If you’re preparing to send your child to college, you might also be wondering how you’ll afford four (or more) years of tuition and other college expenses. The cost for in-state public universities averages $20,000 per year, while private schools cost an average of $45,000 per year, according to the College Board's 2016 report (cited here
While the expense of higher education might seem daunting, you should resist the urge to tap into your retirement savings to help pay for higher education, according to Forbes
contributor Nancy Anderson.
Here are three factors she says you should consider when trying to balance paying for education and saving for retirement:
1. Retirement is a bigger expense than education:
While using retirement funds for education might solve a problem in front of you now, think of what it might do to your long-term goal of saving for that even bigger expense.
2. There are other options for paying for education expenses:
“You think paying $80,000 for college is daunting? Consider someone with an income of $50,000 a year. Replacing that income in retirement takes some doing! If you retire at 60 and live until age 85, you’d need 25 years of income — that’s $1.25 million, not accounting for inflation.”
Encourage your child to enroll in community college courses or take Advanced Placement classes while in high school, Anderson says. Also, some employers offer tuition assistance.
3. Consider that your retirement savings isn’t considered when student financial aid is decided.
Continuing to build up your retirement fund isn’t going to hurt your child’s chances of getting aid from the school or elsewhere.
See the article
for more suggestions on saving for retirement and education.
In addition, consider that there are accounts designed for saving for education and related expenses, such as a Coverdell Education Savings Account
(CESA). A CESA can be self-directed into alternative assets, just as an IRA or other qualified retirement accounts.
For more information, speak to an Equity Trust Senior Account Executive