Save for Retirement First or Children’s Education?

Save for Your Retirement First or Your Children's Education?

A while ago, my brother forwarded me this article from the NY Times – Save for Retirement First, the Children’s Education Second. The financial planners advise that it is crucial to save for retirement before contributing to your children’s higher education. Your children have more options for education than you have for retirement. They can get loans, scholarships, financial aid, attend a community college first, or maybe just not go to college at all.

I’m sure it’s smarter to fund your retirement first and your children’s education second, but I’m one of those people that financial planners butt heads with. Currently, we are able to contribute to our 401k and our kid’s 529 plan at the same time. Life is uncertain, though, and who knows how our financial situation will change in the future. If we can’t fund both our retirement and our kid’s education, I won’t hesitate to put higher education first.

*Originally written in 2014. Updated 2021.

Family Tradition

It’s our family tradition to prioritize higher education. My maternal grandparents put their 9 kids through college. They reinvested any extra money in their business and never set aside a retirement fund. Unfortunately, in their later years they didn’t have much money because their business failed. They didn’t have to live in the street, though. Their children sent them money and helped support them in whatever capacity they could. The more well-off kids would send more money than those with less. That’s the original retirement plan the human race had for centuries and I think it’s a perfectly valid plan. Of course, not everyone has 9 kids. It’s better to have a well-funded retirement, but retirees all over the world make do somehow.

My parents also prioritized higher education over retirement. They put 3 kids through college. They were able to save up some money for retirement, but not enough to fund 30 years of leisurely living. We’ll have to help support them when they get older and we are already preparing for that day by asking my mom to come live with us part-time.

So you can see that it’s our family tradition to prioritize higher education. A good education is a ticket to financial security and I want to give our son a good start in life. We’re not sure how the job market will be like in 20 years, but I know having a degree is better than not.

*2021 update – My mom lived with us for several years. Unfortunately, she developed dementia and we decided to move her back to Thailand. My dad is taking care of her at this time and we send them $1,500 per month. That’s $500 each from me and my 2 brothers. Eventually, she’ll need to go to a dementia care facility and we’ll gladly pay for that.

Saving for Higher Education

Saving for higher education is tricky because there are so many unknown factors.

  • Where will our son go to college? An in-state public university is much more affordable than a private university.
  • Can he get scholarships or grants?
  • We started saving when our son was born. We had no idea how much college could cost when he’s 18.
  • What if he doesn’t go to college?

A university education is a very high priority for us so we decided to ignore the uncertainties and started saving right away. I figured it was best to front-load our son’s education fund. We saved about $10,000 per year in his 529 account for the first 3 years. By 2014, we had about $40,000 in his education fund and slowed down a bit after that. Fortunately, the stock market performed very well since then. By 2021, his 529 education fund grew to about $115,000. We’re more than halfway to our target.

We decided to use our alma mater as a baseline. The cost to attend UC Santa Barbara should be around $200,000 in 2029. We’ll continue to add about $4,500 per year to his education fund, but I feel the hard work is already behind us.


Saving for your retirement first is the smart way to go, but sometimes you just have to do what you believe in. If we don’t have enough to pay for higher education, then I would cash out some of our retirement funds to help. The financial planners are right, though. There are many alternatives for the kids these days. Here are just some of them for reference. Our son will have to resort to some of these methods if he wants to attend an expensive private school.

  • Financial assistance from the school and government – scholarships, grants, and financial aid packages.
  • Student loans – if they can get a low rate, then that’s a good option. We can help pay it off later.
  • Stay at home while attending college.
  • Be realistic and avoid touring expensive private colleges if you don’t have the $$$.
  • Don’t have more kids.  Lucky for us, Mrs. RB40 refuses to go through the childbirth process again.
  • RB40Jr can work a bit to help pay for college.
  • Attend a community college for 2 years then transfer.
  • Take online classes. I’m sure this will be a big part of higher education in 15 years. We already got a preview in 2020. Motivated students can learn just as much online.
  • No need to save for graduate school. He can get a job and the company might pay for a graduate degree as professional development.
  • Any more ideas? Leave a comment and I’ll add them here.

From readers

  • Parents can work at the university and get some kind of tuition assistance.
  • Parents pay for 3/4 of the higher education cost and the kid covers the rest. This is a great idea because the kid will have a stake in the game too.
  • You can tap your Roth IRA to pay for college without having to pay the penalty. You’ll still need to pay tax on the amount withdrawn, though.
  • As the cost of daycare goes down, put the difference into a 529. I love this idea!
  • Coverdell Account – you can contribute up to $2,000/year and get a federal tax deduction.
  • Purchase a rental property and use the income to pay tuition.
  • Purchase a condo and have the kid live there and get a roommate to help pay for living costs. After 4 years, you can sell it to recoup the cost and perhaps make a little profit. My brother did this when he was in a Ph.D. program.


