Balance Saving for College and Retirement

School's out. Summer's here. As parents, you need to think further ahead than summer camp. When it comes to choosing between saving for a child's college education or saving for retirement, which one should be the priority?

Sure, you want to minimize the amount your child will owe for student loans. But keep in mind that there are no loans for retirement if you come up short on your savings.

While there are no hard and fast rules about prioritizing your savings, the usual recommendation is to put aside money for retirement first. Your personal circumstances should be your guide. Here are several things to consider.

How Much Have You Saved?

If you already have significant retirement savings, you may be able to direct more money toward saving for your children’s college expenses. Be sure to run the numbers first, so you know you can afford to do this. However, make sure you’re still contributing enough to your company’s retirement plan to take advantage of employer matching funds.

Contribute to a 529 Plan

A 529 plan allows you to make after-tax contributions to an investment account on behalf of a designated beneficiary. One upside: Parents may be able to contribute less if others are chipping in. Grandparents, other relatives, and friends can contribute to the account. Withdrawals are tax free if they’re used to pay qualified education expenses, including tuition, room and board, fees, books, and supplies.

Open a Roth IRA

Although typically for retirement savings, a Roth IRA can do double duty as a college fund. You won’t pay a penalty on earnings you withdraw to pay qualified higher education expenses if the account has been open for five years or longer. Any funds remaining in the IRA will still be invested for your retirement.

Other Payment Options

There are a variety of ways to pay for college, including financial aid, loans, and work study. In addition, many organizations offer scholarships to students whose interests align with their mission.

Start early. Work with your school’s counselor throughout high school to learn how to qualify for aid.