With the end of the school year just around the corner, thoughts of summer vacation begins to enter our heads. This time also brings thoughts of college education for your kids. You may be asking yourselves, "how can we pay for our kids college education and save for retirement at the same time"?
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 university 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 who can 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 consider tapping into retirement savings to fund their children's higher education as this seems like a logical source of funds, 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 they no longer wanted to go to college anymore? You’ve wasted precious retirement dollars that you may not be able to replace.
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.
The information in this material is not intended as investment, tax, or legal advice. The opinions expressed and material provided are for general information only.