Graduation from college without any debt was a huge financial boon for me. I was able to start saving and investing right away and it gave me a big headstart. We don’t plan to leave much to our son and higher education will be it. It will give him a strong foundation to generate his own wealth in life. Some of my friends still owe a ton of money and I really don’t want to put our kid through that.

What about you? Are you saving for your children’s education? Do you prioritize retirement or higher education? 

You can read more about our son’s 529 account here.

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Joe started Retire by 40 in 2010 to figure out how to retire early. After 16 years of investing and saving, he achieved financial independence and retired at 38.

Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!

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93 thoughts on “Save for Retirement First or Children’s Education?”

  1. We were fortunate to save for our retirement early and for my wife to have a pension. We’re getting into a situation where we may have too much income down the line and hit RMDs in a high tax bracket.

    We haven’t invested much in our kids’ college education. It’s about the minimum every year to get the state tax break. My wife’s GI bill will help a lot with that, but we still probably wouldn’t invest that much. We’re putting the extra money into their education at an early age with the idea that we’ll get “compound interest” in their intellectual development. By the time college comes along, they should be well-positioned to get good scholarships.

    I like to borrow from a few of the college hacking things like community college (hopefully in high school), rental properties (in the ways you mentioned), skin in the game, and online classes.

  2. We funded our two kids college tuition and living expenses 100%, and continued to max out on our retirement savings. However, if we only had one option, we would definitely fund our retirement first as we always wanted to be financially responsible and secured so we don’t become burden to our children when we are old.
    My husband and I both worked part-time and put us through college with some student debts which we had paid off within the first year after working full time. Our parents have not been as financially secured so we have to support them, and it is not fun to be the sandwich generation.
    If kids take out loans, they have years to pay off the debt from their earnings. However, once you are retired, you have no more earning potential to make much money.

  3. Assumption- you are not able to do both due to financial limitations.

    As per me, the Factors considered are more important to debate than the decision itself, but often ignored in the name of “Culture” which has caused a stereotype.
    1. Life expectancy- When the 20th century began, life expectancy at birth in America was 47 years; now newborns are expected to live 79 years. If about three months continue to be added with each passing year, by the middle of this century, American life expectancy at birth will be 88 years. By the end of the century, it will be 100 years.
    Question to ask ourselves- do I want to burden by children with 30-40 years of my retirement, in return of sponsorship of 4 years college? Is that fair on my part…?
    2. Country of residence. If you are in USA, you have free Primary education. And social security and Medicare for retirement. Imagine India, where you have none. Parents have to support 14-15 years of primary education, follow it up with 4 years in college, and then Masters. And no retirement plans like social security or Medicare.
    3. Education levels have changed with each generation. Previous generation, even a high school degree was fine to get jobs. Our generation, graduation was almost the unsaid norm. I anticipate, next Gen will have Masters as the norm. How much can you chase a moving target?
    4. Education inflation has increased 10 times in last couple of decades. It is not comparable with previous generation. What I paid for my entire 4- year engineering degree, now, for preschool 1 year, it costs twice that amount. No point in beating ourselves over what our parents or grandparents were able to do. It’s not a compitition.
    5. Previous generation had more number of children to share the burden of parents in retirement which was a much smaller duration anyway. Current generation has 1, max 2 kids. Is it fair to burden just 1 kid to take care of 2 parents through 30-40 years retirement. Is it not bondage?
    6. Do children become more independent and self reliant if they know the value of money by sponsoring their own education? I think, Maybe!
    7. Children’s married life may get constrained and their Children may be deprived. Because of way longer retirement durations, and the costs of old age health care.
    8. Which one would be a better gift to our children – 4 years college, OR, 40 years retirement obligation for 2 parents who will become frailer and sicker with longer life expectancies ?
    9. Concept of borrowing/loans is you are able to borrow on your own future self. Economic principle says young adults have more borrowing capacity than retirees.
    10. Previous generation used to have kids much earlier in terms of age. With the trends now, data suggests, couples are delaying kids for many reasons. So previous generation had working life ahead of them by the time their children completed college. Going forward, may differ- parents might be already retired or knocking on doors of retirement by the time college finishes. So earning potential after that goes drastically down.
    11. Defined benefit pensions are largely dead in our generation. Our previous generation still had that to support themselves.
    12. Medical costs inflation skyrocketing every year, more than college education, and wages stagnation since the 80’s (in USA). Is it fair to burden children with those expectations? Since we will live longer, long term care which was very less in previous generation, now will be normal.
    13. Obligation is never healthy especially for long durations. Nature intends that We have obligation to our children, they should not have anything to us, rather they should have to their children. That’s nature, to put more importance to future generation, than wasting resources on older generation. Putting an obligation for 30-40 years of retirement to children can be recipe for disaster which can ruin our own lives, the Children’s family, and their children’s upbringing and family.

    What I would do – before college starts, discuss with children clearly about all these points and ask how they want to pursue things. I believe the missing piece is communication with children on what their perspective would be as adults. Should take those feedbacks by sharing our experience.

