The Great Mid-life Savings Battle: You Vs. Your Children

By: Robert DeVries

Many see it as a choice between paying for college or saving for retirement. How can you do both? Last year, I wrote about the financial and emotional resources required to support both your children and parents, Are You Feeling Squeezed in the Middle? Some of us are blessed with parents who are financially set and our main funding concerns are the lives of our children and our own retirement. Many in this situation are faced with trying to save for retirement and pay for college. Sometimes people ask, “If I can only do one, which should I do.”

For some, the choice between these options is more about timing than exclusion of one versus the other. So which comes first? Take a situation where someone might have to choose between deferring salary pre-tax in their 401(k) or saving for college in a 529 plan with after tax money. Many people who are in this situation are in their late thirties or early forties. With children who are 12 or older, there are approximately five years until the college tuition payments begin.   Capital that is needed in five years or less should not be subject to significant risk, so within five years of starting college, the money should be conservatively invested. A conservative portfolio might be comprised of 20 or 30% equites.

Time is the greatest factor

As for retirement, couples in their late thirties or early forties may have 30+ years before retirement and even longer before they will be using a significant portion of their portfolio. In cases like this it may be possible for savings to be more aggressively invested AND, more importantly, for a significantly longer period of time. So for many, the best choice may be to maximize 401(k) deferrals prior to college tuition being due, allowing for the money to be saved and grown over 30 years. Then, once children enter college, lower or eliminate deferrals and pay for tuition from the increase in take home pay.

As with any financial decision, your circumstances may dictate a different course of action. To make smart choices about money for your situation, consult a Certified Financial Planner or Accredited Wealth Management Advisor. Our financial services firm in Satellite Beach, Florida – the Melbourne/Brevard area – has four WealthCoachesTM with those accreditation’s who would be happy to sit down with you and help you prioritize your savings options. Visit our website at or call us today to set up a complimentary consultation at 321-773-7773!

You should not assume that any discussion or information contained in this publication serves as the receipt of, or as a substitute for, personalized investment advice from FirstWave Financial. A copy of the FirstWave’s current written disclosure statement discussing our advisory services and fees is available upon request.