Q: Which goal should have a higher priority? Saving for my own retirement or saving for my child's college education?
A: Both of these goals are very important, however, one of them clearly holds a higher priority. Let's look at the options available for these two life events.
College: When it comes to paying for college there are lots and lots of options. Student loans, financial aid, scholarships, tuition payment plans, work study and part time jobs are just a few ways to help pay for college. There are lower cost options for college at community colleges and online programs as well.
Retirement: Now consider what the options are for funding retirement. First we should try to figure out just how much regular income we'll need to have an enjoyable retirement. For this to be even remotely accurate we'll need an idea of what we're spending on day to day life right now. A general rule is that 70% of your net pre-retirement income makes for a good target retirement income.
Once we have an idea of how much money we'll need in retirement, let's ask the question of the day, "Where am I going to get that money?" Here are the options to fund your retirement: Pension, social security, investment income (401K, IRA's, annuities, certificates, etc.), and work. Unlike college, a loan is not a viable option for retirement funding. A big loan during the golden years usually only serves to make those years a little less golden.
The short and simple answer is that retirement savings is almost always a higher priority than college savings. The quality of life in your golden years will primarily be the result of the choices you have made in regards to saving money for it. Stay tuned to our Savings Story page in the coming months for more information about the details of planning for a successful retirement. Better yet, come to our Financial Focus seminar about Retirement Planning this November!