Saving for retirement and for college: It’s not an either-or!


You know you need to save for your children’s college, and you know you need to save for your own retirement. So how do you balance these financial demands within your budget?

It’s our mission to get you to start saving for college, and the earlier, the better! But we also want you to make sound financial choices overall.

Although we love the dedication to saving for college, the best way to frame this balance of priorities is that it is not an either-or situation. It’s not saving for retirement vs. saving for college. It’s saving for retirement AND college vs. buying an overpriced car that’s going to go down in value. It’s saving for retirement AND college vs. eating out most nights of the week. By making smart, intentional choices, you can find a way to do both. Here are some more tips from financial advisors including Sean Moore, Certified Financial Planner and President of SMART College Funding in Boca Raton, to help you turn your “or” into “and”:

  • Live on a budget. Do you know where your money is going, or do you wonder where it went? By setting a budget for the month — one that includes dollars for retirement and college — you’ll learn where you can make lifestyle cuts to help you make your goals. As for retirement, Moore says to always ask your employer first! Most companies offer some type of employer-sponsored retirement plan — and many companies will match some (or all) of your contributions. If you have a “company match” you want to make sure that you take full advantage of the match before looking at other account types. If you do not have an employer sponsored plan, then an IRA or Roth IRA would be a good option, according to Moore.
  • Consider sending your child to a community college and state schools. If you want to pay for your child’s college, you might not be able to afford a private institution. Attending two years at a community college before finishing a four-year degree at a state university can save you thousands of dollars.
  • Take advantage of changes in your income or expenses. Get a raise? Earmark it for savings! Make some money from a side job? Earmark it! Kids grow out of diapers or daycare? We think you know what to do.
  • Put your savings into the right kinds of accounts. If you’re saving for college, a regular savings account and your 401k are not the best savings vehicles. A much better choice would be a 529 Plan where earnings grow tax free. Open one today, even if you don’t have much to put in; it will be an easy place to funnel birthday money or work bonuses. You can also use the Florida 529 Savings Plan eGift portal to invite family and friends to contribute to your child’s college savings as well. As for retirement, use a savings vehicle specifically designed for retirement such as an employer-sponsored retirement plan or Roth IRA.
  • Automate your contributions. You’ll quickly become used to that money silently slipping out of your checking account, only to be pleasantly surprised at how much has been building up. The mantra is pay yourself first, and this applies to retirement, college savings and any other savings goal.

In its “Parents, Kids & Money Survey,” T. Rowe Price found that 52 percent of parents said it was more important to save for their kids’ college rather than their own retirement.

Remember that there are also ways for your child to help pay for college.  Your child can work while attending college, giving them valuable real-life experience to help build their resume and broaden their horizons.  Encourage your student to complete all the requirements to meet state scholarship programs, like Bright Futures, and get them to start working on their volunteer hours in 9th grade, not waiting until 12th grade when the deadline is looming. Moore said he advises his clients that students should be looking for all the scholarship options out there – from local rotary clubs to essay contests – as soon as they enter high school.

No matter what your situation is, talk to a financial advisor. Each situation is unique and a financial advisor can give you a customized recommendation.

Note: This blog is for informational purposes only and is not considered investment advice. Consult your own tax, financial and legal advisors before making a selection.

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