If you’re like many of the families we work with, planning for your child’s college education is high on your list of priorities. You want to help set them up for success; and understandably so. But here’s something we remind our clients all the time: you can borrow for college, but you can’t borrow for retirement.
Why Retirement Needs to Come First
This may feel counterintuitive as a parent, but your retirement should remain your top financial priority. We’ve seen what can happen when families dip into retirement accounts or stop contributing altogether to fund education. It can lead to years of delayed retirement, increased financial stress, or even needing help from the very children they sacrificed for.
Focusing on your own financial foundation sets a powerful example for your kids. It doesn’t mean you’re turning your back on your kids. It shows them what responsible planning looks like and gives them the freedom to build their futures without carrying yours.
How to Support Both Goals Without Sacrificing Either
There’s good news: with the right approach, it’s possible to save for retirement and still help your kids with college. Here are strategies we regularly walk through with clients in our planning sessions who are looking to balance both:
1. Start with a Retirement Plan
We begin every client relationship by reviewing retirement readiness first. Are you on track? Do you know what your retirement number is, or how much you’re projected to need?
Once we’ve reviewed your retirement outlook, we can look at where there’s flexibility to help with college expenses. In some cases, a Roth IRA or a brokerage account might serve dual purposes. Ask one of our James Financial Planners to understand this strategy more fully.
2. Open a 529 Plan Early
Even if college is several years away, starting a 529 savings plan early gives your contributions more time to grow. You can contribute what feels manageable and let the power of compounding growth go to work. These accounts are flexible, tax-advantaged, and specifically designed for education expenses. Even small, consistent deposits can add up over time. In addition to that, setting up automatic contributions helps keep you on track without second-guessing your plan.
3. Involve the Whole Family
One of the best things you can do is talk openly with your kids about what you’re willing, and able, to contribute to their college education. Setting expectations early often leads to smarter decisions about school selection, student loans, and overall cost planning. It’s also worth exploring career paths that may not require a traditional four-year degree. Many in-demand fields offer strong salaries with only certifications or associate degrees
4. Explore Additional Funding Options
Grants, scholarships, part-time jobs, and financial aid all play a significant role. There’s a lot more opportunity to obtain a grant or scholarship than you might think if you do some research. Parents should help their children explore these options early so that the burden isn’t entirely on them. Some parents treat scholarship research and application like a job for their child.
Military service and employer-funded education benefits are also options. Starting in the military or in the work force will give real world experience and help create a more focused career path.
5. Take Advantage of College Credit in High School
For Ohio students, Advanced Placement (AP) and College Credit Plus (CCP) programs allow high schoolers to earn college credit before they even set foot on campus. AP courses require a standardized exam to qualify for credit. CCP offers college-level coursework through local colleges that count toward both high school and college credit.
In some cases, students have graduated from high school and earned a college degree just over a year later; often while working part-time and carrying little or no debt. These programs can be a game-changer for motivated students and cost-conscious families.
Frequently Asked Questions
Q: Should I pause my 401(k) contributions to help pay for college?
A: Generally, no. Your retirement timeline doesn’t pause just because tuition is due. We often recommend maintaining at least your contribution level to capture any employer match.
Q: Is it ever okay to use retirement savings for college?
A: It’s not ideal. Withdrawing from a retirement account early can trigger taxes and penalties and it shrinks the pool of assets growing for your future.
Q: What’s a realistic amount to contribute to a 529 plan?
A: That depends on your retirement progress and household cash flow. We often suggest starting small, maybe $100 a month, and increasing contributions over time as your cash flow allows.
Q: What if college is just around the corner?
A: It’s never too late to plan. We can explore different ways to bridge the gap, including reallocation of assets, savings boosts, and financial aid strategies.
Q: Can grandparents or other family members help?
A: Yes. Whether through gifts or contributions to a 529 plan, there are smart ways for extended family to lend support without disrupting your plan.
Let’s Talk About a Plan That Supports Both
Helping your children and preparing for your own retirement aren’t mutually exclusive. The right plan allows you to do both; thoughtfully, realistically, and with confidence.
If you’re ready to talk through your options, our team is here to help you build a strategy that supports your goals and your family’s future.
