Should I be more concerned about saving for retirement or for my children’s education? I don’t have enough to save a significant amount for both.
Valerie RumboughThere are a lot of Americans who are asking the same question. The cost of college is increasing at a fast pace, making it very difficult to afford. On the other hand, you have to be able to take care of yourself when you retire. There is one significant difference between the two, however, and that is in the availability of alternative funding sources.
For example, when your children are ready to apply for college, they can also apply for scholarships and grants. Perhaps they can get a part-time job to help take a bite out of the education bill. And although borrowing money is never the first choice, it should certainly be considered.
Borrowing for college is really an investment, when you consider the opportunities available to college graduates vs. non-graduates. Unfortunately, you can’t borrow or apply for a scholarship to fund your retirement.
Determine what you will need in the bank when you retire to be able to meet your retirement income needs. Then determine how much you need to save each month to get there. If you see that you will have extra to place in a college savings plan, then do it. Otherwise, continue to save for retirement and re-evaluate your situation periodically to determine if a college savings plan is within your budget. Happy saving!
Rumbough, CPA, CFP, is vice president of finance with the Baptist Foundation of South Carolina. For more information concerning the above article or other matters, contact her at 800-723-7242. (In accordance with IRS Circular 230, this article is not to be considered a “covered opinion” or other written tax advice and should not be relied upon for IRS audit, tax dispute, or any other purposes.)