Saving for College Is a Major Obstacle to Retirement Savings. Here’s Why You Shouldn’t Let it Be

If you’re putting your kids’ education ahead of your retirement, you’re making a giant mistake. Millions of Americans today are saddled with student debt. And many people owe tends of thousands of dollars in loans. You may want to spare your children the hassle of graduating college with student loans. And so you may be doing your best to sock money away for their studies. But if contributing to your kids’ college funds is getting in the way of your retirement savings, you’re doing yourself a major disservice.

Your retirement savings need to come first

In a recent Schwab survey, 20% of respondents pointed to college savings and paying for education as a major obstacle to building a retirement nest egg. But putting your kids’ education ahead of your retirement is a mistake you might sorely regret. It’s noble to want to give your children the best of everything, including a quality education that doesn’t result in loans. But if you let that get in the way of your retirement savings, you might end up struggling financially once your career comes to an end. Even though student loans do have the potential to pile up on borrowers, federal loans tend to charge a reasonable amount of interest. And there are programs in place that make it easier to pay that debt off, like income-driven repayment plans. Some borrowers are even eligible for eventual student loan forgiveness. But it’s not as easy to borrow money affordably for retirement. Yes, there’s home equity, which many people have the option to tap. But other than that, your choices may be somewhat limited as far as affordable borrowing goes. And anyway, do you really want to end up in a situation where you’re applying for loans and are at the mercy of a bank to cover your basic retirement expenses? That’s just not a desirable scenario, no matter why you’ve gotten there. That’s why it’s important that you first save on a regular basis for your retirement, and then contribute funds you have beyond that to your kids’ education. It’s perfectly OK to build up a nice college fund if you’re maxing out your retirement account every year, or saving at a nice pace. But the key is to make your nest egg the main priority and have your kids’ education fund be secondary.

You don’t want to become a burden to your grown kids

Your goal in saving for your kids’ education may be to help them avoid the burden of student debt. But if you’re not careful, instead of being saddled with student loans, your grown kids might end up saddled with the burden of having to help support you financially in retirement in the absence of you having enough savings. That’s not a good set of circumstances for anyone involved. Take a look at how much money you’re contributing toward retirement savings each year versus your college accounts. If there’s a disparity, aim to correct it as soon as you can. Otherwise, you might end up in a dire spot come retirement. And your children might end up in a situation they don’t want to be in, either.