You're walking the tightrope of life, and you have some important young fans in the audience. Given the choice between a safety net for you, or a better future for them, what do you choose? Having kids prompts some pretty tough savings decisions, and this is a common either/or scenario. If you can only afford to save for one, do you choose your kids' college tuition, or your own retirement?
Many parents are putting retirement savings second
Boston college recently reported that based on surveys, parents are choosing to delay retirement in order to better pay for increasing education costs. The second survey found that parents are becoming more willing to dip into retirement plan in order to pay tuition. It's a position that makes sense. To many people, parenting is about giving their kids the best opportunities possible. But this trend is contrary to the advice of a great number of financial advisers.
To find the bottom line, take guilt out of the equation
Many financial professionals say that if you're concerned about your children's financial security, you should look to your own first. After all, if paying for education means sacrificing retirement funds, there's a good chance you could have to rely on your kids for financial assistance later on. No matter which option you choose, your underlying motivation is the financial stability of your family. So let's look at which option makes your money work harder. One of the most important differences between these two competing financial goals is the availability of external support. Education can be buffered by scholarships and loans, but there is no loan for the utility bill once you've stopped working.
Don't panic and withdraw from your retirement savings without seeking advice
Robbing your retirement savings to fund college could cost you a lot more than you realize. Many retirement savings plans have penalties for early withdrawal, and even if they don't, there's another hidden cost. Withdrawing money from savings plans can count as family income on loan and scholarship applications, reducing the amount of financial support that your children can apply for.
It can run counter to your instincts as a parent, but your entire family may benefit if you find yourself in a strong financial position when it's time to retire. Sometimes, being generous and supportive means committing to your own long-term stability.
Taking care of retirement savings first is similar to the common airline emergency scenario. You always put your own oxygen mask on first, because you'll be in a better position to help dependents once you are secure. Likewise, it's not selfish to prioritize retirement. Chances are it will help the younger members of your family enjoy a better future.