    If I have enough money, I would still encourage them to take education loans, and I would prefer 2 routes from my end:
    1. to plan for Inheritance when my children are 28-33 years of their age (data suggests inheritance has maximum positive impact in this age), and one more phase at End of my Life. 2. second, I would like to sponsor a basic income scheme for children to be a safe net, so they can overcome financial fears and be open to explore options without fear of putting bread on the table.
    3. If I have some more left over, I can try to repay some of the education loan EMI’s.
    4. Help children in ‘kind’, as much as possible, say babysit their children, help with their upbringing, teach them some finances. All that we can do is only By staying independent myself, healthy and wealthy in retirement.

    • Thank you for your input. These are all great points. Although, I think the life expectancy curve is flattening out. It’s not going up anymore. Great point about 4 years of education vs 30-40 years of obligation.
      It’s best to save for both if possible.

  4. Wow I couldn’t disagree more with you Joe.
    ” I won’t hesitate to put higher education first.” – Higher Education is overrated. I know hundreds of well educated people who aren’t even doing what they qualified for.
    This day in age it’s way better to be a dropout entrepreneur than being a book rat.

    I save very very minimal for my kids education and all I can on my FIRE/retirement fund because I totally agree with the NYT’s article.

    • Thanks for your input. College graduates still make a lot more money than non-grads. I doubt that will change anytime soon.
      Both can become entrepreneurs, but you have something to fall back on if you have a degree.
      My family just put a higher priority on higher education than most.

  5. There are also high schools that allow their students to gain associate degrees while in school. Not sure if they are popular in Portland thought. Also, clep exams can help a student get credit for what they already know without spending hundreds or thousands.

  6. Joe, I’m curious about your statement towards the end of your post about not planning to leave much to your son when you pass. My expectation is to follow the 4% rule, and that means in theory you have the same amount when you die as when you started, possibly more. Are you planning to do that and if so does that mean you plan to give your wealth to charity instead of your son?

    That’s great if so. I have to admit I have a strong desire to spoil my kids and maybe hand them the gift of financial independence at some point. Better that they achieve it themselves, but what if it doesn’t work out? Wages keep falling for lower income groups in the US. What if my kids find themselves in that situation and are unable to build the nest egg? It seems that poverty perpetuates itself. Once you get locked in poverty it’s tough to get out. Though possible of course. Supposing they are 50 and trends continue. Age discrimination ends their careers and they haven’t managed to save enough. That will be near the end of my life and I can give them that boost if it turns out they need it.

    But maybe I worry too much.

    • I’m a bit pessimistic when it comes to the 4% rule. It might not work that well in the future. I’m just prioritizing education over leaving a big inheritance for him. Of course, if we have plenty left when we’re 90, then we’d give him or the grandchildren some. I’d probably help pay for the grandkids’ education first, though. Hopefully, he won’t need much help and we can give to charity instead, but we’ll see.

  7. If you access your Roth IRA, you won’t have to pay a penalty or taxes on any withdrawal on any amount upto the amount you personally contributed to use the money for any reason. You will have already paid the taxes on any money contributed to a Roth IRA. Income tax (but not penalty) would apply to any gains taken out of the account prior to age 59.5 if the money is used to pay for higher education.

  8. Saving up for college is a great way to build generational wealth and good will to help the kids so that they, eventually will help you in your older years. That’s the way I see it from a financial perspective. Emotionally it is totally different of course.

    Another thing to keep in mind is, in this day and age, there is an education bubble. I wholeheartedly believe that one day it will come crashing down as people realize that too many people are graduating with a BA in Comparative Histories or other useless majors. You don’t need a college degree to be a car mechanic, many kinds of customer service jobs, electricians or other skilled trades, etc. At most for some, you need vocational school and lots of experience.

    The blunt truth is many people shouldn’t go to college. They don’t have the drive or the IQ or both to succeed in the STEM-dominant future economy which the kid will see.

    So, personally, I would invest more in your own retirement first then the kid’s college education fund plus a “anything goes” fund which will hep him if he does or doesn’t go to college. If he’s going to major in a STEM related discipline, or something that isn’t but you know he will require an advanced degree for and will follow through on (like psychology or a tenured professor in say history), then the college education fund will dent the cost and the “anything goes fund” will be used to blunt it further. Otherwise, if he becomes a professional barista (with the knowledge he will likely become a manager and hope to climb the ladder), then the “anything goes” fund will be a launching pad to get out of the house and get set up, and gradually let him/her control it as they become more fiscally responsible.

  9. Few parents in the United States even consider alternatives to college in the first place. That’s particularly true for this generation. It’s worth noting that college isn’t the right choice for everyone and planning on purchasing a $350K degree (or two of them?) without looking at any other options is downright foolish. It certainly isn’t financially savvy.

    Although my brothers all attended college for at least two years, I was the first person in my family to graduate from a four year university. It’s a highly respected school (read: expensive), but I graduated with only about $15K in student loans which were paid off years ago. The rest was paid by myself from grants, working part-time during the school year, working F/T over the summers and taking two semesters to intern with a large corporation. As an aside, the time spent working was far more valuable than any of the classroom education. Don’t discount the value of working for something vs. being given it freely by someone else.

