Retiring comfortably and helping your child go to college are two common, yet challenging, goals. With some smart choices made now, they are also two goals that you can achieve.
First, understand your current financial needs. For retirement, figure out how many years you have left until you retire. Estimate what your retirement account balance will be by the time you retire. Find out how much you can expect to receive in Social Security benefits. Know what standard of living you hope to have during retirement. Will you travel extensively, or live more simply?
For college, you'll need to plan whether your child will attend private or public college and what the expected costs are. Will your child qualify for financial aid or any special athletic, academic or artistic scholarship, and how many years do you have until your child begins college?
Determine what you can afford to save each month. Prepare a detailed budget listing all of your expenses and income. Take into consideration, though, that the amount you save each month may change periodically as your circumstances change. Once you've reached a dollar amount, decide how you will divvy up your funds to meet both goals.
If you have limited funds, remember that retirement comes first. While your child's college education is most certainly an ideal goal, the burden rests entirely on you to fund your own retirement. If you wait until your child is already in college to begin saving for your retirement, you forego years of tax benefits and compounding your money. Remember, while your child can take out a student loan or earn a scholarship, there is no such thing as a loan for retirement!
If you're having trouble allocating your funds between both college and retirement, professional financial planners like West Financial Group are a huge help. Professional planners show you how each goal is treated independently and which investments are appropriate for each goal.