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Are you faced with the dilemma of having to save for your own retirement while at the same time trying to put money aside to fund your child’s college education? How do you juggle the two goals? How do you determine which is more important or what path to take?

Rest assured you are not alone in this problem. First, answer the following questions. How many years until you retire? How much do you expect to receive in Social Security benefits? How much income do you hope to have in retirement? How many years until your child starts college? Will your child be attending public or private college (and what’s the expected cost)? Do you anticipate that your child will qualify for financial aid?

If you’ve run the numbers on both your anticipated retirement and college expenses and come up short, what do you do? It’s time to sit down and make some tough decisions about your expectations and, ultimately, what you can do to compromise. Realistically, while college is certainly an important goal, you should probably focus on your retirement if you have limited funds. If you wait until your child is in college to start saving, you could miss out on years of tax-deferred growth and compounding of your money. Remember, your child can take out a loan (or maybe even receive a scholarship) to attend college, but there is no such thing as a retirement loan!

You might need to make some sacrifices to meet both goals; here are just a few ideas:

  • Wait to retire – the longer you work, the more you earn and the less you’ll need in retirement savings
  • Consider working part-time during retirement
  • Reduce your standard of living now, or reduce your expected standard of living during retirement
  • Invest more aggressively (although this also carries with it a greater risk)
  • Expect your child to contribute more money to offset college expenses (through loans or part-time work)
  • Send your child to a less expensive school (state school vs. private school, or community college)

While it’s true that retirement accounts can be used to save for college, there may be negative consequences to doing so. It’s best to talk with a financial professional to determine the appropriate course of action, and to make sure you’re on track to meet your goals. I encourage you to call us so that we can assess your personal situation and develop a strategy designed to help you meet your future financial needs. We look forward to speaking with you.

Heritage Financial Planning, LLC

We help individuals create retirement strategies using a variety of investment and insurance products to custom suit their objectives.

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