Saving for Retirement & Child’s Education

You want to retire comfortably when the time comes.

You also want to help your child go to college.

But only have $1 at the end of the month…

So how do you juggle the two?

( I have 2 kids in diapers, so I am fully aware of this struggle!)

Know What your Financial Needs Are

The first step is to determine what your financial needs are for each goal. Answering the following questions can help you get started today!

For Retirement:

How many years until you want to retire?
Does your company offer a retirement/pension plan at work?
How much do you expect to receive in Social Security benefits?
What kind of lifestyle do you hope to have in retirement?
Do you want to plan to work part-time in retirement?

For College:

How many years away is college?
Will your child attend public or private college and what is the expected cost?
Do you have more than one child?
Does your child have any special skills that could lead to scholarship?(all kids are “special”, be real)
Do you expect to qualify for financial aid?

Figure Out What You Can Afford to Put Aside Each Month

After you know what your financial needs are, the next step is to determine what you really can afford to put aside each month. To do so, you’ll need to prepare a family cash flow statement that lists all of your income and expenses. Once you’ve come up with a dollar amount (I hope its more than $1), you’ll need to decide how to divvy up your funds.

Word to the Wise- Retirement Needs to Take Priority

Do not feel guilty.

Though college is certainly an important goal, you should probably focus on your retirement if you have limited funds. With generous corporate pensions mostly a thing of the past, the burden is primarily on you to fund your retirement. But if you wait until your child is in college to start saving, you’ll miss out on years of tax-deferred growth and compounding of your money. Remember, your child can always attend college by taking out loans, but there is not such thing as a retirement loan!

Help! I Can’t Meet Both Goals

If the numbers say that you can’t afford to educate your child or retire with the lifestyle you expected, you’ll have to make some sacrifices. Here are some things to consider.

Defer retirement
1. The longer you work, the more money you’ll earn and the later you’ll need to dip into your retirement savings. Or, consider working part-time during retirement.
Make lifestyle changes now
1. Reduce the amount of money you will need in retirement. By starting to live on less today, you can free up more money to save and reduce your overall retirement need.
Increase your earnings.
1. Make more money today- to save! Consider increasing hours at your job, finding a new job with better pay, taking a 2nd job, or having a previously stay-at-home spouse return to work.
Invest more aggressively
1. Try to get your money to work harder for you. Investigate the interest rates you are earning and the type of portfolio’s you are invested in. Understand the risk / reward trade off. Aggressive investments mean a greater risk of loss.
Send your child to a less expensive school.
1. Explain to them the money situation. There might be a lesser-known college or state school that may provide a similar quality education and experience. Your child will not you to be a burden on them later in life…

Wrap Up

Don’t stress and don’t feel guilty. Organize your finances. Understand what your need is for both goals. And save the majority for your retirement. At some point you will not want/be able to work and you need a nest egg to replace your income. You child will still be able to go college, via loans, grants, aid and possibly scholarships.

As always, you can consult with me to discuss your current situation

Look for future posts on financial planning and check out my post on the proper way to Budget.

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Thanks for stopping by and I hope you achieve financial success!

–Jared