College Savings vs. Retirement Savings: Which wins?
A consumer wants to know if to prioritize daughter school or personal retirement? With limited resources to be able to save, she wants to know retirement for me versus college for my daughter — which one wins?
Scott Halliwell: Hello and welcome to Ask USAA. My name is Scott Halliwell. We have a question today from Betty in South Carolina that’s a tough one for many parents out there. With limited resources to be able to save, she wants to know retirement for me versus college for my daughter — which one wins?
Well thanks, Betty, for the question. You know, being a parent myself I understand the competing emotional interests that are at play here, so I really appreciate you giving me the opportunity to offer you my thoughts. In a perfect world, I think we would all be able to do everything we wanted. We’d be able to save as much as we need for our retirement funds and also be able to do whatever we deemed appropriate for our children as well. However, as you pointed out in your question, that’s not always possible.
So which one should win? Should it be college for your daughter or should it be retirement savings for you? Well as cold as it may sound — remember, I’m a parent here, too — retirement should be the winner in this case. There are three big reasons why I think this is the case.
The first one is you can’t borrow for retirement but you can borrow for college. The second reason would be, or the second reason why retirement should win out over college, is that generally speaking retirement can’t happen without saving, but college could. For instance, your daughter might be able to go to the military and use the GI Bill, or she might be able to work part-time while still going to school. Bottom line, there’s an awful lot of options that are available for her to get through school that you might not have available to fund your retirement if you don’t save for it.
And the final reason why I think retirement should win out over college is retirement savings shortfall is potentially worse for your daughter than a college savings shortfall. What do I mean by that? What I mean is if you run out of money in retirement, the reality is your daughter might have to take care of you, which could then have a much greater impact on her life than not being able to fund a college for her at this particular point in time.
Finally let me just reiterate the point that I made earlier. As a father, I certainly understand the not-so-pleasant emotions that this response can create but I really do believe it’s the right thing to do when you’re faced with a situation of not having enough money to do both. And remember, even though you may not be able to help your daughter from a financial perspective, that doesn’t mean you can’t help her out in other ways.
So thanks a lot for the question, Betty, and for giving me the opportunity to share my thoughts. I hope these ideas help your situation and I wish you all the best, and your daughter as well.