    Despite that success story, there’s little chance I’ll be sending (or saving) for our two daughters to attend college. There’s many other ways of improving their lives outside of college that my wife and I feel will be *far* more beneficial. It’s not a financial decision – it’s a “we don’t believe in the value proposition of attending four years of college.” Both of us are college educated (and she continued through law school), so it’s hardly a knee-jerk reaction about the ridiculous cost of education nowadays.

    At a minimum, every college bound student should take at least one year off before jumping into another four years of classroom education. They’ve already spent 12 years (on average), so why not spend 1-2 years in the real world and learn something practical instead. It’s the perfect time to take risks, explore and learn with little consequences. No school loans, no mortgage, no children. Very few people every get that opportunity again in life. Regardless of retiring early or not, you’re a different person at age 40/50/60 and it’s never the same as being twenty years old.

    James Altucher has written much on this topic and compiled a wonderful list of alternatives. It’s well worth reading regardless of your current viewpoint. I think it’s available freely (this link from his email list), but also see it on Amazon for a few bucks in hard copy.

    40 Alternatives to College ~ James Altucher

  10. As a Dave Ramsey follower, I would have to say save for retirement first. Although cost of college tuition is rising, I went through and paid for college on my own. My parents barely made ends meet so college savings was not part of their budget. As a result, I applied for scholarships, worked part-time, and got students loans to fund my own college education. Personally, I think it made me appreciate college more and work harder to do well.

  11. I am planning to give a Grant to a (any) university-student-to-be, based on my qualifying criteria. I also plan that the candidate must work to pay 10% of the cost.

    The information from College Board is that a four-year degree tuition costs $8900 per year. Tuition plus room and board costs $18,000 per year.

    Suppose this candidate lives at home and go to local university, I will fund 8900×4=35,600 less 10% =32,040.

    Suppose this student go out of state, I will fund $18,000×4=72,000 less 10% =64,800.

    • That’s great! 10% of the cost is not too bad and most students should be able to do that. Is this going to a local student?

  12. Neither my parents nor my husband’s parents paid a penny towards our college costs. We fortunately were able to get a lot of scholarships, but we still graduated with student loan debt (which we are paying off as quickly as we can.) My parents both retired last year, and I am SO GLAD that they prioritized saving for their retirement. There is no way that we could financially support them by ourselves. We spend $500/month on student loans. There is no way we could support our parents on that, especially not all three sets.

    We are saving for our son’s future, but we want to keep the savings flexible enough that he can do as he pleases- if he prefers to be an electrician like his very successful and happy uncle, or he wants to start a business or go be a rockstar, those are all fine options, too. And we are definitely prioritizing saving for retirement b.c we do not want to force him to take care of us in our old age.

  13. 1) College should be put in prospective. It is typically a requirement for a “good” job and mandatory for graduate schools. With the change in college education (on-line, etc) in a typical job, attaining a college degree is typically the barometer for qualification/promotion in one’s career. Honestly, for the most part, no one cares where you got your degree, be if if you did on-line, community college, 4 yr public, 4 yr private schooling, or did it right out of high school, or did it after school as you worked a full time job. Those that will be “successful” will be those obtaining a degree in the most cost effective means, so that they are not saddled with debt (or significantly detracting from non-wealthy parents retirement funding). Should one pursue graduate training in the most common disciplines (healthcare) one could “argue” the private prestigious universities are also relevant for success. Personally having a doctorate degree and having worked in a few hospitals, no one similarly really cares what school a doctor graduated from, as most programs do a solid job of training providers, and there are many more important factors that make a good provider. Most high paying careers (at least healthcare) require graduate school training. A college degree nowadays in seen as “expected” and does not have the “prestige” of previous generations. And keep in mind, obtaining that graduate degree costs you in time/money and makes it unlikely one can retire by 40. With huge levels of nurse/physician/other provider “burn out” having invested huge sums/time to get that graduate degree can make one feel even more trapped than changing careers for someone only having a bachelor’s degree (such as you walking away from engineering). Sending/having your kid go to certain college as just another part of the “keeping up with the Jones” which is probably part of many cultural expectations (ie. typical Asian cultures). The shame when asked, “where’s you son going to college,” and instead of saying he is at this/that 4 yr program, one has to drop your eyes and say, “he’s going to such/such community college” to get his basic education requirements completed in a more cost effective manner.

    So, sure save for your kids college fund, but keep things in perspective.

    2) Be careful assuming your kid will go to college at all, even if you want/think he should. I know plenty of upper middle class kids that had professional parents who’s kids turned out to be a disappointment when it came to going to college (kids I grew up with/parents who are professional colleagues/friends). I’m sure the 100% the parents thought these kids would follow in their footsteps and go to college to be successful like their parents. You just don’t know.

