Why I’m Putting Retirement Savings Ahead of College Savings

As someone who graduated college with a modest pile of debt (and that’s after sticking to an in-state school and working throughout my studies to pay a lot of my expenses along the way), when I had kids, I told myself early on that I’d do my best to fund their college education to a significant degree.

I know that graduating with loans held me back as a young adult. I didn’t start funding a retirement account, for example, until those loans were paid off, whereas had I not had that debt, I would’ve started saving and investing a bit earlier.

But as important to me as it is to try to put my kids through college, I refuse to put their education ahead of my retirement savings. Here’s why.

When borrowing just isn’t feasible — or desirable

Borrowing for college may not be ideal, but there are many loan options available to those pursuing a degree. Now you can technically say the same thing about retirees who need money — there are different borrowing options they can look at, such as home equity loans or reverse mortgages (both of which have drawbacks).

But after working hard for decades, I don’t want to spend my senior years borrowing money to scrape by. I don’t even want so much as a modest mortgage payment hanging over my head. And that’s why I insist on maxing out my retirement plan contributions every year before putting any money into my kids’ college accounts.

Because I’m self-employed, I have the option to save for retirement in a solo 401(k). Traditional 401(k)s currently max out at $20,500 for workers under 50 and $27,000 for those 50 and over. Solo 401(k)s, however, come with higher limits than that. The amount you’re able to contribute to one of these plans hinges on your earnings, but either way, I make it a point to max out my solo 401(k) before a dime of my income goes toward saving for my kids’ education.

Get your priorities straight

If you’re struggling to strike a balance between retirement and college savings, you’re in good company. And it’s noble to want to contribute as much toward your kids’ education as you can.

But you should never let your desire to fund your children’s education compromise your retirement. If you neglect your nest egg so you can send your kids to a private school and cover their living costs, you might struggle to cover your own living costs once your time in the workforce is done.

Remember, Social Security is facing benefit cuts if lawmakers don’t manage to address its funding shortfall. That makes saving for retirement all the more pressing.

Furthermore, sacrificing your retirement savings to pay for college could put you in a position where you’re then forced to rely on your adult children to help you out financially later in life. If you’re the type of parent who’s eager to pay for college, then you’re probably the type of parent who does not wish to burden their children as they’re trying to achieve their own goals as adults. A good way to avoid that scenario is to first save money for retirement, and then sock money away for your kids’ education.

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