In today’s tough economy, many employees face a tough decision: Should they first focus on saving for their kids’ college education or their own retirement?
Assuming it’s truly an either/or situation, most financial planners say it’s better to focus on creating a retirement nest egg.
Why? Because holding assets like 401(k)s and IRAs don’t affect a student’s eligibility for financial aid. In fact, participation can help cut out-of-pocket college costs, because it reduces net income.
Secondly, there are plenty of unknowns that could affect students’ needs for funds. Will they attend a public or private school? Will they receive a scholarship? Will they attend a trade school or community college?
And unless the employee or spouse is in line for an old-fashioned pension, retirement savings will largely fall on the employee’s shoulders.
Social Security may help a bit. But unless employees participate in 401(k) and/or an IRA, most will someday be faced with three unpleasant options:
- delay retirement
- don’t retire at all, or
- retire to a lower standard of living.
5 helpful funding sources
As expensive as college can be, there’s at least the potential for some wiggle room in paying for it.
- Low-interest loans for tuition, books, etc.
- The student may qualify for a scholarship or grant
- The employee’s parents (the student’s grandparents) may be in a position to offer assistance
- Cheaper state schools or community colleges, and/or
- The student may work and contribute to his or her own expenses.