As someone who graduated from college with a modest pile of debt (and worked while he was a student after going to state school and paid for a majority of his expenses on the side), when I had kids, I told myself early on that I would make my own Do their best to fund their college education to a significant extent.
I know that as a young adult, I was held back by graduating through debt. For example, I didn’t start funding a retirement account until those loans were paid off.
But as important as it is to me to educate my kids in college, I refuse to put their education ahead of my retirement. Why here
When borrowing is not possible or desirable
Borrowing for college may not be ideal, but there are many graduate credit options. Now you can technically say the same thing about retirees who need the money – they can look at different loan options, such as: B. Home equity loans or reverse mortgages (both have their disadvantages).
But after decades of hard work, I don’t want to spend my final years borrowing money to make ends meet. I don’t even want a modest mortgage payment hanging over my head. And that’s why I insist on maximizing my retirement contributions each year before pouring money into my kids’ college accounts.
Being self-employed gives me the opportunity to save in a single 401(k) for retirement. The traditional 401(k) is currently capped at $20,500 for workers under 50 and $27,000 for workers over 50. However, Solo 401(k)s have a higher limit. Whether or not you can contribute to either of these plans depends on your income, but in any case, I would recommend putting a dime of your income into your Solo 401(k) before saving for your children’s education. K) value maximizing,
Make your priorities clear
If you’re struggling to balance retirement savings with college savings, you’re in good company. And it’s good that you want to contribute as much as possible to your children’s education.
But you should never let your desire to fund your children’s education jeopardize your retirement. If you neglect your nest egg so you can send your children to private school and cover their living expenses, you may have trouble covering yourself your own The cost of living after the end of your employment.
Keep in mind that Social Security faces cuts in benefits if lawmakers fail to close their funding gap. That makes saving for retirement more urgent.
Additionally, if you sacrifice your retirement savings to pay for college, you may be forced to rely on your adult children to help you financially later in life. If you’re the kind of parent who looks forward to paying for college, you’re probably the kind of parent who doesn’t want to burden their kids in achieving their own adult goals. try to do. A good way to avoid this scenario is to first save money for retirement and then set the money aside for your children’s education.