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Fund Your Retirement or Your Child's College?

12/12/2022

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Towards the end of the year, many are undergoing an annual review of their retirement funds. It certainly was a tough year and one of the decisions many parents are grandparents are facing is the difficult decision to either save for retirement or use funds to pay for their children’s or grandchildren's college education. Here are some thoughts on the matter:

Prioritize retirement over education
In most cases it is more important to put the financial needs of retirement ahead of college education. Here's why:
  • Retirement funds will be used to cover your basic needs for daily life for as many as 20, 30 or even 40 years. While education for children is important - and expensive - it is secondary to your long-term well-being.
  • Financial aid and numerous other programs are available for your child to take advantage of to help them afford college. This includes current and future student loan forgiveness programs.
  • If necessary, your child can take out student loans. While it may take years for them to repay a student loan, they will have future income potential to do so. Your income will be lower or even stop upon retirement.
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Ways to plan for both
There are plenty of opportunities to fund both retirement and college education in a tax-advantaged way. Consider funding basic retirement needs first, then look at educational savings accounts and related programs. Here are some suggestions:
  • Start saving early. Use time to help grow the value in your retirement and education savings accounts. Take advantage of employer-provided 401(k) or similar retirement programs, especially if there is an employer match. After that, look into Coverdell Education Savings Accounts and Section 529 plans to maximize your education savings potential.
  • Research and apply for grants and scholarships. Start researching early, as there are college scholarships available for children as young as 5 years old!
  • Consider in-state public colleges. They are generally less expensive than private or out-of-state colleges. If an out-of-state college is preferred, check to see if they have reciprocity agreements with your home state.
  • Look into work-study programs. Many schools provide part-time jobs for students to help them pay for school while keeping up with their studies. These programs vary based on a student's financial needs.


Making financial decisions like this can be tough, but with proper planning and insight, a path that works for you can often be found. Call if you want to discuss your specific situation.


"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.  
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. 
 
For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA;  Janice Papais, CPA
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Phone: (630) 320-3720

Monarch Accounting Group Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527-7836
Email: Info@MonarchAccountingGroup.com


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  • Home
  • Solutions
    • CFO Services
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    • Other Services
  • Resources
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    • SmartVault
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  • Contact Us