How to Save for Retirement and Your Child’s Education
May 16, 2023
If you’re like many Americans, you’re probably thinking about saving for your future as well as that of your children. These key considerations can help you plan for retirement and your child’s post-secondary education.
- Define Your Goals: Determine what success looks like for your retirement and your child’s education. For retirement, ask yourself when you’d like to retire and how much income you think you’ll need each month. For your child’s education, factor in how many children you have, how long before they’re due to begin their post-secondary education, and what type of college or trade school they’re likely to attend.
- Set a Budget: Whether you already have a working budget or need to develop one that factors in your income and expenses, review your current financial situation and determine how much money you can allocate toward savings each month.
- Prioritize Your Retirement: It’s great if you can afford to save for both goals simultaneously. But if that’s not realistic for your situation, don’t lose heart. Save for retirement first. Your children have many options to finance their education, such as scholarships, grants, and student loans, but there are no loans or grants for retiring. Don’t forget to include your future Social Security benefits in your planning. Log in or create an account to check your status and projected benefit.
- Maximize Retirement Savings: Many retirement accounts such as 401(k) plans or IRAs offer tax benefits. Contribute as much as you can to these accounts, especially if your employer offers a match. Roth IRAs can be a useful tool for both retirement and educational savings because they allow you to contribute after-tax dollars, which can be withdrawn tax-free in retirement.
- Develop a College Savings Plan: Consider which type of educational savings plan — a 529 plan, custodial account, or other account — makes the most sense for your situation. Some options offer tax benefits, which can help you maximize your savings potential.
- Start Today: The earlier you can start saving, the better. You might not think a modest monthly sum will make a difference, but small contributions will grow over time. If your income increases, you can revisit your plan and contribute more as you’re able.
Saving for retirement and your children's education can be a daunting task, but with proper planning and discipline, it's achievable. Schedule an appointment with one of our financial planners to develop a personalized plan that meets your specific needs and goals.
