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Retirement or College Funding: Which Comes First?

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retirement, college, save for college, kids college

If you’re working your way out of debt, one of the most difficult questions you might face is how to prioritize college savings and retirement.

If you’re like most parents, you’ll phrase the question this way: What is more important—my own security at retirement or my child’s education and future? It’s easy to think about it that way because it’s an emotional issue.

Lately, a lot of parents have decided that college savings should come first. The economy has seen better days, and desperate, misguided parents have dipped into their 401(k)s to pay for their child’s college tuition.


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According to a Sallie Mae and Gallup study, 7.4% of parents took out a loan from their 401(k)s in 2010. That’s more than double the amount in 2009. It’s an alarming trend—one based on fear and desperation. And, after taxes on the loan and an early withdrawal penalty, it’s a trend that will get quite expensive and stressful.

It’s never a good idea to pull money out of your retirement fund before the time comes. But the more difficult question is this: Should you delay saving for retirement to pay for your child’s tuition?

No. Dave prioritizes retirement over college savings because you need retirement money to live, eat, and pay for shelter—the basics. You’re not working, so that money is your only source of income.

Saving for college is extremely important, but it’s a luxury. Your child will have other ways to pay—scholarships, grants, part-time jobs. They can select a more affordable school. Pay for your child’s college if you can, but remember that it’s not as important as retirement.

Retirement is a necessity. If you don’t have retirement money saved up, then you’re working until you die or living on Alpo. Get to a place financially where you can start putting 15% of your income toward retirement first, then begin working on an ESA or 529 for your kid’s college.

Don’t guilt-trip yourself into doing something you’ll regret in a few years, like taking money out of your retirement. Your child will be okay—with or without your help. This isn’t child abuse. It’s wise parenting.

Remember: College is a luxury. Living, eating, and having shelter during retirement is a necessity.

We all face challenges in both our parenting and our money. Financial Peace University offers practical answers to many of the questions you have, including saving for retirement and college. Find the class starting nearest you!

What do you think about saving for retirement and college? Leave a comment below.

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