The challenge of paying for college and saving for retirement at the same time

by Grace

Especially for parents who had their children when they were in their 30s or later, the crunch of paying for college while trying to save for retirement can be tough to manage.  The Family CEO gives advice for families who find themselves in this situation.

Reduce other expenses to free up cash for these goals.

… It might be something big, like driving a car with high payments. Or something small, like have premium cable channels that you never watch. Big or small, eliminating some of these expenses and directing them to retirement or college savings can help you meet those goals.

I have neighbors who put their kids through college debt-free using this strategy.  Exercising great discipline, they gave up one of their cars, fancy vacations, most clothing purchases, and housecleaning services during the six years they were paying college tuition.  It’s certainly not easy, but it can be done.

Create new streams of income or boost the ones you have.

In some cases this is quite feasible – consultants can take on extra clients, teachers can tutor on the side, SAHMs can go back to paid employment.  But sometimes it’s hard to find new money, and even then the amounts are meager.  The whole family can get in the act; maybe a teen can earn spending money from a summer job.

If you need to choose one, choose retirement.

… there are multiple ways to pay for college, but no one is going to fund your retirement for you.

Since time is not on their side, older parents in particular should avoid skimping on their retirement savings.  It can be a hard decision for parents to put their needs above those of their children, but here’s one way to think about it.

It’s like putting on your oxygen mask first on an airplane. Make sure you’re taking care of yourself, so you can in turn take care of them.

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3 Comments to “The challenge of paying for college and saving for retirement at the same time”

  1. I found the following remark a bit ridiculous: “Exercising great discipline, they gave up one of their cars, fancy vacations, most clothing purchases, and housecleaning services during the six years they were paying college tuition. It’s certainly not easy, but it can be done.”

    I have never had a car, haven’t had a fancy vacation since my honeymoon 26 years ago, spend under $100 a year on clothes (the whole family spends under $500 a year on clothes, probably closer to $200), and have never had housecleaning services. Calling what your rich neighbors did “not easy” and “great discipline” is ridiculous.

    That said, I will be retiring shortly after my son finishes college, so I’ve been saving for both. I’ve been putting aside 10% of my income since he was born for his college expenses, and I believe that he’ll be able to graduate debt free. I also believe that I’ll have enough retirement savings to retire when I’m 65 or 66.

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  2. Yeah, the definition of “great discipline” among NYC wealthy suburbanites is probably quite different from what many others would consider it to be. Your comment reminds me of the complaints I often hear from mid-upper class parents about how unfair the system is that denies them college financial aid.

    You’ve never had a car? That’s especially impressive, as I think that anyone who has relied on public transportation, walking, or cycling all their life (especially in raising a family) is doing something quite unusual. (Exceptions for inhabitants of NYC or other similar cities.)

    My neighbor walked to and from work for all those years, admittedly not too hard considering he lives about a mile away. Still, that’s very unusual around here and was a significant inconvenience. As a practical matter, I don’t think too many people living around here would be able to do it without great hardship.

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  3. I’ve only lived in small cities (Palo Alto, Ithaca, Santa Cruz), as I find large cities like NYC too noisy and crowded for me. Neither my wife nor I have ever had a driving license, and she doesn’t even bicycle. It is not as hard as most drivers think to live without a car, even when raising a family. We don’t spend substantially more time on transportation than other families, but we do limit the distance we travel each day. Shopping locally for us means about a 2-mile radius,while drivers often think of 20 miles as “local”.

    That said, my father did find it difficult to give up driving in his 80s, and ended up moving from the suburbs of Chicago to Boulder, so that he could walk for all his errands.

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