It can be difficult finding the balance between saving for retirement and your children's college education. You don’t want to stress about finances in retirement, but you also want to help your children throughout their higher education. You can reach your retirement and education savings goals with a few changes. Continue reading to learn how to save for retirement and your children’s education.
Find Out What You Can Set Aside Each Month
You can only save if you have money to spare. To find out the income you have that can be set aside, prepare a detailed budget including all of your income and expenses. The amount you put into savings may need to fluctuate due to unexpected expenses or loss of income. Once you have your budget, decide on how to divide up your leftover income.
Start Saving NOW
Time is on your side when it comes to saving. Even if you do not have several hundred dollars to contribute every month, a small contribution can build to a sizable sum. This principle is applicable for both education and retirement savings. You need to give the funds time to grow and build inside of the account. Starting a college fund when your child is born is a great start. If you aren’t saving for retirement already, it’s time to get going!
Know Your Accounts
Consider using a 529 savings plan for education savings. It is a great investment vehicle for parents who want to save for their child’s education. It is important to note that the only qualified withdrawals are for education expenses.
A Roth IRA is a great idea for retirement planning. You can contribute each year, watch your money grow, and withdraw your earnings tax free once you are in retirement.
Retirement Comes First
While it is great to save for your childrens’ education, you need to have a main focus on saving for retirement. With pensions becoming less common and Social Security not being able to fund all of your livelihood, you mostly have your savings to live off of in retirement. If you put your education goal first and wait until your child is in college, you will miss out on years, potentially decades, of savings and compound interest.
If you’re struggling to meet both of your goals, consider these tips:
-Defer retirement to earn more money
-Change your spending habits to free up money for saving
-Invest more aggressively for a better return
-Have a reasonable expectation of what you can cover for your child’s education
If you need help balancing these two savings goals, Lifebridge Financial can help. Our trusted advisors can use your financial portfolio to set you up on a path to reach your goals. Contact us today to set up a call. Time is of the essence.