The rising cost of student loan debt may influence how you secure your financial future. Student borrowers could end up with less savings if they pay off their student loan debt expediently. Prioritizing student loan repayment over retirement is a risk because retirement contributions are usually tax deductible.
What Should You Do? Save for Your Retirement or Your Children’s College?Submitted by The Participant Effect on August 9th, 2017
Most parents put their children’s needs above their own, including funding their children’s educations. After all, everyone wants their children to be happy and successful. However, financial advisors that specialize in pension consulting warn that prioritizing your kids over your own retirement could be a mistake. Why should retirement be your main priority?
You can’t borrow for retirement. Student loans can help your children fund their college years, but there aren’t any loan programs for retirement. While any loan should be carefully considered, student loans typically feature low-interest rates. Other options to fund college include attending a less expensive community college and then transferring to a larger school, as well as scholarships, grants, work-study programs, and more.
Retirement savings may offer bigger returns that college savings. If your employer offers a 401(k) program with a matching contribution, you’re essentially getting free money. Plus, you have a variety of investment options in the plan that can generate even more earnings. While investing in a 529 education plan may offer attractive investment choices, you won’t receive an employer matching contribution.
Investing in yourself protects your children in the long run. If you’re not financially ready for retirement, your children may have to help you. Often, this can happen when their own careers are reaching their peaks, or when they need to provide for your grandchildren. Prioritizing your retirement means your kids won’t have to bear that financial burden.
While it’s natural to want to provide for your children, it shouldn’t come at the expense of your retirement. The Participant EffectSM can assist participants with making better financial decisions. For more information about ways that you can work toward a confident retirement or pension consulting, visit www.theparticipanteffect.com or call us at 888-968-9168.
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This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
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