7 Reasons to Prioritize Retirement Over Your Child's Education

There are a variety of ways to pay for college, but no ways to get around saving for retirement.

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Jars of savings
Alamy
By Joe Udo

If you have children, you most likely wonder whether to prioritize their higher education or your own retirement savings. The average debt load for the class of 2012 was nearly $30,000, and that's a tough way to start out. As a parent, I want to help my kid as much as I can, and I'd hate for him to have debt before he even earns his first regular paycheck. Currently, we are able to save for our retirement and our child's education at the same time, but many parents aren't able to do that. If you can't save for both, here is why saving for retirement should be the first priority for most parents:

Financial aid. There are myriad financial aid options for college students. They can apply for federal student aid, grants and a variety of scholarships. These financial aid packages might not be enough to pay for all costs, but they can help quite a bit.

Stay at home. One option to help reduce the cost of higher education is to stay at home while attending a local university. The tuition is just one cost of attending a university. The dorm, meals, phone and utility bills are a significant portion of the price tag. Living at home might not be as appealing to the kids, but it's a good option if you want to reduce the cost of higher education.

Community college. You can significantly reduce college costs if you attend a community college for two years and then transfer to a prestigious university to finish the degree. Delaying attendance at a higher cost university will give the family two more years to save, and the cost will be much less than going to a 4-year college the whole time. Of course, the student will also be able to stay at home and save on the cost of living as well.

Factor in the cost. The cost of higher education should be factored in when your family explores college options. Ivy League colleges are great,
but they cost significantly more than in-state public colleges. If you can't afford to pay the bill, then be realistic and rule it out early. Of course, if your student is exceptional and can get scholarships from those private colleges, then the cost might end up being quite similar to an in-state school.

Work part time. Students can work part time to help pay for their education. Typically, students only attend classes a few hours per day, so they should have some extra time to work. It makes them feel like they have a stake in the game if they help pay for their own education. People rarely appreciate things that are free.

Roth IRA. Saving for retirement in a Roth IRA is very flexible. You can tap your Roth IRA to help pay for college if that's necessary because you can withdraw your contributions at any time without penalty. And the earnings accumulated in the Roth IRA can be used to pay for higher education without being subject to the 10 percent early withdrawal penalty (if you are younger than 59½), but you will have to pay income tax on that portion of the distribution. However, the amount you withdraw from your Roth IRA will be factored into the financial aid calculation.

Student loans. Students can get loans to help pay for college, but you can't get any loans for your retirement. It's tough to start out with debt, but graduates have a lot of time to pay it off. Life can be much more difficult if you don't have much retirement savings when you're older.

As much as you want to help pay for your child's university education, resist the urge to prioritize it over your retirement. If you divert your retirement savings toward your child's higher education costs, then your children might need to supplement your retirement. That can be just as financially draining as a student loan. There are many financing options available when planning for college, and you should consider as many of them as you can.

Joe Udo blogs at Retire By 40 where he writes about passive income, frugal living, retirement investing and the challenges of early retirement. He recently left his corporate job to be a stay at home dad and blogger and is having the time of his life.


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39 Comments

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jenniferetmfs

It is true that children can get loans to pay for college but there are no loans for retirement. You have to plan for that. I know the idea of burdening a child with student loans is not a pleasant one, but they do have other resources to access and you won't. Learn about your options at http://www.mutualfundstore.com/investment-planning. Each person has to make their own choices in this matter, but there are a myriad ways to go.

May 07 2014 at 5:20 PM Report abuse rate up rate down Reply
Cate

It is NOT your responsible to pay for your kid's education.

April 01 2014 at 1:42 AM Report abuse rate up rate down Reply
Steve

WE went bankrupt to see my grandchild through college, I helped another grandchild through college, and things are even worse now between us and our children DON'T do it, We lost our 401 K , home and savings.

March 31 2014 at 1:13 PM Report abuse rate up rate down Reply
nbsauto711

just dont send ya kids to school for underwater basket weaving and you will be just fine...it all works out in the end

March 31 2014 at 1:03 PM Report abuse rate up rate down Reply
Mark

Now you tell me, after the fact. I took out 70K in loans to put 3 kids to college. They all have loans of 20 to 30k each themselves. Combined we should have just bought a house or something. They all have good jobs now, and I owe too much to plan well for retirement. Just looking at the numbers I don't know why they would lend a grocery store worker that much money., and why Banks get money at 0% while i'm being charged 8 1/2 %. Sure bail out the banks and screw main street. I have myself to blame, however They (the government ) should have lent main street the money at 0 %, not the banks.

