Most parents want to pay for their children's college education, or at the very least help pay for college. While it would be great for your children to be able to start like after college without student loans to pay off, the cost to parents may be too high.
The average annual cost of a 4-year public college is $12,127 (source: The College Board's Annual Survey of Colleges, 2005-2006), with 4-year private schools averaging $29,026 a year. College costs have been outpacing inflation by rising over 5% per year.
On the other hand, saving for retirement has become even more important as companies have started freezing or eliminating pension plans, and the future of Social Security continues to be uncertain.
Paying for both college and retirement will be challenging for most parents. Here are some suggestions to help you to achieve both goals:
• Have a plan. You should determine how much you will need for retirement and how much you anticipate your children will need for college.
• Start saving as soon as possible. Time is your greatest ally, whatever your savings goal. Figure out how much you are able to save each month, and setup an automatic plan as soon as possible.
• Prioritize - if you can't afford to save for both goals, retirement should take priority over saving for college. Your children can always borrow for college or earn scholarships; you can not borrow money for retirement.
• Save for both. Ideally, you'd like to be able to save for both goals at the same time. If you're able to, allocate money to both goals. You may wish to visit with a financial planner to determine how much should be allocated to each goal.
• Research - there are several different types of college savings accounts available. Find out which type of account will benefit you the most before you invest.
• Use retirement accounts to save for retirement and college. Retirement accounts can be tapped into to help pay college bills (IRA withdrawals can be taken penalty free for college expenses; Roth IRA contributions can be taken penalty and tax-free). However, you should only do this if it will not sacrifice your retirement savings.
The bottom line to getting the most out of your savings - prioritize your savings goals, have a plan in place, and start early.
About the Author:Kristine A. McKinley, CFP, CPA, teaches individuals and families how to invest and plan for retirement, college, and other financial goals. Kristine offers financial and tax planning on an hourly, fee-only basis.
To sign up for free financial planning tips, worksheets, checklists and more, visit http://www.beacon-advisor.com
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Frequently Asked Questions
403b
By: Artiejo | 03-10-2008
I have a 403b annuity.Can I roll this over into an IRA? I am age 70.
Ssdi
By: Frank O'D | 03-10-2008
If you are on social security at age 62 can you, at some point, because you become disabled and unable to earn the $13,500, apply for ssdi? Thank you
Help!
By: confused1 | 02-10-2008
which would you choose, a state retirement pension or tiaa creff plan?
My husband and I are in our 80's. We have $250 ...
By: Berny | 02-10-2008
My husband and I are in our 80's. We have $250,000.00 in CDs and are drawing interest on this plus our social security. I want to know if this is a comfortable situation for us.
My IRA account
By: SoCalGrammy | 02-10-2008
My traditional IRA is 100% Vanguard 500 Index Fund. Should I keep it as such or what should I switch it to? I am retiring in 15 years. Thanks.
Did you know this about Nancy Pelosi?
By: fredst | 02-10-2008
You are kidding me, right ? Adding a tax to your retirement is simply another way of saying to the American people, "You're so darn stupid that we're going to keep doing this until we drain every cent from you." That's what the Speaker of the House is saying. Read on............... Nancy Pelosi wants a Windfall Tax on Retirement Income. In other words tax what you have made by investing toward your retiremet.
Madam speaker Nancy Pelosi wants to put a Windfall Tax on all stock market profits (including Retirement fund, 401K,and Mutual Funds!)
Alas, it is true - all to help the 12 Million Illegal Immigrants and other unemployed Minorities! Again, quoting Speaker Pelosi,...' We need to work toward the goal of equalizing income, (didn't Karl Marx say something like this), in our country and at the same time limiting the amount the rich can invest.'
(I am not rich, are You? Since when is this country about limiting possibilities of the individual?)
When asked how these new tax dollars would be spent she replied: 'We need to raise the standard of living of our poor, unemployed and minorities. For example, we have an estimated 12 million illegal immigrants in our country who need our help along with millions of unemployed minorities. Stock market windfall profits taxes could go a long way to guarantee these people the standard of living they would like to have as 'Americans'.' (Read that quote again and again and let it sink in.)
'Lower your retirement, give it to others who have not worked as you have for it'.
This lady may be from the most beautiful city in the country she is also out of her mind and she is the speaker of the house!
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