    3) I always wonder, isn’t it smarter to invest that college fund money in a rental property? If you kid goes to college, then the rent can be used to offset college costs. You can even further offset college costs by having a rental near his school and collecting rent from his roommate(s). You could always sell the property when your kid goes to college if you’ve decided to financially assist. If they don’t go to college, then, if necessary, you can help them get ahead in life by getting started on the housing aspect of their adult lives.

    4) Also be careful assuming your son will follow suit culturally and be willing to/able to assist you in retirement. You can assume your son will follow suit in supporting his elders, but that’s an assumption and the trend of immigrant/cultures is to be LESS likely to stay with past traditional thoughts. You see that all the time. What if you kid doesn’t marry an another Asian? Or one who doesn’t hold to the old traditions? Or what if she’s got her parents retirement expenses as a burden also? Or what if other health/personal reasons makes it hard for him to help? Nice to have that ongoing guilt, “I sacrificed my retirement to put you through that private school . . . ” What about his kids? They could easily resent dad financially not being able to help them because he’s got to support gmom/gdad. With all due respect, maybe you should go back to that job you detest so much so that you parents can have more disposable income (you’d do anything to help right?). Can’t happen to you right? My hope is the same as you, that my child will be there for his parents.

    5) In not a financial or math person, but I always wonder, instead of college and especially graduate schools (where I see current graduate students having $250,000 graduate school debt having lots of stress even finding a job) what if that otherwise lump sum of money was put in a “retirement” fund for them vs. college. How much would that provide them in 40 more years? Would this let them truly retire by 40? Wouldn’t that make a parent happier, knowing you gave them freedom to not worry about funding a retirement to great extents, find a job/career that they truly enjoy so that someday, they can choose to also retire early?
    Enjoy your blog, NO disrespect meant on any comments!

  14. These are two things that many parents worry about. You want to be able to send your child to college to receive the education they need to be successful in our society, while saving for retirement is essential to be prepared for life after your career. Both are important but which should take precedence over the other? Kids do have more options for higher education through loans and scholarships but it is always good to be prepared. You need to take care of your future as well. This is a tough question.

  15. I don’t have kids yet, but when we do have them I know I want to be able to help them out with tuition. I don’t mean pay for the entire amount, but at least a large portion. My parents didn’t pay for mine at all and it was a huge struggle.

    I think I will prioritize retirement savings if I have to do one or the other; kids can go to school without college savings from their parents but parents can’t retire without savings.

  16. I do see college costs becoming more manageable in some way, shape or form over the next 20 years.

    I think I saw a statistic out there that 40% of those with bachelors are working in jobs that do NOT require a degree? I’m sure part of it is a function of the economy, but for the others I doubt they will support their kids going to school for degrees that don’t help them.

    I tend to believe things swing like a pendulum just like housing prices did. They went sky high, then blew up, and have been recovering for a while. Right now, education is high and getting higher. I for one, hope they go sky high so that a reversion to reasonable levels can take place– it will probably include some structural changes in how education is offered, but also to include some selection bias so people stop borrowing $50K+ for a degree in art history (nothing against art history, but taking on student loans is a financial decision as much as a dream).

  17. I wonder if college costs will go down if online teaching becomes more popular? The colleges will not need large class rooms and their real estate requirements could become smaller. I wonder how realistic that expectation is?

    • If they can get massive online teaching going, then I’m sure the cost will come down. Imagine thousands of students taking an online course. You can hire TAs to help answer questions. It should be much more affordable then.

  18. This may sound very selfish and my thoughts may change once I have kids, but I am of the opinion that you should save for yourself first. More often than not, your child will be eligible for SOME form of financial aid and as you stated, you can always help with paying off their student loans or even get a PLUS loan (which you can apply the interest for tax savings). My parents helped me when they could, but by the time I was done with 4 years in undergrad and a 1 year masters program, I still ended up $128k in the hole. This debt may seem huge to some, but it forced me to pick a career path that would help pay down that debt.

    While a more manageable debt level would have been nice and it set me back a few years saving for financial independence, my student loans aren’t a death sentence. One thing that I would certainly do differently for my child is get them to really think about the cost. I went to 2 private schools and am obviously paying through the nose. Part of that was because I made these decisions so early in life and neither of my parents when to college, so they just thought the amount of debt doesn’t matter, just get the education. I’d rather equip my kids with the tools to make the right decisions and borrow responsibly. How does the saying go, give a man a fish…

    • Jeez, that’s a huge saddle. It’s good that you have a positive attitude, though. WE’ll definitely factor the cost into the equation when the time comes. A good private college would be nice, but only if it will pay off. Perhaps if our kid can get a scholarship.

  19. I wrote on this a few months back and still come back to that it’s a very personal decision. Generally speaking, you need to do what you believe in and I say if you can do both then great. I personally would err on the putting aside for retirement first then college, but actively try and do both. We’re doing both now, though our main focus is retirement. As has sort of been touched on already by others, as I would look for ways to not spend like crazy in retirement I’d also look for alternatives for the college situation to mitigate those costs. God only knows what tuition is going to look like 15 years from now and but the list of alternatives provided is a great start at mitigating some of those costs.