March 31 2014 at 11:22 AM Report abuse rate up rate down Reply
dubricus

There is a simple remedy. If you want to retire one day, don't have kids.... or do what people have done throughout history.... Pour your resources into your children. Make sure they marry well & stay married... & make it clear from childhood that you expect them to support you in your old age. That's how the world always worked & still does in most places. Retirement is something that was invented during the Depression to get older people out of the workforce to open up jobs for younger workers. Then after WW2, retirement became something to be "sold." Right now, we are at the peak of the "financial services" industry selling both retirement & education.... & we are seeing the corporate acquisition of the American educational system. Always remember that for-profit = sell the cheapest product for the highest price possible to get the most profit for those at the top. Then their game is to share as little of that as possible with ordinary share holders, if there are any.

March 31 2014 at 10:51 AM Report abuse rate up rate down Reply
ktirandazi

Greedy boomers have lifestyles including huge houses and big cars. Downsize to a small house and small used cars and you'll be able to afford retirement and also help with your children's college educations. Also the government and the colleges are taking advantage of our young people with inflated tuitions. They cannot to afford to pay for college by working like they could in the old days. Thanks greedy boomers!

March 31 2014 at 9:58 AM Report abuse rate up rate down Reply
3 replies to ktirandazi's comment
grlsrm200

First if a child wants to be a brain surgeon then it will cost lots of money.You don't get this kind of education from a community school. Yet certain congress people who are living off of lobbyists and are millionaires would raise the interest rates on loans and leave many people who have the brains and ambition short on cash and unable to fund their education. We need jobs first and foremost and as Boehner sits on the bills to create jobs and should put these bills up for vote but won't to "get Obama " our nation sinks into a place where our children cannot compete in the world and so we will look for the brains from other countries like Japan and India. Further letting our nation slip from any position of growth.
Our most important resource is our children. With a good education they will keep our country number one in the world instead of a nation being forced into slavery. Fact: Yes people should save for their retirement because the longer we live the more it will cost because as we grow older we are subject to dementia and other ailments that will require nursing homes. But if our children are going to able to compete is the world then education must be for everyone and not just the rich. There must be government loans and there must be parents who can save and there must be children who work summers and maintain a grade average of B in order to make this happen.It is time to stop giving our work to other countries and those who make profits off shore must pay their fair share of taxes. This article is dealing with upper middle class to those who are wealthy people . Well, there are 47% according Romney who are working poor but this should never mean these children should be shut out from getting an education.
.. So this article is addressing those who have good jobs not the ones who work for$7 dollars an hour.

March 31 2014 at 9:52 AM Report abuse rate up rate down Reply
1 reply to grlsrm200's comment
matilda524

Thank you for that small piece of sanity!

Because apparantly the world only needs plumbers and electricians. And anyone who thinks knowing how to speak and write proper English isn't a REAL American.

March 31 2014 at 10:14 AM Report abuse rate up rate down Reply
1 reply to matilda524's comment
wlh1923

Apparently, you too. Hey, that last "sentence" you wrote was a doozy. Care to translate that or at least finish the thought - because whatever point you were trying to make you dropped, lost or forgot to insert after the word "English"? I think you made yourself an example of whatever it is you were trying to make an example of. Apparently

March 31 2014 at 11:18 AM Report abuse rate up rate down
grlsrm200

First if a child wants to be a brain surgeon then it will cost lots of money.You don't get this kind of education from a community school. Yet certain congress people who are living off of lobbyists and are millionaires would raise the interest rates on loans and leave many people who have the brains and ambition short on cash and unable to fund their education. We need jobs first and foremost and as Boehner sits on the bills to create jobs and should put these bills up for vote but won't to "get Obama " our nation sinks into a place where our children cannot compete in the world and so we will look for the brains from other countries like Japan and India. Further letting our nation slip from any position of growth and deeper into yet more poor people..
Our most important resource is our children. With a good education they will keep our country number one in the world instead of a nation being forced into slavery. Fact: Yes people should save for their retirement because the longer we live the more it will cost because as we grow older we are subject to dementia and other ailments that will require nursing homes. But if our children are going to able to compete is the world then education must be for everyone and not just the rich. There must be government loans and there must be parents who can save and there must be children who work summers and maintain a grade average of B in order to make this happen.It is time to stop giving our work to other countries and those who make profits off shore must pay their fair share of taxes. This article is dealing with upper middle class to those who are wealthy people . Well, there are 47% according Romney who are working poor but this should never mean these children should be shut out from getting an education.
think about this these children who are locked out of education.and how will they be able to contribute to society or will they be victims of the frustration of being locked out. If we do not educate all our youth we will pay a higher price in the end.. So this article is addressing those who have good jobs not the ones who work for$7 dollars an hour.

March 31 2014 at 9:51 AM Report abuse -1 rate up rate down Reply
Mike

If you can't afford children, don't have any.

March 31 2014 at 9:14 AM Report abuse +1 rate up rate down Reply