College Fund Versus Retirement Savings: Which Comes First?
One of the unfortunate realities for couples who are planning a family is that they are often faced with the dilemma of choosing between a college fund versus retirement savings. Because the costs of both college and retirement have continued to climb, it’s often no longer feasible for parents to be able to afford to do both simultaneously. Which begs the question, which one should come first?
Costs Of College
Since 1978, the cost of attending college has skyrocketed by an astronomical 1,225%. According to The College Board, the average annual cost of tuition is currently:
- $3,440 for public two-year college
- $9,410 for public four-year college (in-state)
- $23,890 for public-four year college (out of state)
- $32,410 for private four-year college
These are only the costs of tuition, and do not include additional costs like books, room and board, and other common living expenses. With those costs factored in, attending a public four-year college may cost upwards of fifty or sixty thousand dollars.
Planning For Retirement
While the cost of college is certainly high, it absolutely pales in comparison to the current amount needed for a couple to retire.
In 2017, the average cost of retirement was $738,400. With that much money, a retired couple would be living on approximately $2,000 per month of income, which is far less than many would expect to be sufficient.
Realistically, couples should be aiming for a million dollars or more in retirement savings if they want to live comfortably after they stop working.
Retirement Takes Priority
As hard as it may be to choose, parents should prioritize retirement before a college fund. Not only is college an optional expense, there are often many ways to reduce (or eliminate, in rare cases) the expense entirely through scholarships, grants, and other types of financial aid.
Successfully planning for retirement requires making smart choices now, and following some basic guidelines as couples get closer to leaving the workforce.
For those who are struggling to put money aside for retirement and/or college funds, consider speaking with an experienced financial planner to discuss your goals and get help creating a plan that will enable you to have the lifestyle you want for yourselves and your children.
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