Retirement or College Funding: Which Comes First?

3 Minute Read

If you’re working your way out of debt, one of the most difficult issues 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? There’s a lot of emotion wrapped up in that question, which makes it easy to come to the wrong conclusion.

Lately, a lot of parents have done just that by deciding college savings should come first, and they’re dipping into their retirement savings to cover the costs.  


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Stealing From Your Future

Over the last two years, the average amount parents withdrew from their retirement accounts to pay for college nearly doubled. The figure rose from $2,710 in 2013 to $5,276 in 2015, according to a Sallie Mae and Ipsos study. This increase is an alarming development—one based on fear and guilt.

Listen, we get it. The amount of money you’ve managed to save for your kids’ college is no measure of your desire to see them graduate from the school of their dreams. But no matter how much you want to help your kids financially during their college years, you need to be realistic about how you’ll do that and save for your own future needs.

Why Retirement Comes First

In the Baby Steps, Dave gives retirement priority over college savings for a reason. You’ll depend on your retirement savings to live, eat, and pay for shelter—the basics. If you’re not working, 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, or 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 you’re 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 Education Savings Account (ESA) or 529 plan for your kids’ 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. Food and shelter during retirement are necessities. 

Have questions? Find an investing professional in your area.

What do you think about saving for retirement and college?

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