Should You Save for Retirement or Your Child’s College? Experts Say Start With Yourself
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A Reddit user recently posed a tough question: Should they save for retirement or for their young children’s future college expenses?
Most Reddit responses encouraged the user to prioritize retirement. “Take care of yourself,” one commenter wrote, “so you won’t be a burden to your children one day.” Another added, “You can take out loans for college, but not for retirement.”
We brought this question to financial experts: How can parents juggle these two major — and often competing — financial goals?
Consider Your Family’s Unique Priorities
The answer isn’t one-size-fits-all.
Like many personal finance decisions, this one is deeply individual, says Kevin Mahoney, a certified financial planner and founder of Illumint, a financial planning firm for millennials in Washington, D.C.
“Some people have a specific retirement lifestyle in mind, which has significant implications for how much money they’ll need,” he explains.
Likewise, Mahoney adds, some families are strongly committed to covering their children’s college costs to ensure they can attend their chosen schools. The value placed on these two life goals often shapes how people allocate their money.
Prioritize Yourself First
Experts agree with Reddit’s consensus: prioritize your own financial well-being.
“Just like on an airplane, put your own oxygen mask on first,” says Marguerita Cheng, a certified financial planner and CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland.
“There’s all kinds of financial aid available for college, but there’s no financial aid for retirement,” she adds.
That’s why she recommends focusing on retirement savings — and building an emergency fund — before turning attention to college savings.
Start Early, If You Can
“You want to magnify the compounding effect of your retirement savings, so the earlier you begin, the better,” says Steven Conners, founder and president of Conners Wealth Management in Scottsdale, Arizona.
Many people reach retirement age and realize they’re not financially prepared, Conners says. That’s why he suggests at the very least contributing enough to your employer-sponsored retirement plan to receive the full match. Early contributions have more time to grow.
Once your retirement savings are on autopilot, you can turn your attention to college savings. Tools like 529 plans allow tax-free growth when used for qualified education expenses.
Ideally, as one Reddit user pointed out, saving for both is the best-case scenario.
Flexibility With College Savings
529 plans offer flexibility: you can transfer funds between children, and leftover money can even be rolled into a Roth IRA in the beneficiary’s name — up to a $35,000 lifetime limit, as long as the account has been open for at least 15 years.
Adjust as Life Changes
Even if you can only set aside a small amount each month for retirement or savings, don’t delay, Cheng advises. “The most important thing is to start,” she says — even if that’s just $50 a month.
As your child grows and child care expenses decrease, you might be able to put more into college savings.
If you lose your job or experience financial hardship, it’s okay to temporarily pause contributions, Mahoney notes.
Another strategy is saving in a regular savings or brokerage account that doesn’t offer tax benefits but gives you full flexibility.
“If someone is really conflicted, it’s OK to just invest in a brokerage account and let it grow, then you can make the choice later on,” Mahoney says.
