It’s no secret that student loan debt is increasing and is a financial burden for many Americans. It’s something I certainly see working with my clients. In fact, I believe it’s the main reason why the question is often asked…Which is more important: saving for my kids’ education or my retirement?
The first thing people need to remember is that student loan debt can be considered good debt because it is an investment into an individual for them to garner opportunities that may be difficult without it. That is with the caveat that the money is borrowed responsibly.
However, it’s a question we often get. So, here are some things to consider if you’re asking yourself this question:
What’s the best path for you?
Each family is different. And truthfully, each person is different. Many are surprised when they realize their goals differ from their spouse when it comes to topics like their children’s education and retirement. The key is to really figure out what your goals are pertaining to retirement and college funding and finding the middle-ground.
Do you want to fully-fund their education? Or partially? There isn’t a right answer, it’s about what the family wants to do. I have clients that feel funding education is most important while others that believe funding retirement is.
Try to look at it from a different perspective.
It’s incredibly difficult to know how you are truly going to feel 30 – 40 years from now. Some clients often tell me that they’ll work until 65 or 70 years old to help with education funding. I don’t doubt if they I can, I want them to question if they’ll really want to.
Making a predication about how you will feel that far into the future is nearly impossible, so having conviction around your decision is imperative. I have clients that have a plan built for this specifically. They’ve paid for two kids’ undergrad and graduate degrees, and they are happy as ever. They wanted their kids to have zero college debt. It’s as simple as that.
Analyze the downside.
One of the biggest concerns with prioritizing education funding over retirement is it may increase your chances of an underfunded retirement. It raises concerns about where your income will come from. In most cases it comes from one of two places, either you must get back into the workforce or work longer, or your kids are going to have to help you fund your retirement. It’s common to underestimate the cost of living in retirement or the quality of life that you want to have. In doing so, a shortage of money becomes a real concern.
The unpredictability of children.
Kids are unpredictable. As they grow and begin thinking for themselves, they may have different ideas about their future. Regardless of how bad you may want them to go to school, they may decide it’s not for them. Or, best-case scenario, they get a full scholarship. By considering both in your planning strategy you can look at alternative options that can be a potential source of funding your child’s education, but also be a tool you can rely on in retirement. The key is to try to prepare for all scenarios.
Work with a professional.
Finally, the last bit of advice is to work with a professional. Working with a financial advisor can help you weigh all the potential options that you have, provide insight based on what your goals are, and make appropriate recommendations based on where you are at and where you want to go. It’s important to find someone you enjoy working with. Finding a person, you feel comfortable enough to be candid with will help them create a plan fully customized towards you and your goals.
Special thanks to our Guest Blogger, Clint Brady, for sharing this information with us!
Clint is a financial advisor with Northwestern Mutual. He is an advocate for families and business owners on creating a path to financial independence.
Click here for a free, no obligation consultation with Clint.
Interested in learning more? Read more of Clint’s posts for Cedar Rapids Moms Blog: