By Why these two goals are so different.
After well over a decade in this business, we see certain topics over and over again when we sit down with clients in our conference room. Two of the most common goals people have are saving for retirement and saving for college, and the two can often feel at odds with one another, In most cases, saving for college feels more difficult than saving for retirement, and there are several reasons for that.
When we’re helping people plan for retirement, we generally have a good idea of what we’re aiming for in terms of how much, when, and what each clients wants once they’re done working. College isn’t so easy to predict (easy being a relative term!). Planning for the future of a two-year-old is much more of a moving target than planning for the golden years of a 50-something.
While there are always variables to consider in retirement, there are even more when it comes to college. First, cost can vary greatly from one school to another and even from one year to another. In-state or out-of-state, public versus private, prestige versus community college – and these decisions usually aren’t ones that can be made too far in advance. Even with careful planning, saving for education can feel like a shot in the dark.
In retirement, the goal is to crunch a few numbers and then work to make sure everything is fully covered. When saving for college, there are other potential sources of funding – scholarships, grandparents, grants, loans, etc. Additionally, parenting style comes into play here too. Will the student be expected to contribute to his or her educational costs, or are the parents planning to foot the entire bill (or try to)? Will loans be considered?
We usually recommend that client families prioritize their retirement needs when it comes to setting savings goals.
College costs can be supplemented, and if loans are necessary, students have more years to deal with them than retirees do to play catch-up on saving. There’s no such thing as a retirement loan! Of course, each family is different. If you or someone you know is struggling to balance saving for retirement and preparing for college costs, let us know. Our team can take a detailed look at your situation and create a plan tailored specifically to you.
