Financial Planning for College & Retirement

College for the kids, cozy retirement for mom. How hard is that? Plenty hard — especially when things don’t go as expected. But as one woman learned, there is always plan B.

By Marion Asnes

The High Price of College Tuition & Promises

When things began to go wrong, I was knowledgeable enough about finances to realize just how badly I was missing my goals. Three years ago, with Ana already in high school, I had only $4,000 in a college savings plan, and the other funds we had counted on had dwindled. At the same time, I began tuning in to the real, updated cost of college. I remember marveling with some friends at a college reunion that the cost of tuition in 1977, our senior year, had been $4,500. "You know what it is now?" asked one. The staggering answer: $29,000. Since then, of course, costs have continued to escalate. This year, the bill for tuition, room, board, and fees at an elite private university will surpass $40,000. Many parents figure that, once they’ve added in everything from dorm-bed-size sheets to airfares home, they’ll spend closer to $50,000. Having also edited stories about financial aid, I knew that my husband and I made too much to qualify for it in any significant way.

Still, I couldn’t imagine breaking the promise I had made to my children, the same one my parents had made to me: You get into a top college, and we’ll pay for you to go. Stepping back from this idea would completely go against the grain. In 17 years of raising children, I’ve learned what is most important: I would leave my friends at the dinner table to sing to a fretful baby; I’ve embraced the humiliation of having a preteen "help" me shop for clothes. Didn’t the same maternal attitude suggest I should dip into my retirement money to help them launch their adult lives?

It had been easy, before, to adhere to financial planners’ gospel about college: Never, ever sacrifice retirement for college. But that was when we had — or thought we had — enough money for both. Now Mark and I are envisioning a less glossy version of the golden years. His portfolio has recovered somewhat. But even with my savings, we can’t pay for years of comfortable living. And I’ve had to push for major adjustments in our lifestyle, such as owning one car, not two, and forsaking expensive vacation travel.

Stuck between two imperatives — sacrifice for your children; don’t sacrifice your retirement — I’ve decided to cheat a bit and save for both goals: About 75 percent of my saving now goes to retirement, and the rest of it goes to college funds. That’s not a scientific decision; it’s part strategic, part gut feeling. And I’ve put my own spin on other elements of the conventional wisdom. Here are my five basic principles.

5 Basic Rules of Saving for College & Retirement

RULE 1: Don’t focus on today’s trade-offs; think long term. The experts’ advice — put retirement first — has compelling logic: It’s far easier to borrow for education than for retirement. When I get to that fateful day, if I’m short of funds, I know I’ll have few options. I’ll have to keep working longer than I want, cut back drastically (will I be able to keep our house, travel to visit my children?), or ask my kids for help. None are palatable for me. So even if I don’t observe the planners’ law to the letter, I am following it in spirit. Giving the kids too much today will hurt me — and possibly them — later.

RULE 2: Remember that times have changed. Retirement today is altogether different from when my parents were promising me that college money. Our parents’ retirement system was described as the three-legged stool: a company pension, Social Security, and personal savings. Today the company pension has almost disappeared, and the Social Security system is under great pressure. The last leg is the only one we can count on: savings, such as 401(k)s, IRAs and the equity in our houses. Rather than a sturdy stool, we’re balancing on one stilt. And because we’re living longer, that stilt has to support us for even more years.

Why dwell on all this? Because it consoles me a bit to know that I’m not alone. And it comforts me most of the time to believe that society won’t abandon an entire generation. Finally, I try to remember that our culture pressures everyone to spend too much, and that’s something I can resist.

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