Financial Education

How to Save for Retirement and Send the Kids to College

As a parent, you may have lofty goals to save early and often for your child's college education while also saving for your retirement. But as life unfolds your plans may take a detour, especially in the aftermath of stock market volatility and a tough economy. Perhaps your retirement accounts have taken a hit and you're looking for ways to build them up. At the same time, kids may need help paying for rising college costs. Many parents wonder:

  • Should I focus on saving for retirement or college?
  • Should I save for both goals equally?
  • Should I save more for the goal that comes first chronologically?

The answers depend on your unique situation, but in general, it makes sense to put your retirement savings first. Students have numerous opportunities to manage college costs, from taking out low-interest student loans to choosing a less-expensive school or working through college. They have decades to pay off the debt, whereas your retirement horizon may be approaching quickly.

Before the College Years

>Maximize retirement savings first. If your employer matches your contributions up to a certain amount, make sure to contribute enough to receive this benefit. Try to increase your contributions each year, or whenever you get a raise. Keep in mind that retirement assets are sheltered from the aid formulas used to calculate student aid, so it can be beneficial to build up funds in your retirement accounts vs. other taxable accounts.

Save for college next. Consider directing additional savings to a 529 college savings plan.Contributions compound on a tax-deferred basis and are tax-exempt when the money is used for qualified higher education expenses. Family members can contribute as well, so you may encourage grandparents and other relatives to contribute to your child's 529 plan instead of giving cash gifts.

>While the Kids Are in College

>Leave retirement assets alone. You may decide to reduce retirement contributions in order to help with tuition payments. However, you should avoid withdrawing money from retirement accounts to pay for college. Doing so may shortchange your retirement future andreduce next year's financial aid eligibility, since retirement distributions are considered taxable income.

Consider other sources of funding. Financial aid, student loans, scholarships and grants may help fund higher education if your child qualifies.

>After Graduation

>Refocus on retirement savings. With college bills out of the way, make it your mission to ramp up contributions to your retirement plan. If your finances are in great shape, you may have the flexibility to help your child pay off student loan debt in the future, should you choose to be so generous!

Need help setting your savings strategies for retirement and college education? Set-up an appointment with a Chaco New Account Representative to review your options. Give us a call at 513-785-3500, we’re here to help make your money work for you.

Please note that neither this financial institution nor any of its affiliates give tax or legal advice. Consult your tax advisor regarding your individual circumstances.

Investment products:
Not federally insured
Not a deposit of this institution
May lose value

Our Difference is Simple

When it comes to your financial plan, we understand what you need now and more importantly, what you need tomorrow. We are here to help you get the most out of both. Whether just starting out or preparing to retire, we help you become financially prepared and fully informed. At Chaco, we bring you the same expertise and competitive services as other institutions, but with the compassion and genuine care that can only come from being member-owned and operated. From CDs and savings to mortgages and more, we work to keep things simple when it comes to your finances – so you can focus on your life. And that makes a difference.