You’ve worked hard throughout your career. Now, in your 50s or 60s, retirement is coming into view. You know you should maximize your IRA or 401(k) contributions. Or perhaps you’re already retired and coming to appreciate the importance of making your nest egg last.
But now your children or grandchildren are touring colleges and sending out applications. You desperately want to help them start their adult lives financially strong, without the burden of massive student loans.
And maybe you’re starting to wonder — or perhaps you’ve been asked — if you should cut back on saving for retirement or even dip into IRA or 401(k) funds to pay their college bills.
You’re far from alone. Two-thirds of parents of adult children polled for a March 2023 Bankrate survey reported making financial sacrifices for their kids ages 18 and up. About half reported dipping into retirement or emergency savings, one in five significantly so.
The heart wants to help. According to a July 2023 survey by personal finance website WalletHub, 72 percent of U.S. parents say their children’s education is worth going into debt for.
But if it’s a choice between going into debt to pay for your kids’ school and safeguarding your retirement security, consult your head as well. The stakes are high, and the consequences can be lasting.
“Whether it’s your children or grandchildren, take care of yourself first,” advises Roger Whitney, a certified financial planner (CFP) and host of The Retirement Answer Man podcast. “If you don’t do that, you’re just going to wind up being a burden to them later.”
Here are four things to think about in weighing whether to reduce or forgo saving to cover kids’ college costs.
1. You have less time to recoup the costs
Your college-age children or grandkids have their entire working lives in front of them and decades to earn, and save, before they retire. Your window for both generating income and saving money is getting smaller, if it hasn’t already closed.