Smart planning for college and retirement.
With a combined income of $450,000 and $2.1 million in retirement accounts, the Johnsons are in a good financial position, but the impending college costs for their three children, aged 8, 12, and 15, presented a significant hurdle. They wanted to maintain their current retirement contribution levels while simultaneously building a substantial college fund, feeling squeezed by competing priorities.
Using the Deferred Payment Loan Calculator, the Johnsons explored the possibility of deferring payments on a $150,000 home equity loan used for home improvements. By deferring the principal payments for 5 years, they freed up $15,000 per year in cash flow, which they immediately directed towards 529 plans for their children. The Loan Calculator further allowed them to compare different loan options and interest rates to minimize the long-term cost of deferral.
The Deferred Payment Loan Calculator was used in conjunction with the Loan Calculator to compare loan scenarios and determine the optimal deferral period and interest rate impact. The HELOC Calculator was also used to verify the most advantageous borrowing option.
$75,000 in additional college savings achieved over 5 years through strategically deferred loan payments, allowing the Johnsons to maintain retirement contributions.
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