For many parents and grandparents, deciding how to allocate savings between a loved one’s college education and their own retirement can be challenging. While both are important financial goals, it’s essential to strike the right balance so that neither is compromised. Here, we share some strategies to help you manage both priorities effectively.

1. Put Retirement First

While it may be tempting to prioritize a child’s or grandchild’s college fund, securing your own financial future should come first. Unlike education, which has funding options like scholarships, grants, and student loans, there are no loans for retirement. Ensuring a well-funded retirement prevents you from becoming financially dependent on others later.

Maximize contributions to tax-advantaged retirement accounts like a 401(k) or IRA and take full advantage of any employer matching contributions. A good rule of thumb is to aim for saving at least 15% of your income toward retirement.

2. Save for Both Goals Simultaneously

You don’t have to choose one over the other—start early and contribute to both. Setting up automatic contributions to both a college savings plan, such as a 529 plan, and your retirement accounts allows your savings to grow steadily over time. Even small, consistent contributions can compound significantly.

3. Use Tax-Advantaged Savings Accounts

Retirement Accounts: 401(k)s, IRAs, and Roth IRAs provide tax benefits that help maximize long-term savings for retirement.

529 College Savings Plans: These accounts grow tax-free and offer tax-free withdrawals for qualified educational expenses, making them an excellent option for funding higher education.

4. Encourage the Student to Contribute

Students can help offset education costs by applying for scholarships, grants, and work-study opportunities. Encouraging part-time work and budgeting skills can also help reduce reliance on loans while teaching valuable financial responsibility.

5. Adjust Savings Based on Your Timeline

If retirement is decades away and college is approaching soon, you might contribute more toward education in the short term. Conversely, if retirement is near, prioritize retirement savings while making smaller contributions to a college fund.

6. Seek Professional Guidance

Finding the right balance between these financial priorities can be complex. A financial advisor can help develop a strategy tailored to your unique situation, ensuring you meet both your retirement and college savings goals effectively.

With careful planning, it’s possible to prepare for both college expenses and a secure retirement. If you’re unsure how to allocate your savings, contact our office for experienced financial planning guidance. We can help you develop a plan that supports both your future and your family’s educational goals.