Saving for College Tuition without Sacrificing Your Retirement Goals
Parents’ lives change the minute their child is born. Once the excitement wears off, they start to see how their financial situation has changed as well. Their human nature is to sacrifice greatly for the betterment of their children. As parents, they need to manage those sacrifices, so they do not end up sacrificing their retirement goals as well. One major obstacle for parents investing in their retirement is also saving for the increasing costs of their child’s future college education. A survey by T.Rowe Price, “Parents, Kids, & Money”, reveals how conflicted parents are trying to save for both retirement and college:
- 76% of respondents are willing to delay retirement to pay for their child’s college education
- 67% of parents said saving for college education is a higher priority compared to 33% who stated retirement savings was a higher priority
- 69% said that because their child will attend college before they retire, they felt like they should put money towards college savings first and then save for retirement after
- 50% believe because they helped their child with college education costs, their child will help them in retirement
- 42% lose sleep worrying about college costs (up 28% from the 2014 survey)
- 57% of parents are willing to take on $25,000 or more in debt to pay for their child’s college education, with 19% willing to borrow $100,000 or more
Parents can take several steps to help them successfully retire and pay for their child’s higher education costs. Taken early, they can effectively achieve both goals.
- Save early, invest wisely, and take advantage of tax-deferred growth. These rules apply not only to retirement planning but also to college education funding.
- Understand future retirement needs, but also understand the cost of public/private colleges and the impact of inflation on those costs.
- Take advantage of the available savings options. For example, there are education saving accounts that can offer solutions to college education savers (i.e. 529 Plans & Coverdell ESA)
There are many choices to be made by parents, but realize that not all choices need to be made alone. The RetireAdvisers® team with Pension Consultants can help assist with effective planning for retirement AND saving for college tuition.
To learn more about improving your financial security, email email@example.com or call 1.800.234.9584.
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