A single mother is advised on how to stop depleting her Roth IRA to pay for her daughter's university tuition. The expert suggests a strategy focusing on cash-flowing the remaining tuition costs through budgeting, eliminating consumer debt, and encouraging the daughter to contribute via part-time work to ensure the mother's retirement security.
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I am a single mom. I have one daughter. She is 20 and she is going to school, university, and
we have not been, well lately, the financial aid has not been helping us out because
we earn, I guess, I guess earn, we don't earn, how do I say, we earn a lot for a family of two
and I've been helping her out paying her tuition every semester but I, what I rely on to pay for
her tuition balance or leftover balance to help her pay her semester is taking out of my IRA,
my Roth IRA. Oh. And I don't like to do that because that's my, of course, that's my,
my retirement. Absolutely. And yeah, so any helpful tips, please?
Where do I start? How much, how much have you pulled out of the Roth so far?
Like every, every year I take about, I take about a thousand five times two will be around
3,000 a year. How much is in there total? Right now it's 5,858 with 70 cents. Okay. Okay. So it's,
it's about to be zero if we keep this up. Yes, exactly. How old are you? I'm 44. Okay. Well,
it's clear that you love your daughter. Can we agree on that? Yes. You're doing something
genuinely sacrificial to invest in her future and that, that part is right. Your heart is right
there, but the vehicle that you're using to do that, that's the issue here. Because right now,
here's the future. Let me paint it for you. You retire broke. Now your daughter has to take care
of you financially, sacrificing her future, creating a generational cycle, right? Yeah.
And you didn't mean for this. You had good intentions, but I don't want you to become
a burden to your daughter later on because you sacrificed for her today. So I think there's a
different way we can come up with a game plan to cashflow $3,000 a year. Would you agree?
Yes, sir. We're not talking $30,000 a year. $3,000 is manageable.
Yes. It's about like $6,000 to $7,000 a semester. Okay. Is she working at all?
She's about to work here part-time in the summer. Good. So how much will she make doing that?
That we don't know yet. Cause she will be working soon. So she's going for animal science. That's
major. And, um, she's been applying to all these like vet clinics and stuff. And so, um,
is she wanting to be a vet tech? What's her goal? Uh, like a vet tech. Yes. Okay. Does she know how
much vet techs make? Uh, I think she told me once, but I forgot that number. Okay. I thought I heard
you say that for a family of two, you guys bring in a really good income. What do you guys bring in
together? Or what do you bring in? Um, a year is 120. Okay. Approximately. Okay. And how much
longer does she have for school? She has two more years to go. Two more years. So we're talking like
$12,000 solves this? Correct. Yes, sir. You got it. Okay. So what if we had a game plan to where
she works part-time, she covers, let's say half of that amount over the next two years and you
cover the other half and you both cashflow it without robbing your future. Okay. Let me write
this down. I have my notes and everything. So yeah, you said you bring home how much a month?
Seven? Seven. Now how much of that can we use to save for the college fund and cashflow this?
Okay. I have consumer debt and I have a car loan. So what's left on the car loan? Um,
it's $9,984.56. Okay. And the other? And the consumer debt is $4,603.05. Okay. And have you
stopped going into debt? Yes. Okay. Great. I'm just paying these off already. Um, these are like
past, um, past debt. They're older debts. They're older. Yes. Uh, yes, sir. So ask, answer one
question for me. So before you were saying that you were taking out $3,000 a year from the Roth IRA
to make this happen, right? So that's essentially all we're looking to find. If you were floating
all of it except $3,000, that feels like a fairly easy equation to solve unless I'm missing something.
Because now we can just budget 250 bucks a month over to a little savings account so that we have
three grand by the end of the year. You see the math on that? 3,000 divided by 12. So now we can
make a budget. Okay. Hey, we're going to budget to cover our debts, aggressively pay that off.
And on the side, we put 250 away in a savings account earmarked for her college. Yes. In addition
to what you were already putting aside. Yes. And then if she can work part-time, that lowers the
amount you even need to put in. Yes. Um, because I, um, I do cash out my vacations from work.
So that's like every quarter. Um, so I use that extra money to pay, uh, for, uh, the rest of her,
her tuition plus, uh, the 1,500 of the IRA. I'm sorry, Roth IRA. I'm sorry. Okay. So we won't cash
out the additional 1,000 or however much it was from the IRA. If you want to keep cashing out
your vacation, that seems to be working for you. There's extra cash there. And then the rest is
cash flow through the budget. Plus your daughter's, uh, portion from her job. And I think
you've got it covered. I think you're doing a great job. Paychecks are the solution instead of
your retirement account. So are you investing anything currently into the Roth IRA every month
or anywhere else? Yeah. It's what's a month. Uh, it's with Edward, uh, Edward Jones. Um, and how
much is that? Um, about 400, 480 or 60 a month. Okay. So starting today, we're going to pause
that. We're going to take back that 480, uh, a month and apply it to our debts. Oh, okay. I,
okay. So we can actually go tell our employers say, Hey, I can stop that. Yes. So I have like
to stop all contributions. And what this does is it allows you to focus for a season
so that you can get rid of your consumer debt so that you can cashflow your daughter's college.
So that's your deep. Why let that fuel you to get really intense, to not let this debt drag
on any longer. It's been hanging out long enough. You got a future ahead of you. Your
daughter has a future ahead of her. And so let this be an aggressive season for the next six
months. We're going to knock out the consumer debt, which frees up how much in payments.
What's the car payment? What's the consumer debt payment every month?
The, okay. The, um, the, the car loan is 390, but I pay 500 a month. Actually I raised it to
525 to pay it faster. Okay. So 390 on the car. Plus how much on the consumer debt?
Uh, it, well, it varies on the payments monthly, but it's 4,000 right now, 4,603.
I make monthly, like, I guess their minimum payments. Cause I have some like a couple
hundred bucks. Uh, yes. Okay. So right there, that's going to be five, six, 700 bucks freed up.
Once you knock out these debts, now you've got some margin. Now, instead of ever robbing a
retirement again, we are just building and building and building so that you can retire
with dignity and not have to rely on your daughter to cover the gap.
And the good news is once you do that, if you start investing 15% of your income
from let's say age 46, when this is actually done to age 65,
you're going to be right close to a million dollars.
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