How to Balance Your Child’s Education Costs with Your Own Retirement Goals
As summer comes to a close, families often turn their attention to school supplies, tuition payments, and college planning. But it’s also a good time to take a closer look at your long-term financial goals — especially saving for retirement.
When you’re trying to save for both your children’s education and your own retirement, it’s easy to feel pulled in two directions. But with a clear plan, you can make meaningful progress on both goals.
Weighing the Options
Many parents can feel inclined to prioritize their child’s education. However, student loans, grants, and scholarships can help cover education costs. There’s no equivalent option for retirement. That’s why it’s important not to pause or reduce your retirement savings, even when college expenses are on the horizon.
A good starting point is to create a savings plan that evaluates both college and retirement. If you don’t already have a financial advisor, consider working with one to map out your goals. A solid plan can help you estimate how much you’ll need for each and decide how to allocate your savings. It also helps you make use of the right types of accounts — ones that offer tax advantages and long-term growth potential.
Saving for Retirement
For retirement, 401(k) plans are a common choice. These accounts let your money grow tax-deferred and often come with matching contributions from your employer. Starting early can give your investments more time to grow through compounding. If you’re not contributing at least enough to get the full employer match, consider making that a priority.
Saving for College
When it comes to saving for college, 529 plans can be a smart option. These accounts are specifically designed for education expenses. Contributions grow tax-free, and withdrawals are tax-free when used for qualified education costs. Many states offer tax benefits for contributing to a 529 plan, making them even more attractive for families planning ahead.
Automate Your Savings
Automating your savings can help you stay on track with both goals. Setting up automatic transfers to your retirement and college accounts can help you stay disciplined and reduces the temptation to spend the money elsewhere.
If your budget is tight, revisit your plan each year and adjust as needed. For example, you might start by putting a little more toward retirement now, then shift focus to college once your child is closer to enrolling. Or, if you have more flexibility once tuition payments are complete, that could be a good time to boost your retirement contributions.
Consider involving your child in the college funding process as well. Encourage them to explore scholarship opportunities, apply for financial aid, or take on a part-time job. These steps can reduce the financial burden on your family and help your child develop financial responsibility early on.
Key Takeaway
Saving for college and retirement doesn’t have to be a choice between one or the other. With a thoughtful, consistent approach, you can make progress toward both. The key is to start as early as you can, revisit your plan regularly, and stay committed to your long-term goals. As the school year begins, take this opportunity to check in on your financial picture. A little planning now can lead to more peace of mind later — both for your child’s future and your own.
This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant. Please consult your investment professional regarding your unique situation.
Patricia L. Hutchinson
Director of Retirement Plan Services
AIF®, MBA