We all want to retire comfortably. But for some, saving for your children’s college education and saving for retirement at the same time can be a real challenge. You can certainly do it if you identify your goals and create a realistic plan, though.
Determine your needs by answering the following questions –
• How many years do you have until you retire?
• Does your employer offer any retirement plan or pension plan? If so, what is the current balance? At the current rate of savings, how much would you accumulate by the time you retire?
• What are your targeted Social Security benefits? You can calculate this by using your benefit statements and personal earnings or by going online to: SSA.GOV.
• What standard of living do you hope to have in retirement?
• Is part-time work in retirement a possibility?
For child’s college education
• How many years do you have until your child goes to college?
• Does your child want to attend a private or a public school? What would be the costs for each of them?
• Do you have more than one child whom you have to save for?
• Does your child have any special academic, artistic, or athletic talent, which might get him or her scholarships?
• Do you want your child to qualify for any financial aid?
An excellent resource for unbiased information about the potential costs of your child’s college education, including online calculators, is: SAVINGFORCOLLEGE.COM
Calculate how much you need to set aside every month
Prepare a family budget and list all your sources of income and expenses. Your expenses will be split into two categories: fixed expenses and discretionary expenses. Keep in mind that your needs and your ability to afford your current lifestyle may change over time. Once you’ve understood your needs, the next step will be identifying how much you can save every month. Your biggest opportunities to find more money to save will be found in your discretionary, or non-essential, expenses.
Retirement is a priority
College education for your child is certainly one of the more important goals you may have in your life, but you should focus more on your retirement, especially if you have limited funds. The burden is on you to fund your retirement. If you hold back on funding your retirement savings until your child reaches college, you will lose out on tax-deferred growth and the power of compounding interest. Your child can take a loan for continued studies, but you certainly wouldn’t want to try to get a loan for your retirement. So, make your decisions wisely.
Follow these steps if you have a hard time managing both
It is better that you save for both your retirement and child’s education simultaneously. But if you can’t, here are some options for you to consider.
• The longer you work, the more you earn. Defer your retirement, if possible.
• Work part-time after retirement.
• Increase the hours of your current job or look for another job with better pay.
• Reduce your cost of living now so that you can enjoy a comfortable retirement later without compromising with your child’s college education.
• Have your child participate in taking student loans or work part-time to fund his or her education.
• Consider colleges close to home so that your child can commute, reducing expenses.
Nothing is impossible if you have a realistic plan and put forth the best efforts However, if you need a more concrete suggestion or a place to start, look at the 529 plan for your state. It may not be what you choose to use, but sometimes it’s easier to make decisions after you have options to compare in front of you.
Help yourself to help your children
No parent wants to put their child or their needs second. When it comes to some financial decisions, the only way to help them, though, is to be in a secure place on your own first. It may not be easy to juggle saving for your retirement and your child’s college education; you’ll have to be flexible in the choices you make and look for any opportunities that come. However, by starting now, you are already set on the right path to balancing both you and your child’s future.
If you need further guidance, consult with your [financial planner](). Your financial planner can help you create a plan to juggle both financial goals.