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Saving for Retirement vs. Paying for College

Retirement Planning Financial Planning

As many parents start ramping up their retirement planning efforts, their kids are also preparing for an important next step in life: higher education. It may seem overwhelming to manage both at once, but it’s important to face some very hard decisions. If you’re thinking about tapping into your retirement accounts, ask yourself a few questions:

  • Is this a sacrifice I can afford to make?
  • Are there other ways to get the money we need?
  • How much is my kid willing to contribute?

It’s no secret – college is very expensive, whether your kid attends a Save Postuniversity close to home or in another state. According to the College Board, the average cost of tuition at four-year private universities is up to $33,480. After room and board, you could possibly spend about $45,000 a year or more. Although in-state universities may be cheaper, the expense is still great.

Putting a plan in place

One of the first things to do after evaluating the costs of tuition is to consult with a financial planner. They will help you assess your goals, look at your current retirement plan, and provide objective, realistic advice on whether or not your finances can meet your expectations. Many families find it easy to consider tapping into retirement savings to fund their children's higher education, but that may not be the best alternative.

While evaluating your financial standing, you may realize your retirement savings can’t withstand such an expensive hit and you need to look at other options. Now is the time to draw your children into the conversation and make decisions as a family.

Avoiding the guilt trap

Parents always want the best for their children, and our modern society even shames parents that are not able to put their kids through school, or willing to sacrifice their own retirement. As the cost of college continues to rise, your kids should take a vested interest in their education and be willing to contribute. Think about this – what if you paid for a very expensive college and your child decided that’s not what they wanted to do anymore? You’ve wasted precious retirement dollars that you may not be able to replace.

Most financial advisors tell parents to prioritize retirement savings for good reason. You can borrow funds to pay for college, but nobody lends money for retirement.

Millennials have reshaped the notion of college and tend to make their own rules. Having a stake in their own future will be meaningful, helping to take some of the burden off of you. Being practical about the situation and empowering your child to make a commitment to their education teaches responsibility and guidance for the future.

Working with a financial planner can help set goals and offer solutions where everyone can have a vested interest in paying for college, and you won’t compromise your retirement. In today’s economy, being strategic and attempting to avoid touching your retirement is a good way to go.


Disclosures:

  • This material is intended to be educational in nature, and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client. These materials are not intended as any form of substitute for individualized investment advice.  The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own.  Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors.  Faithful Steward Wealth Advisors can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein.
  • Some information in this blog post is gleaned from third party sources, and while believed to be reliable, is not independently verified. The statements contained herein are based upon the opinions of Faithful Steward Wealth Advisors.
  • This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.