Can I Save for Retirement AND College?

Retirement & College

 

Creating a retirement strategy is an important financial goal for many investors. But what if you also wanted to help a child or grandchild with higher education costs? Can you have two priorities with your investing strategy?

To see what this looks like, let’s take a look at two investors–one preparing for retirement only (the blue line) and the other pursuing the twin goals of retirement and college (the red line).

Life Savers

In our two options, let’s assume both individuals committed to investing $700 per month for 35 years. They placed the money into an account that earned a hypothetical 6 percent a year, year after year.

After 35 years, the retirement-minded individual would have a little more than $1 million. But what about the parent who also wanted to help pay for college?

After saving for 15 years, that parent continued to save $700 a month but diverted $350 a month to invest in a college savings plan. After 35 years, the college-saver had accumulated $663,665 and pursued their twin goal of paying for college.

Were both strategies effective? The better question is, “Did both individuals pursue their goals?” With a strategy in place and 35 years of disciplined investing, both arrived at their destination.

Saving Smarter, Not Harder

Helping someone pursue the dream of a college education can be rewarding, and it doesn’t have to look the same for everyone. Here are a few strategies that can help:

• Start Small: If you have concerns about taking money away from retirement, consider saving a smaller amount for higher education. After all, anything helps.
• Use Financial Aid: Many financial aid options may be available to your children or grandchildren to help offset the costs of college. Some examples are scholarships, grants, loans, and work-study programs.
• Communicate Goals: Communication is always a good idea. Being open and transparent about your financial priorities and the needs of your future college-goer can help. Using a tax-advantaged account like a 529 College Savings Plan makes a lot of sense too!

Saving is a noble endeavor, whether for retirement or a college education. The good news is that the two are not mutually exclusive. We can discuss your goals and how you can do one, the other, or both, including what the best types of savings accounts are for Retirement and College based on your individual Financial Goals and options! See more information on my website or schedule some time on my calendar!