What’s more important, saving for retirement or the children’s college?

2013

Should I save for retirement or for my children’s college?

While I am not a CFP or anything of the type, I spent many years working with thousands of employees helping them manage their retirement and other benefits; in other words managing life events.

To me the answer to the question is simple . . . you save for retirement first.

There are many options for college, grants, loans and scholarships, working, a state school, etc. Even if your child is accepted at Harvard the chances are most of the cost will be covered by the college. While many people, me included, are attracted to the best private colleges and want the best for their children, the best does not necessarily mean we have to risk our future financial security to provide an adequate education for our children.

Unless you are one of the very few Americans with a good, guaranteed defined benefit pension … one where you cannot outlive the monthly annuity and perhaps with a survivor annuity as well, your saving goal must be to assure an adequate income (for you and a survivor) during many years of retirement. While there may be options for college, there are no options for retirement unless your idea of a secure retirement is living on Social Security alone.

While you know when college expenses will occur, that is not true for retirement. You may have a plan to retire at 65 or even work to 70 or beyond, but many times that is not in your control. Ask the people who lost their job at age 55 or 59 or those who were forced to retire early because of illness or those who simply wish they could do something with the rest of their lives other than work.

Furthermore, you are faced with not only saving a sufficient amount, but investing that money over many years hoping to see it grow and then using what you have accumulated to live on for . . . for who knows how many years and therein lies a major part of the challenge.

Finally, consider this. As people are having children older in life many Americans will find that their children are still in college during the years they are retired or about to be. It does little good if college is paid for and mom and dad are unable to pay their bills or have insufficient assets to avoid being a burden on their children in later years.

It seems to me that your primary goal should be a financially secure retirement . . . for your benefit and for your children’s benefit as well.

P.S. None of this does much good if the unthinkable happens, so part of the equation must also be adequate life insurance along the way to retirement. It was quite revealing to me that many of the young family men and women killed in the 9/11 attack had no life insurance; quite irresponsible in my view. In fact, I know of one company affected by the attack that only the week before offered a life insurance program to it’s employees . . . only 30% took any coverage.

A word to the wise or those who should be.