Dad weighs $300,000 college bill against $1.2 million nest egg

A 48-year-old father with $1.2 million saved is asking whether to spend roughly $300,000 so his daughter can attend a preferred college near home, and MarketWatch’s Moneyist has a blunt answer: guard the retirement fund.

The dilemma came from an anonymous reader using the name “Softball Dad” in Quentin Fottrell’s MarketWatch advice column. The father said his daughter is a highly ranked competitive softball pitcher with a 3.94 GPA and wants three things from college: softball, a strong education and no debt.

Her choices, according to the father, are complicated by geography and money. He wrote that she could probably receive an athletic scholarship at a midmajor or low-major Division I school, but local Division I programs are hard to crack and she would prefer to remain close to home. Nearby Division III colleges are also on the table, including some with strong academics and steep costs.

The family’s income puts need-based aid out of reach, the father told Fottrell, and he said some of the schools under consideration generally do not offer merit scholarships. His estimate: about $70,000 a year out of pocket, paid largely from a taxable brokerage account.

The family balance sheet

The father said he began saving for retirement at 42, after his income rose to about $500,000 a year. His wife earns another $50,000, according to the letter.

He listed the family’s assets as about $360,000 in a taxable brokerage account, $700,000 across 401(k) accounts, $100,000 in a Roth IRA and $80,000 in a high-yield savings account. Their daughter also has $115,000 in a 529 college-savings plan.

The family owes $250,000 on a home the father values at about $850,000. His retirement goal is to stop working, or cut back sharply, around age 60 or 62 with $5 million saved.

The Moneyist calls the swing too pricey

Fottrell advised against using such a large share of the family’s savings for the most expensive college option. He wrote that money pulled from investments now carries an opportunity cost beyond the tuition bill because it also removes years of potential market gains.

In Fottrell’s view, the daughter’s goals should fit within the parents’ financial limits. He said she can still pursue softball and a strong education through less costly schools, partial scholarships where available, work, loans or a possible transfer after two years.

Fottrell also pointed to NCAA rules, noting that Division III schools do not award athletic scholarships. Division II schools can offer athletic aid, and lower-cost Division I options may also help reduce the bill.

The 529 account should be used first for education costs, Fottrell said, regardless of which college the daughter chooses.

Fottrell also laid out the retirement math. He said a $1.2 million portfolio growing at an average 7% annual return could reach about $3.3 million in 15 years without additional contributions. If the father invested $100,000 a year, those contributions could grow to about $2.5 million over the same period, putting the $5 million target within reach, according to Fottrell’s calculation.

At a 4% withdrawal rate, Fottrell wrote, $5 million would produce $200,000 a year before Social Security. His bottom line was that the parents may choose to help with college costs, but should not take on the full burden if it threatens retirement.

This story draws on original reporting from MarketWatch.