Sep 02

With all the press about people not saving enough for retirement, or much else for that matter (the median household net worth is $91,304, including home equity) I’ve been thinking more about how people prioritize their spending. Debt taken on for college tuition has always been thought of as “good” debt. I’ll pass on that judgment and just call it a sometimes necessary evil. But for whom, the student or the parent? Should parents pick up the tab? There are studies out there for nearly everything, I wonder if any study has been done on whether students do better for the fact that they had their schooling paid for, therefore not needing to work while going to school, or if they did better having their own money at stake.

We have been fortunate, by having a child later in life, we were able to start saving from the day she was born and will be able to handle those bills by the time she’s in college. Others might be tempted to tap their equity lines or take early retirement account withdrawals to put their kids through college. I’d suggest not doing this if it puts your own retirement at risk, you don’t get a second chance to save. Fellow Money Maven Len Penzo offers 22 Signs Your College Degree Might Not Be Worth the Money, Craig Ford offers a different spin with Roth IRA college savings, Monevator gives us 10 reasons to retire early,  Neal Frankle asks Can You Retire Now? Makes you wonder.

Joe

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7 Responses to “Retirement or College tuition?”

  1. Roshawn @ Watson Inc Says:

    I believe college is a luxury that should be furnished if finances allow but not at the expense of retirement.

  2. Carol@inthetrenches Says:

    In times past when the family farm was predominate and small businesses prevailed a child was trained and given the opportunity to be a part of that business as they grew up. This was their career training. College has become the new training grounds for building a career and peoples ability to provide it on behalf of their children varies greatly. Fortunately there are scholarship programs and student loans available when a family does not have the willingness or ability to cover the entire cost. Should paying for college supercede retirement savings? The decision must totally be made on an individual basis.

  3. Ryan Says:

    I agree with Roshawn. We just finished reading and reviewing Debt-Free U on our site. The book makes this very point the main takeaway: Take care of your retirement first, your kids will still be able to go to school.

  4. JOE Says:

    I appreciate the comments, thanks!

  5. IRA FAQ – All the Answers You Need In Plain English Says:

    [...] Retirement or College Tuition? Joe Taxpayer [...]

  6. John Says:

    When I was in High School(early 90s) my father had told me that he had saved some money for college in the form of savings bonds thru out my lifetime, in other words maybe enough to cover tuition for a year, year and half. Realizing that I would have to pay a lot for my college (plus other reasons like realizing I wasn’t ready for school) I enlisted in the Marines. After 4 years I got out and started working full time and going to college. With the benefits of the GI Bill, plus being a veteran (allowing me to take CLEP exams for free), and having an employer contribute to the degree, I was able to finish my bachelors in less then 3 years, all while investing for retirement. I have also completed an MBA on the company’s dime and the GI Bill.
    So there are other ways to pay for school. That being said I also save some money for my 2 children’s future college needs. My wife and I agreed that they should not be handed all the money for school and that they should have to work for it in some way, whether that be scholarships, military, extra jobs, loans etc. In fact my wife couldn’t afford college and only now in her 30′s has shown an interest in going back for a degree because we can afford it.

  7. Andrew Says:

    Interesting question. I’d say, if paying a child’s tuition is the difference between retiring or working for 5 more years, I say pass on paying the tuition. The student has a ton of time to pay off this debt while you have only so many years to enjoy retirement. On the other hand, if you can afford to do it, I think it’s a great burden to take off your child’s shoulders.

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