Saving Goals: Retirement or Kid’s College Fund?
If you have children, the question of when and how much to save for their college costs has probably crossed your mind. But, in the same breath, you also need to focus on keeping whatever you can for your own retirement.
There is no question that you want what’s best for your children. However, should those wishes override your future stability after retirement?
In this post, we will investigate this question to help you make an informed choice about how to direct your savings.
College Costs Skyrocket
The idea of saving for your kid’s college fund may seem intimidating when looking at the rising costs. However, the term ‘rising’ does not really capture the rapid uptick in tuition and other educational expenses. Since 1980, college prices have shot up over 169% and continue to go up.
Many parents think that it is unfair to push these inflated costs onto their children through student loans. The reality is that student loan debt can negatively impact a young person’s future.
Does this mean that you should start redirecting more of your retirement contributions toward that college fund to help cover these costs?
Start With Yourself
While this may seem like a tough pill to swallow, the truth is that you need to focus on your own savings first. This seems ridiculous as a parent. Why would you sacrifice your kid’s future for your own retirement?
The truth is that much like college, the landscape and future of retirement have changed as well. Employers are offering fewer options for retirement savings. In addition, pensions are practically extinct today.
This means that you are the only one responsible for your retirement.
Your healthcare is one of the primary expenses you’ll face in retirement. A 2019 report from HealthView Services Financial says that those who retire at 65 can expect to pay about $387,000 in healthcare costs. And these costs do not include long-term or nursing care!
These costs show why it is vital to plan and save to cover the own costs of your retirement. Otherwise, you may burden your children with many of these costs down the road.
How to Balance College and Retirement Savings
While savings goals often lead to difficult decisions, you don’t have to divide your savings into an either/or scenario. There are plenty of ways to help your children with some of their college costs while also succeeding in your retirement savings goals.
Start With Your Retirement Goals: As mentioned, make sure you’re hitting your targets first and foremost. If you don’t have access to a 401(k) or other employer-based option, make sure you max out other retirement accounts like Roth IRAs.
Set Realistic Goals About College Savings: Set a goal that you can realistically pursue in terms of helping your kid pay for college. Will you be paying for full tuition? Are you providing a windfall to help your kid get started? Understand that goal so you can plan for it accordingly.
Encourage and Support Other Opportunities for Your Child: Don’t forget that your child has many opportunities to help offset the cost of college. From scholarships to financial aid, encourage your child to find and pursue these options.
Adjust Your Plan Based on the Situation: Sometimes, certain situations may call for more help for your child. For instance, perhaps a scholarship or other funding opportunity could fall through, requiring more assistance from you. Take these sorts of scenarios as they come. But remember to prioritize your own retirement savings as much as possible.
Delta Capital Management: Help Where You Need It
You may still have questions on how to successfully save both for retirement and your child’s education. If so, get in touch with Delta Capital Management today. Their team of financial advisors can help you find a plan that connects to your life. And this can help you develop a path to achieve these financial goals.
