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Should I Save for College or Retirement?

If you have to choose one, choose to save for your future

If you want to start crunching some numbers, go online and use some of AARP's retirement and college savings calculators. But don't stop there. Decisions about retirement and college are too important to leave on the back burner, so talk to a financial advisor. You don't have to be a seasoned investor to need sound financial advice.

Online benefits calculators can give you an idea of what your monthly retirement income will be, but an advisor can help you chart a course to establish and reach retirement goals, plus determine how much you can reasonably put toward your children's education without damaging your retirement resources.

In addition to a financial advisor, college funding experts can identify well-known and little-known avenues to pay tuition and give prudent advice based on your circumstances.

Whether or not you're spoken to advisors yet, make sure your student completes a FAFSA (Free Application for Federal Student Aid), then investigate savings options like your state's 529 plans – which allow a maximum contribution of nearly $300,000. Also look at Coverdell Education Savings Accounts (ESAs), which work similar to IRAs (Individual Retirement Accounts) allowing savings up to $2,000 annually (based on family income parameters) until your child turns 18.

Don't overlook custodial accounts, U.S. savings bonds and municipal bonds. Additionally, IRAs allow you to withdraw money for your children's education without a penalty, but never consider this option first – IRAs are for your retirement.

Also, encourage your teens to work part time to save for college. This will promote personal investment in their education and give them a greater sense of value for their college experience.

Parents, get your 'to-do' list ready. Retirement savings is always the top priority, followed by estimating education costs. Then with the help of advisors – and your future college student at your side – research every tuition option available.

Don't feel guilty about putting retirement first. Today's parents are frequently older than most parents a few generations ago. Now many are sandwiched between raising children, caring for parents and managing a host of financial challenges.

Over the past few years, a lot of people's retirement and college savings dwindled as a result of the recession. Now, it's time to plot a new course and stick to it. If you've got valuable tips and insight on this topic, please share your thoughts below in the comments section of this article. We welcome your input.

You may also like: 10 steps to prepare for retirement. >>

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