Bad plan 101: Boomers paying for kids’ and grandkids’ college from their retirement savings accounts

A CNN report yesterday found that 25% of Baby Boomers surveyed report that they will be tapping their 401K retirement plans to pay for their kids’ college. Many report that they are also helping to fund their grandkids’ education.
This may sound like a nice help to the younger generations when they then have to take on less employment and debt to get through school, but there will also be a longer-term cost. A new MetLife study confirms that a growing legion of Boomers cannot afford to retire and are planning to work well past age 65. This means there will be less jobs for younger workers when they finally do get into the work force. See: Boomers, Saddled With Debt, Plan To Work Through Retirement, MetLife Study Says

“Baby Boomers are saddled with debt from putting children through college, borrowing against their homes and, in some cases, from owning a second home, according to a new study by MetLife.
Additionally, the life insurer's study says that low interest rates and a difficult stock market have adversely affected their nest eggs. For fear of outliving their savings, many plan to continue to work. Some will work indefinitely, the study says.
In the past about 75 percent of people fully retire in four to five years after turning 65. By the time early Baby Boomers retire, people born between 1946 and 1955, fewer than half will retire before turning 70.”

In response to this deficit of savings, typical financial advice is to ramp up the risk side of the remaining retirement savings accounts and see if Boomers can get lucky in outrunning their capital. But betting on lady luck to solve these issues is a poor plan; you’d probably have better odds of success buying regular lottery tickets.
A more plausible plan would be for Boomers to increase their savings and tell their offspring to buck up and find the bulk of their own funding for school in the form of working and saving more and applying for scholarship, bursaries and loans. It is perfectly acceptable to work and go to school at the same time. It’s amazing what multi-tasking people can manage when they need to. If need be, it is also perfectly ok to study part-time in order to earn our keep as we go. Hey with Boomers keeping the best jobs for the next several years, there is no great rush to get through school and into the full-time career space anyway.
As far as government “stimulus” efforts go, it would also make great sense for more tax dollars to subsidize education costs. Post-secondary costs have spiralled out of control the last several years. This is super short-sighted and counter-productive: nations have a vested interest in educated workers.
Hey we gave trillions to the banking system and that created no new jobs or smarter people. Why not stimulate something useful like education?