Saving for Retirement and College

It’s that time.  June… a lot of folks are getting ready to send their high school graduates off to college.  If you plan to pay for your child’s college education, how can you possibly save for retirement and your child’s college education at the same time?Saving-retirement-college

 It’s seldom easy to achieve a balance between saving for your retirement and saving for the ever-increasing costs of a college education within your present income. Yet it’s imperative that you save for both at the same time. To postpone saving for your retirement means missing out on years of tax-deferred growth and playing a near-impossible game of catch-up. To accomplish both goals, you may need to compromise.

The first step is to thoroughly examine your funding needs for both college and retirement. On the retirement side, remember to include the estimated value of any employer pension plans, as well as your Social Security benefits. This evaluation will likely prompt you to examine some deeply held beliefs about your financial goals. For example, is it important that you travel regularly in retirement, or is it more important that your child attend a prestigious Ivy League college?

If you discover that you can’t afford to save for both goals, the second step is to consider some compromises:

  • Defer your retirement and work longer.
  • Reduce your standard of living, now or in retirement.
  • Increase the family income by seeking a better paying position in your present career, getting a second job, or having a previously stay-at-home spouse join the work force. Beware, though, of potential drawbacks like day-care costs, commuting costs, and tax disadvantages on the increased income.
  • Seek out more aggressive investments (but beware of the risks).
  • Expect your child to contribute more money to college. Some parents may find it difficult to accept, but the majority of college students finance a portion of their education with student loans.
  • Investigate less expensive colleges. You may find that some less expensive state universities have more to offer in certain programs than their pricey private counterparts.

The third step is to re-evaluate your plan from time to time as your circumstances and wishes change. Remember, the important thing is to earmark a portion of your present income for both goals and do the best you can.

Trevor- SP-Leadership-2016-Portraits-468

By Trevor Hammond

About Trevor Hammond

As a veteran of the mortgage industry, Trevor Hammond is the co-author of "Borrow Smart, Retire Rich," a Certified Mortgage Adviser and a founding Faculty Member and Contributor to the National Institute of Financial Education (www.niofe.org). And he has provided thousands of homeowners with the clarity and confidence to make smarter decisions when it comes to their mortgages and money. In 2013 he launched an entirely new kind of mortgage company: Aspire Mortgage Group, which is committed to educating and empowering homeowners to increase savings, eliminate bad debt, and safely increase net worth. The specialized group of mortgage professionals at Aspire Mortgage Group have redefined what homeowners should expect from a mortgage company. To learn more about Trevor Hammond and our team of mortgage advisors please visit our website at www.aspiremortgagegroup.com or email Trevor directly: trevor.hammond@sierrapacificmortgage.com. Aspire Mortgage is a Sierra Pacific Mortgage Partner.
This entry was posted in Blind Spot 1: Developing a Plan, Blind Spot 2: Increasing Fiscal Literacy, Uncategorized. Bookmark the permalink.

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