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How to Save for College AND Retirement With Small Children

March 16, 2013

by John Bearss

How to Save for College AND Retirement With Small Children? When it comes to saving for your retirement vs saving for your child’s education, it is imperative to have clear goals and a plan before moving forward.

Two of the most common goals for savings are: Saving for Children’s College Education and Saving for Your Retirement. Is it possible to achieve both of these goals in today’s economic environment? I would like to answer this question today.

How to Save for College AND Retirement With Small ChildrenIt’s seldom easy to achieve a balance between saving for your retirement and saving for the ever-increasing costs of a college education within your present income. Yet for many families, it’s imperative that you save for both at the same time. To postpone saving for your retirement means missing out on years of tax-deferred growth and playing a near-impossible game of catch-up. To accomplish both goals, you may need to compromise.

Step One: Examine Your Funding Needs

The first step is to thoroughly examine your funding needs for both college and retirement. On the retirement side, remember to include the estimated value of any employer pension plans, as well as your Social Security benefits. This evaluation will likely prompt you to examine some deeply held beliefs about your financial goals. For example, is it important that you travel regularly in retirement, or is it more important that your child attend a prestigious Ivy League college?

Step Two: Consider Compromising

If you discover that you can’t afford to save for both goals, the second step is to consider some compromises:

– Defer your retirement and work longer.

– Reduce your standard of living, now or in retirement.

– Increase the family income by seeking a better paying position in your present career, getting a second job, or having a previously stay-at-home spouse join the work force. Beware, though, of potential drawbacks like day-care costs, commuting costs, and tax disadvantages on the increased income.

– Seek out more aggressive investments (but beware of the risks).

– Expect your child to contribute more money to college. Some parents may find it difficult to accept, but the majority of college students finance a portion of their education with student loans.

– Investigate less expensive colleges. You may find that some less expensive state universities have more to offer in certain programs than their pricey private counterparts.

Step Three: Ongoing Maintenance

The third step is to re-evaluate your plan from time to time as your circumstances and wishes change. For example, your child may decide he or she does not want to go to college at some point. Or, your child may receive abundant scholarships due to high academic or athletic achievement, and you may not need the funds for college anymore. Another change may be that your child gets married and receives grants for college tuition. There are many unexpected events that can change your savings goals and plans. Ongoing evaluation of your savings is a key strategy in making good financial decisions. Remember, the important thing in knowing how to save for college and retirement is to earmark a portion of your present income for both goals and do the best you can.

So make sure you have your financial affairs in order and a good way to start this process would be to contact me by e-mail at or call me toll free at (888) 914-9909. I would be more than happy to review your financial situation with you to make sure your financial house is in order, and thank you for joining me this week for your retirement minute.

Until next week!

Have a retirement planning question for John Bearss? Send it to him here.

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Disclaimer: Investing involves risk. Always do your own due diligence and consult a trusted financial professional before making any investing or financial decisions. John Bearss is a retirement specialist. He is also a registered representative of and offers securities through SICOR Securities, Inc., Member FINRA, MSRB, SIPC, 6500 Poe Avenue, Suite 105, Dayton, OH 45414 | (937) 890.3101. Neither SICOR Securities, Inc., Lifetime Decisions Management nor their representatives provide legal or tax advice. Please consult your CPA or qualified tax advisor before making any decisions. Lifetime Decisions Management, Inc. and SICOR Securities, Inc. are not affiliated.

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