  20. Yeah, when I have kids, my retirement comes first. In turn, I won’t have to ask them for help in retirement. I prefer the take-care-of-yourself method of doing things, but I know other cultures and families do things differently.

  21. I totally empathize with the tradition of putting your kids through school (at least undergrad). It really does open doors and allow them to try new opportunities for the rest of their lives. Big student loan balances are very constricting.

    On the other hand, I think you need to make sure you don’t go overboard contributing to 529 plans or saving for your kid’s college if your retirement savings is not fully funded. If you end up having extra savings when your kid turns 25 and realize you can spare $10K+, then you can easily pay off a big chuck of their debt for them. On the other hand, if you fund your kid’s full education and then realize you are falling short of your retirement savings needs, what can you really do?

    I hope with all this hard work and diligent saving/investing you don’t have to end up living in your kid’s basement when you retire (unless of course you want to), but at least not be forced to do so.

    I plan to do similar to what I stated for the remaining years. I’m 25 now, single with no kids. I do have around $6K in a 529 plan with Vanguard and contribute $50/mo just to keep it going. I’ll change the beneficiary once I have my first child and probably split the account for each additional child. Compounding is on my side so I’d rather invest more now and then stop later than the other way around. I hope to at least have 2 years of tuition saved per child (the rest I’ll fund from taxable savings/investments), since having extra money in a 529 will be sort of a waste or I’ll have to give it to someone else. My sister is a doctor though so I don’t foresee her kids needing my help (mine may need her’s :] ).

    I would help out as much as you can, but your primary focus should be retirement savings in my opinion. Like I said, if you don’t have enough saved he can always take out loans throughout school and if you find yourself with some money to spare, you can make a one time payment and cut the balance down for him.

    • It’s great that you started even before having a kid. Not many people do that. I intend to fully fund our retirement account first for tax reason. We can pull money out of the retirement account to pay for the education as needed.

  22. If I had to choose between one or the other I would choose retirement. I went to college with scholarship and my kid will have French citizenship, meaning he/she can go to college for less than $2,000 a year.
    Even if it were expensive, I would still have them work part time, apply for every scholarship under the sun and as a last resort co sign their student loan if they are doing really well in a degree that is worth the cost, not spending 8 years on a “find myself” degree.

    • Nice. That’s a great system. Yeah, I probably won’t fund an undecided program. Go take a year off and figure out what you want to do. 🙂

  23. I agree with you Joe. My in-laws are Korean, and the amount they sacrificed for their children is amazing. They worked long hours at the laundromat from 5am-11pm 7 days a week. They had enough to fund college tuition for 4 kids, and helped anytime someone needed a down payment for a house or a car with an interest free loan or just gave the money. My mother-in-law provided free childcare for all the grandkids whenever she was needed. All 4 children are successful on wall street or are MDs. No matter how much you have for retirement, if your kids are not launched into life appropriately (financially & educationally) – how worthless would all that retirement money be? For my in-laws retirement all the kids chip in now and my husband and I provide for them as well. We are lucky that we are able to save both for retirement and for our 2 kids college fund. We plan to fully fund 4 years private college and graduate school tuition (but not living expenses). We have purchased 2 rental properties and each child will be given one when they are in their 30s, in hopes that it will help them with a down payment later on for their own families. We live very frugally for our income, because we realize money is safety net for later on. Kids before retirement, but hopefully both.

    • Wow, that’s great. Thanks for sharing. We also want to get our kid started out on the right foot. Seeing our kid do well would be much more satisfying than have more money in retirement. You’re doing really well. Good plan with the rentals.

  24. I hope you don’t take this as overly critical, because as you said you are funding both your retirement and your kid’s college fund so my comments don’t apply to your present-day actions but rather your scenario of funding education over retirement. I noticed that you said that your grandparents put 9 kids through college and your parents put 3 kids through and you only have your son’s education to fund. There is a HUGE difference between 9 children (or 3) supporting their parents in retirement and 1 child supporting his. Of course, your grandparents probably had to expend a lot more capital than you will have to on the educations. My point is that the family tradition that was feasible with multiple offspring has to transition to funding both your retirement and your kid’s education in your generation. Deciding to fund your single child’s education and then planning on him supporting you in retirement sounds to me like a recipe for disaster – and thankfully that is not what you’re doing!

    • You’re right about that. The college education cost was lower in the old days. The access was the big problem for most people. If we have 3 kids, then we probably would expect more help in our retirement. With 1 kid, I don’t think we can expect that much. That’s life in the first world country.

