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Balancing Your Tuition and Retirement Savings

Balancing Tuition and RetirementIf you’re working to pay your child’s tuition, retirement might be the last thing on your mind. With a six-digit tuition hanging over your head, it’s easy to put your savings on the back burner.

But it would be a mistake to put off these contributions, because the power of compound interest is still working hard on your contributions. If you put off investments for just a few years, you’re potentially losing out on tens of thousands of dollars.

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Never sacrifice your retirement to pay for college

Unless you already have more than you need in your retirement accounts, you should continue to fund them during your kid’s college years. Even if your child requires a student loan. You can pay for college without sacrificing your retirement.

Never fail to contribute an amount equal to your employer’s match!

Failing to meet your employer’s match is tantamount to throwing away free money. Even if the market falls, a match of several thousand dollars means you’re still coming out ahead. It’s less money you have to contribute yourself, so if you prioritize this contribution over tuition, you’re basically getting that money back.

However, like all things in life, balance is key. It’s tough for some people to motivate themselves to save for retirement, but it’s also possible to be a little overzealous about socking away your money.

Don’t over-fund your retirement savings

Despite the general advice to prioritize retirement, it is possible to do so at the cost of under-funding college savings. If you put too much into your 401k, you risk coming up short when it’s time to pay the bills. There are penalties for early withdrawal on these accounts, so be careful. The exception is an IRA, which allows you to withdraw your contribution. But it’s best to avoid this situation entirely: hit your retirement number, and recognize when enough is enough.

As the cost of college rises, the balance between tuition and retirement becomes even more difficult to manage. It’s important to know when to focus on each, and how to take advantage of benefits that will help you get the most bang for your buck. That way, you can pay for college without sacrificing your retirement. Our financial advisors will be glad to meet with you to set up a portfolio that provides the proper liquidity for payments and maximizes tax benefits to keep the growth of your retirement fund strong. Click here to schedule a complimentary consultation.

Lisa has spent 25 years in insurance and financial services, specializing in college planning, retirement, investment planning, employee benefits, and life, disability and long term care insurance. As an independent broker, she is able to live out her philosophy of focusing on each client's specific situation, customizing a personal plan that matches them with the best products to address their needs and providing ongoing monitoring and support. Lisa is a Certified Funds Specialist® (CFS®) and has completed three courses toward the CERTIFIED FINANCIAL PLANNER™ (CFP®) certification. Lisa holds her FINRA Series 6 and 63 registrations with LPL Financial, as well as state Life & Health Insurance and Property & Casualty insurance licenses. She is a member of the Agency Management Resource Group (AMTC), GAMA International and the National Association of Insurance and Financial Advisors (NAIFA). Securities offered through LPL Financial, Member FINRA/SIPC. Lisa lives in Hoffman Estates, IL with her son Brett. She enjoys golf, wine and physical fitness, especially running for a cause. Lisa has completed several half marathons, the Chicago Marathon and a 3-day breast cancer walk.

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