We all want to retire comfortably when the time comes and many of us also want to help our children go to college. Putting together a savings plan to reach two long-term goals can be a challenge, but it can be done with some planning and an understanding of what should take priority.
 
 

Know your financial needs

It all starts with determining the financial needs for each goal. Ask yourself the following questions.

Retirement:

• How many years until I retire?
• Does my company offer an employer-sponsored retirement plan or a pension plan? Do I participate? If so, what’s my balance? Can I estimate what my balance will be when I retire?
• How much do I expect to receive in Social Security benefits? This can be found using calculators on the Social Security website or by signing up for a my Social Security account.
• What do I want to be able to do in retirement? Do I want to travel extensively or will I be happy to stay in one place and live more simply?
• Do I expect to work part-time in retirement?

College:

• How many years until my child starts college?
• Will my child attend a public or private college? What is the expected cost?
• Do I have more than one child to save for?
• Does my child have any special academic, athletic or artistic skills that could lead to a scholarship?
• Do I expect my child to qualify for financial aid?

 

Determine how much you can put aside each month

Determining how much you can afford to put aside each month is best accomplished by preparing a detailed family spending plan that lists all income and expenses. Our spending plan worksheet is a good way to get started. Keep in mind that the amount you can afford may change from time to time as circumstances change so you will want to revisit your spending plan regularly.

 

Dividing available funds

Retirement takes priority. College is certainly an important goal, but you should probably focus on retirement if you have limited funds. If you wait until your child is in college to start saving, you’ll miss out on years of potential tax-deferred growth and compounding of your money. Remember, there are other options to pay for college such as loans and scholarships, but there’s no such thing as a retirement loan. Ideally, you can try to pursue both goals at the same time. Even if you can allocate only a small amount to your child’s college fund - $50 or $100 a month – you might be surprised how much you can accumulate over the years.

Knowing the best way to allocate your funds between retirement and college can be a challenge. That’s why we have CUSO Financial Services, L.P. Financial Advisors here to support you on your financial journey and help you plan for the future. Make an appointment for a complimentary consultation or ask about them when you visit one of our Financial Health Centers.