  25. Have you considered what happened if/when RB40 Jr. gets married? Have you considered the stress of him trying to support you will put on his marriage? I ask because due to personal experience. My wife graduated with a PhD, completely debt free, because her parents funded her education. We both work and make a very good living. It however bothers me how her parents swiftly “retired” when she got her first job. We now pay their mortgage, various bills, buy weekly groceries, etc. My wife feels obligated to take care of her parents. I however resent the thousands of dollars that we spend monthly. I’d feel better if we were using it to payoff students loans. I see my in-laws as a big burden on us. Don’t do the same to your children.

    • No, I haven’t thought of that. Hopefully, he won’t have to support us much. Maybe just help out a little. Is there more to the story? I would be resentful too in your situation. Why did they retire? I wouldn’t suddenly stop working and ask my kid to pay for our mortgage when he gets a job. That’s messed up.

      • No, there isn’t much more to the story. My father-in-law had a physically demanding job. He initially worked hard to provide for his family. My wife attended private schools growing up, not cheap at all. Anyway, my FIL was fed up with his job and quit. I have tried many times to convince him to go back to work. He can find something less tasking on his body. His entire income can be invested in a Roth IRA and other options. My wife has spoken to him too but he is content, retired. Very little saved, no retirement savings. He says, without shame, that his daughter is his retirement account.

        We can afford to take care of my in-laws. I still detest doing so. I would not feel this way if we were paying off student loans. I guess our situation is the other extreme

        • That would be pretty tough to deal with. My dad can’t stop working. He is too restless. Everyone is different. I’d be disgruntle in your position too especially since he could still work.

  26. Joe, your specific family background is so interesting, and I can definitely see the benefits of that approach. First, that’s awesome that your maternal grandparents funded the educations of all their children. It’s advantageous for the family members with income (parents) to fund the educations/future incomes of the children, and for the children to then contribute to the retirements/future income of the parents. That’s arguably a much more efficient approach than what is typical: student with no income taking out loans, while parents with spending problems underfund retirement.

    I think your family’s approach might be a cool behavioral economics trick for the typical American household, along the lines of how a mortgage can be a forced savings plan. Americans suck at saving for retirement; might they do better funding their children’s education, with the tacit agreement that the children will help fund their parents’ retirement?

    • That would be an interesting paper to read. Americans just have a huge spending problem. It’s like a personal social security program. The children don’t have to fund everything. They just need to help out as needed. Thanks for the idea.

  27. I’m in my 30’s and have 4 kids all under the age of 5
    After maximizing our Roth and tax deferred accounts every year, I think it makes sense to front load the 529 for a minimum of 5-8 years prior to saving for retirement in taxable accounts-other than $20-30K for emergencies- (Our goal is to have $50-80K per child in it when we stop) that way we will have 8 years to grow and have a pool of income for the kids to draw on for education. Once we have a good base set up then I will look at aggressively saving in taxable accounts to have a pool of income to draw on before the 55yr withdrawal limit on 401K.
    The drawback to the 529s are the high fees most have- small pool of investments to choose from and 1/year rebalancing limit-even the best plans have fees ranging from (0.5% -1%)

    I am currently looking into the Coverdell to improve our flexibility.
    Does anyone know if the Coverdell Educational Account limit is $2,000/child or $2,000/yr total?

    • Front loading the 529 is the way to go if you can afford it. I’ll look into Coverdell too. I didn’t know much about this until now. Thanks.

  28. I was thankful to receive lots of scholarships for college. My parents helped me pay for living expenses by giving me a stipend. I always managed my money and never asked for more. Well, take that back. I did ask my stipend to be raised from $300 to $400 per month, sophomore and junior year. They worked hard to support me. I would help my kids, but I would also expect them to try their hardest and get scholarships. It’s to their benefit. But I don’t have kids…so what am I saying.

  29. I think if your family tradition / culture is for the kids to support the parents in their retirement then it can make sense to fund college first. If everyone is happy with that system then thats fine. For most people however theres no expectation for kids to support their parents in retirement so it makes more sense to save for retirement before college.

    I’d also think about how your savings can impact potential financial aid. A large pile of money in a 529 will actually undercut your financial aid liability.

    • Hopefully, he won’t have to support us in our retirement. The last time I looked into financial aid, I think it’s better to have money in 529 than a taxable brokerage account. That’s where it would be if we don’t put it in the 529. I’ll double check.

  30. Your children can always work and borrow money to fund their education (as I did) but you will not be able to borrow money to fund your retirement.

  31. Great points you bring up here. Similar to you I was extremely fortunate to have my parents pay for all of my undergrad and most of my graduate tuition (I took care of my own housing, food, incidentals, and took out low interest government loans) therefore I didn’t have the burden of a lot of high interest debt when I graduated ($0 post college, about $30k post graduate school, but in low interest loans).

    Not being weighed down by debt has been a HUGE weight off of my shoulders and has allowed me to invest early and often. I think this was one of the greatest gifts my parents gave me and something that I want to do for my daughter as well.

    And because they’ve helped me so much, I wouldn’t bat an eye about helping them during retirement if they needed it – whether monetary, in the form of time, etc.

