By Farm Bureau Financial Services on May 17, 2023
Saving for Retirement and Post-Secondary Education
Saving for your retirement and your child’s education at the same time can be a challenge. But you may be able to reach both goals if you make smart choices now.
Step 1: Know Your Financial Needs
First, determine what your financial needs are for each goal. Here are a few questions to think about.
- How many years until you retire?
- What standard of living do you hope to have in retirement?
- Do you or your spouse expect to work part-time in retirement?
- How many years until your child starts college?
- Do you have more than one child whom you’ll be saving for?
You can find online calculators to help you predict your retirement income needs and your child’s college funding needs.
Step 2. Figure Out What You Can Afford to Put Aside Each Month
After you know what your financial needs are, the next step is to determine what you can afford to put aside each month. To do so, you’ll need to prepare a detailed family budget that lists all your income and expenses. Once you’ve come up with a dollar amount, you’ll need to decide how to divvy up your funds.
Step 3: Focus on the Top Priority
Focus on your retirement if you have limited funds. With generous corporate pensions mostly a thing of the past, the burden is primarily on you to fund your retirement. But if you wait until your child is in college to start saving, you’ll miss out on years of tax-deferred growth and compounding of your money.
Remember, your child can always attend college by taking out loans (or maybe even with scholarships), but there’s no such thing as a retirement loan!
Step 4: If Possible, Save for Your Retirement and Your Child’s College at the Same Time
Ideally, you’ll want to try to pursue both goals at the same time. The more money you can put away for college now, the less money you or your child will need to borrow later. Even if you can allocate only a small amount to your child’s college fund each month, you might be surprised at how much you can accumulate over many years.
If you’re unsure how to allocate your funds between retirement and college, a professional financial planner may be able to help you. They can also help you select the best investments for each goal. Remember, just because you’re pursuing both goals at the same time doesn’t necessarily mean it’ll be the same type of investment. Each goal should be treated independently.
Contact a Farm Bureau advisor today to discuss your options. We can help you create a plan to get started in achieving your financial goals.