College Savings vs. Retirement

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photo by 3W Giant Mart

My family consists of two adults and two children, ages 35, 34, 4, and 2. Like most people in our stage of life, we tend to worry a bit about retirement and college educations.

Jason and I had a conversation recently where we agreed that saving for college was not one of our top priorities, and won’t be for the foreseeable future. A few weeks later, I had the same conversation with a friend of mine, and it turns out that he and his wife have decided to save little to nothing for their children’s future secondary education as well.

In our situation, there’s a huge home remodel to complete that will likely take most of the next two years, hopefully without taking on much debt.

Because of our 3 major life events in the last 6 years, we’ve saved very little for retirement:

  1. Jason’s bachelor’s degree from a private university
  2. Majorly remodeling a home
  3. Our decision for me to stay home with the children through their little years

That bothers us (not our choices, just not being able to save for retirement. Also a choice, actually).

Once the remodel is finished, I’m hoping that he’ll agree to funnel most of the money we were spending on it into our retirement accounts in order to beef them up.

To provide the equivalent of $45,000/year for 25 years beginning when I turn 65, CNNMoney’s retirement calculator says that we need to have $1.9 million saved ($754,078 in today’s dollars). And that we need to save $6,400/year more than we are right now. I didn’t factor income from Social Security in, since I’m not convinced it will be around in 30 years.

Jason and I talked briefly about how we hope to be able to pay for enough of our children’s post-high school education (college, training, apprenticeship, whatever) that they won’t have a mountain of student loan debt like Jason and I are still trying to dig ourselves out from under. We aren’t planning to add anything to their 529s for at least the next few years. Instead, we’ve decided to add gifts to the children’s secondary education funds onto their wishlists (starting at $10 because, hey, $10 today is $13.66 in 2026, per Tom’s Inflation Calculator) and mention it right along with whatever things they need or want whenever anyone asks us. I won’t be offended at all if nobody decides to contribute, I just hope they aren’t offended that I present the option. People can be funny about money.

Why, oh why, didn’t Dr. Seuss write THAT book??

The college cost calculator at The New York Times spit out the figure $174,646 for one year at a private university in 2026, the year our oldest will graduate from high school. That’s $698,584 for four years. I can’t even fathom that right now. That number doesn’t figure in merit-based awards, which I hope they’ll be receiving if they choose a private university.

$45,000/year isn’t much, even in today’s dollars, for two people who hope to have vibrant lives full of travel to far-flung places, visits with family, and the ability to be generous with our loved ones and the organizations we support.

Jason and I both hope to continue working part time on projects or at jobs we love well past the age of 65, so $45,000 (or less) with that additional income should work.

Deciding to focus on our retirement over our children’s probable future education expenses is the right decision for us, but I know other people in the same situation would make a different decision.

A handful of questions for you…

  1. Do you plan to pay for your kid’s secondary education in full?
  2. Is it in bad taste to include a child’s 529 or other savings account on a wishlist, or to mention it as an option to the gift-giver in conversation?
  3. Which is your priority right now, retirement or college savings? Or neither? Do tell!
  4. Have any great calculators to share? My addiction is only mild and fleeting, I swear.

Thanks for sharing!

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2 responses to this post.

  1. Thanks for sharing! It sounds like your parents set their priorities early and stuck with them–good for them! What great role models. I’ve heard it’s common for people to dip into retirement to pay for college, but that just scares me. I don’t think I would do it, but then, I’m not there yet and I certainly can’t judge.

    And doesn’t it feel good knowing that they’ve taken care of themselves so that you don’t have to worry about that? That’s a nice gift they’ve given you and your brother. I know I think about the future and my mother’s health and wonder what we’ll do if she can’t live alone or needs full-time care. But I guess we’re just doing what we can right now to ensure that we’re in a good place to help her later.

  2. Posted by Jane on August 22, 2012 at 6:23 pm

    My mom has talked a lot about this exact thing. They didn’t save for my brother or my education, instead they made wise descisions with their retirement savings and saving in general as we were growing up. Maintaining their good credit allowed them to to feel comfortable taking on debt with small, smart loans to help us with rent and other essentials during school. Now that they are closer to retirement they have met with financial advisors to confirm that their current funds are in all the right places. Apparently a lot of people dip into their retirement accounts to help their kids with schooling. My parents did not do this, leaving them in good shape for retirement. Currently I am going through a very difficult financial situation personally, and because my parents never compromised their own savings, they have been able to offer me financial support. Im happy they have a great retirement and I know my mom is happy she is able to help me out. I am constantly thankful that they are willing, and able, to help me out.

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