As our students prepare to head back to school, many families face the difficult decision to save for retirement or use those funds to pay for their children’s college education.
With student loan amounts in the trillions of dollars, our kids are exiting college with debt the size of small home mortgages. Given that both education and health care costs continue rising dramatically from year to year, it is hard for you to prepare financially for both college and retirement. What should you do?
Retirement prior to education
In most cases it is more important for parents to put their financial needs ahead of their children. Why?
Some tips to consider
There is plenty of opportunity to fund both retirement and college education in a tax advantaged way. You might wish to consider funding basic retirement needs first, then look at tax advantaged educational savings programs.
Retirement: First fund employer provided 401(k) and similar programs, especially if there is an employer match. Max your annual contribution limits if at all possible. After this there may be funds available for your children.
Child’s Education: Look into Cloverdell savings plans, 529 college savings plans, and children’s retirement plans. Remember to include others in your plan, like grandparents, as a possible funding source for college savings.
Consider other ways to generate college funds. Here are some ideas;
Making financial decisions like this are tough, but with proper planning and insight a path that works for you can often be found.
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Welcome to my blog page the purpose of which is to provide you with timely and relevant tax and accounting information. I intend to bring you information which you can use now to assist you in lowering you income taxes. I will when appropriate give you links to tax related web-sites, worksheets and check-list to assist you in meeting you recording keeping requirements and provide you with the information you need to prepare an accurate return and pay the least amount of tax you are legally required to pay. Please check back often and feel free to post your questions and comments