With summer winding down and as many of our clients are getting their kids ready to go back to school, we are frequently asked, “What’s the smarter choice for the long-term: to add to my retirement fund or pay for my kids’ college?”
It’s an entirely reasonable question. Parents are reading headlines about American college grads owing more than $1.48 trillion in student loan debt, and the Class of 2017 graduating with an average student loan debt of $39,400 and an anticipated 21 years to pay off their student loan.* Faced with the fear that their kids might be saddled with tens of thousands of dollars of crippling debt that will last decades, many parents are considering sacrificing their own financial stability to help their kids.
But here’s some advice from one of our Compass Point licensed advisors, Kate Glidden: “It’s not an ‘either or’ situation where you can only pay for college or only invest in your retirement. Your college student has time to manage and pay off their debt; your time is more limited. Consider other options before you reach into your retirement funds to pay your kids’ tuition. Some of those options include beginning to contribute annually to a 529 plan while your child is young and comparison shop: should your child consider a public university rather than a private university?” If you’re uncertain about what to do, come speak with your advisor.