While your children have the ability to apply for scholarships, grants, federal work study, and student loans, there is no financial aid for your own retirement2.
Saving for college instead of retirement, using home equity loans, and raiding IRAs are bad ideas as far as retirement planning is concerned.
In a perfect world, college and retirement would be part of the same financial plan but with as with any important life goals, there will be trades-offs.
Take into consideration the following when it comes to saving for college:
- Pay yourself first – before even looking at your after-tax cash flow, make sure you are making sufficient contributions to your employer's retirement plan or individual retirement account.3
- College savings plan – For example, with a 529 plan, after-tax contributions are made and grow federal tax-free. When the funds are used for qualified education expenses, there is no tax on the deferred investment growth, either. Friends and family can also contribute to your 529 plan, which can be a great gift idea for special occasions.3
- Consider alternatives – Merit scholarships, independent scholarships, work-study programs and federal loans can all help families achieve their goals. There are no loans for retirement.3
Supporting your children through their college years at the expense of your retirement may seem like a good idea at the time, but prioritizing college over your retirement could negatively impact both parties in the long run2. Any money you take out of your retirement accounts to assist your children now runs the risk of becoming a burden to your children in the future.1
Sources:
1 - http://www.savingforcollege.com/tutorial101/tough_choices.php
2 - http://money.usnews.com/money/personal-finance/articles/2014/05/29/which-comes-first-saving-money-for-your-retirement-or-your-kids-college
3 - http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2015/10/15/pay-yourself-first-save-for-retirement-then-college-for-the-kids