ARBOR WEALTH: Purse strings, heartstrings and graduate school

Staff Writer
The Destin Log

(This is the third in a three-part series on personal debt.)

“And now the heart is filled with gold …

As if it was a purse …” from“Tears of Rage” as performed by The Band

Your daughter, who has amassed $27,000 in undergraduate student loan debt, has been accepted to law school. The cost will run upwards of $100,000 when all tuition and living expenses are factored in. Naturally, she doesn’t have it. How much more debt should she assume? And how much financial help, if any, should you provide? Assume the young graduate is your granddaughter. Same question.

Let’s say you don’t provide any financial assistance for law school, and that the young lady absorbs that extra $100,000 in debt herself. Will entering the legal profession owing $127,000 in student loan debt be a prudent tradeoff for obtaining an advanced degree? Difficult to say. Only an adult who has paid down significant loan amounts can fully appreciate how being saddled with that much debt can derail personal finances. But we also know that those with college and advanced degrees enjoy a much higher employment rate and make substantially more than those with less education.

Back to parents and grandparents. Let’s say you’re three years away from retirement, and you’ve just started getting serious about your retirement investment accounts in the last five years. And that you now have, oh, $850,000 total in your qualified (taxes not yet paid) and non-qualified accounts. And let’s say that you hope to retire with a little over a million dollars. Let’s also assume that like many Americans you have no pension. You’re probably going to want your investment accounts to generate income on which you can live, and these dividends, when combined with your Social Security payments, will represent your only sources of income in retirement. How much of your current $850,000 can you afford to liquidate to supplement your daughter’s educational expenses? Good question.

Or let’s assume that you’re a grandmother whose spouse has recently passed, and that now you’re receiving only one Social Security payment plus income generated by your investment accounts. You can’t go back and re-earn those W-2 dollars, and providing for your granddaughter, say, $100,000 taken from an investment total of $900,000, may impact your ability to generate sufficient income from your investments. And this could cause you to have to cut back on your current lifestyle.  What do you do in response to your granddaughter’s tuition situation?

It’s a question that tugs daily at the purse and heartstrings of adult Americans. Only you can decide. But run the numbers first. If you don’t take care of yourself, you’re potentially opting to become a financial burden for that daughter or granddaughter down the road, one who may or may not be in a position to assist you.

Margaret R. McDowell, ChFC, AIF, a syndicated economic columnist, is the founder of Arbor Wealth Management, LLC, (850-608-6121 —, a “fee-only” registered investment advisory firm located near Sandestin. This column should not be considered personalized investment advice and provides no assurance that any specific strategy or investment will be suitable or profitable for an investor.