Retirement vs. Funding Your Children's College Education

As many parents start ramping up their retirement planning efforts, their children are also preparing for an important next step in their lives: 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 child willing to contribute?

It’s no secret: College is very expensive, whether your kid attends a college close to home or in another state. According to the College Board, the average cost of tuition at four-year private colleges is $38,070. After room and board, you could possibly spend over $50,000 per year or more.1 Although in-state colleges may be cheaper, the expense is still great.

Putting a Plan in Place

One of the first things to do after evaluating the cost of tuition is to consult with a financial planner. They will help you assess your goals, look at your current retirement plan, and provide objective, realistic guidance on whether your finances can meet your expectations. Many families find it easy to consider tapping into retirement savings to fund their children's higher education, but that may not be the best option.

While evaluating your financial standing, you may realize your retirement savings can’t withstand such an expensive hit and that 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 who are unable to put their children through school or are unwilling to sacrifice their own retirement. As the cost of college continues to rise, your children 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 that they no longer want to attend? You’ve wasted precious retirement dollars that you may not be able to replace.

Most financial professionals tell parents to prioritize retirement savings for good reason. You can borrow funds to pay for college, but nobody lends money for retirement.

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 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 professional can help set goals and offer solutions so everyone can have a vested interest in paying for college without you having to compromise your retirement. In today’s economy, being strategic and avoiding affecting your retirement is a good way to go.

_{https://research.collegeboard.org/media/pdf/trends-college-pricing-student-aid-2021.pdf}

_{This is for educational purposes only and not intended as individual advice.}