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Retirement or College Planning: Can You Realistically Achieve Both?

by Mike

The following is a guest post by Lisa Cintron.

With the present economy and the state of Social Security the way it is, millions of American families are wondering how, or even if, they can realistically save enough for retirement and send their children to college. The simple answer is yes. But it won’t come easily for most; you will need to work hard and maybe give up some things. You will also need to teach this to your children–something older kids might balk at, but will be appreciative of as adults.

Here are five steps to get you started on the path towards giving your children a great education while securing a good retirement for yourself.

1. Fund Retirement Accounts: A good rule of thumb is to invest 15% of your take home pay for retirement planning. There are no scholarships for retirement. If need be, your kids can take out student loans. Your first priority is to yourself. The longer you delay saving money, the more compound interest you lose out on. If you are debt free you should contribute to your retirement accounts to get your employers match, if any, and up the maximum allowed. Outside of 401ks you can invest in mutual funds or index funds which are great for long term savings. Consult your financial planner to learn what is best for your situation.

2. Fund College Accounts: After you make sure that you have taken care of yourself, start funding Educational Savings Accounts (ESA), or other college savings accounts, for your kids. The younger they are when you start this, the more time the money has to grow thanks to compound interest. Let your kids know that you are saving for their education but that they may also need to contribute when the time comes.

3. Tighten Up Your Budget: If you find that you just don’t have the money to fund retirement and college savings, look over your budget. If you don’t have a budget, now is the time to create one. Find out where every dollar is going. You may be surprised to see how much you spend on one area. If possible cut back wherever you can and direct that money to your savings goals.

4. Take On Part Time Work: Maybe you have tightened your budget as much as you can. This does happen. There is a limit to how frugal you can be, but is isn’t too difficult to get a part time job to earn more income. Deliver pizzas or newspapers, have a garage sale, scour the second hand shops and sell your great finds on eBay. There really is no limit on how much you can earn.

5. Involve Your Kids in Family Finances: If you haven’t yet, get your kids involved in budgeting and showing them how much it costs to run a household. While they won’t get any say in most of it, they can learn how to write checks, balance the budget and how interest works. Explain your savings goals to them and turn saving into a game. If you give them weekly allowances, help them to budget the money so that they don’t blow it all on candy.

And finally, consulting with a qualified financial advisor to help execute your plan is always a good idea. There may be some creative financial plans that you may not be aware of, however an advisor can guide you through the treacherous road of financial planning.

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{ 5 comments… read them below or add one }

Hunter

The most important message that I take from this article is the need to plan, and plan early. It’s up to us to decide the best way to allocate our savings and investments. Without a targeted strategy we are wasting our hard earned resources. Excellent post.
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Jenna, Adaptu Community Manager

I would definitely focus on retirement first. They don’t give out scholarships during the golden years. Encouraging your kids to get involve in financial decisions, make good college choices and encourage them to achieve in sports/arts definitely helps.

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JO

It’s really painful problem. it’s clear who can make an independent income solves part of the problem. But it’s still not easy. and save all the time is also not so nice. What do we do?

jo -
hydroponicsfuture

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Hunter

I agree with the prioritization, of placing retirement above college funding. These simultaneous demands are challenging to meet. I think that college funding values and expectations may need to be moderated to be satisfied with realistic outcomes. Paying for some, rather than all college expenses may be more achievable.
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optionsdude

I have focused on retirement savings first and have managed to put away some for college but not enough to cover it all. For the remainder, I will be relying on loans which will need to be paid off before retirement. I figure once the kids are out of the house, I can use the money that was spent on them to knock out their college expenses.
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