5 Reasons to Prioritize Retirement Savings Over College Savings
Photo: @element5digital on Unsplash
Dear Parents,
Are you sacrificing your retirement savings to help your children pay for college? Please stop. They’ll thank you later.
-Annie
As a parent, I totally understand the desire to give your kids the world. You raised these precious babies and you want them to have the best future imaginable. For many of us, our children are one of our greatest achievements, so of course you want to pay for their college education.
We’ve all heard about the crippling student debt crisis. College costs are rising and each year it becomes more difficult to make enough money to pay for that degree. And many millennial parents are still paying off their own student loans, wondering how to save for their children to go to college, let alone for their own retirement.
With all these conflicting goals, it can be challenging to figure out what to do first. Should you save for your children to go to college or for your own retirement?
If you have to ask this question, the answer is most definitely save for retirement.
Under no circumstances do you want to pay for your child to go to college only to have to depend upon them to support you in retirement.
Here are five reasons why you need to prioritize retirement savings over college savings:
Photo: @aaronburden on Unsplash
There’s no financial aid or student loans for retirement.
Sure, Social Security might help you out a little bit, but the rest is up to you. Social Security was meant to be a supplement, not a solution. Unfortunately, there’s just no way around the fact that you’re gonna need every dollar you can possibly save.
2. There are many ways to reduce the cost of or pay for college.
Students can get loans, scholarships, and other types of financial aid to reduce the cost of going to college. In addition, it’s possible to find cheaper alternatives, such as starting at a community college or selecting an in-state school. Students can also choose a college where they are in the top half of applicants, increasing the amount of aid the college will offer.
3. Having college savings (such as those in a 529 account) can increase the amount of your expected family contribution. Retirement savings are excluded.
I’m not a fan of trying to hide assets so you can get more financial aid, but at the same time, it just doesn’t make sense to save for college at the expense of retirement. Having college savings will increase the amount you are expected to pay, but having retirement savings won’t.
4. You don’t know what will happen with college.
Maybe your child won’t go to college or will get scholarships to cover the cost. You can’t predict with certainty what your child will do, but you can be certain that you’re going to need money to survive in retirement.
5. Your children will thank you.
Trust me, your kids do not want you to pay a whole bunch of money for them to go to college only to have to support you in your old age. You will all be a lot happier if you can just live off your retirement savings and they can focus on their own lives and retirement savings.
Look, I’m not saying you shouldn’t save for college if you are able. Just don’t do it at the expense of your own retirement.
Once you’ve contributed as much as you’re allowed to retirement accounts, such as a 401k, 403b, IRA, or Roth IRA, then you can consider saving for college in a 529 plan.
I know this is hard, but I promise you’ll be so much better off if you prioritize retirement savings.
If you’d like to learn how I can help you make a plan, schedule a free 15-minute Discovery Call, send me an email, or hop into my DMs on Facebook or Instagram.