    What kind of a 529 do have set up for your son? (e.g. what state plan and in what kind of a fund). I have one opened up in CA and invested in a Vanguard S&P fund.

  32. I think the estimated figures for a college education are dramatically overestimated. The state university closest to us is also the cheapest in the state at about $5200 in tuition per year. Including books, housing, fees, etc even if that rises 100% or 200% by the time our daughter is in college, it’s still nowhere near the estimated figure. We are saving in a 529, and we “hired” our daughter, so she has a roth, but we are putting more in retirement. I don’t want her to be forced to take care of us because we have no money.

    • I think the large part of the cost come from living near the college. If the kid can live at home, then it’s a huge saving. I’ll see if I can hire our kid when he can contribute. Thanks for commenting.

  33. No way in hades will I let my child or myself pay $355k for college. That is borderline insane. We will evaluate this over the next 8 years when my daughter is 18. We’ve already had discussions on plenty of other avenues other than giving away that much money for a piece of paper. I left college early to take a tech job and never looked back.

  34. Save for both! I think if you are planning ahead, you can tell RB40 JR. that you are willing to pay for the first two years of college, then he’s on his own. I think that might be a good solution if you want to still fund retirement and not pay for all the costs of education. As much as I detest my student loans, I’ve become SUCH a hard worker and a hustler because of it. I know I wouldn’t be this way if I was debt free, so there is a lesson here. If you can help out a bit, without sacrificing your savings goal, while giving him the motivation to want to be financially independent, it might work out best for everyone. Just my opinion. Also, thanks for the link love 🙂 I wondered why my traffic had a boost, lol.

    • Wow, such a positive attitude. That’s why you’re making such good progress. Great job hustling. It just sounds so tiring.

  35. Overall I appreciate this post and think it is very accurate. However, I take online classes and have noticed they are actually more expensive than on campus classes, and the fees are the same regardless. For instance, when I convert to a fully online student, I will still have to pay the transportation bus pass fee of $77. Fortunately for me, due to my great-grandfather, I don’t have to worry about paying for college. It helps immensely and I can really focus on my studies rather than worry about how to afford next semester. It also helps to take summer classes as it gets you out of school quicker.

    • Thank you for your input. I thought the online courses would be more affordable. Why are they as expensive as the campus classes? I guess it’s not on a massive scale yet.

      • When I first looked at graduate school options, I checked out the difference between online and “live” classes. The online classes are more expensive because it takes a lot more effort to set them up on the front end so the student receives the same (or similar) quality as a live class. And having set up online training before for work, I can attest to the effort and follow-up it takes versus giving a live presentation.

  36. We did both. We contributed the maximum to get the $5000 state tax deduction, and that amounts to about 2 years tuition for each kid (so far). Now that we are retired, and our state tax deduction for 529 contributions went away, the balance will be paid from our investment portfolio and the other methods you mentioned (kids stay at home during college, inexpensive reasonable schools, community college for 2 years, etc).

    • You did a great job so far. That’s half way already and you have 3 kids. That’s tough. I like staying at home during college. It saves money and doesn’t take away anything. Except maybe too many drunken parties…

  37. We’re following the advice of a friend: as the cost of daycare goes down, put the difference into a 529. Here in Massachusetts our daughter started in the infant room of a large center at $1300/month. She’s down to $1115, so we have $185/month going into the 529. That’s not much per year now, but it will go up quite a bit when she starts Kindergarten, and if we could swing nearly $16K each year when she was an infant we should be able to do the same if not more when she’s a college freshman.

  38. I agree with you Joe about the importance of saving funds for both college and retirement.
    Unfortunately, it is rare that our kids will help us out in retirement primarily because they are struggling with their own financial challenges of home, work, and children. And, the American culture is lukewarm about supporting older parents, as compared to Asia or the Middle East.

    We paid for our children’s colleges but drew the line for graduate school. One of our children went on to medical school and she wanted us to pay for that. No way, Jose. She did end up with $140,000 student debt, but she makes a great salary and could have paid it off in a few years (at three percent interest.)

    I am a great fan of community college having taught there for 16 years. In comparison with a four year college, teachers focus on teaching at the two year college level. Most are excellent. In the four year school, it’s a crap shoot. Lots of pressure on publish or perish and TA’s (teacher assistants) are all too common. In addition, in attending a name college for undergraduate, I had famous professors (on the publishing side) who were full of themselves and could care less about their students.

    In Oregon it’s going to cost about $100,000 for four years at a public university (minimum) like UO or OSU or PSU at the present time. In a private college like Stanford or Harvard or Duke, that sum is more like $250,000. Lots of ways to do the educational route theses days. I’d suggest: two years community college, two years at state university, and then two years for grad school. With the right major, that should provide a good entrance into the work world.

    For comparion purposes in my day (1960): private college was $2000 a year ($8000 for four years), and $3000 a year for grad school ($6000). Total investment of $14,000 then as compared to $150,000 to $300,000 today.

    • Thank you for your wisdom. I think community college is a great way to start out as well. It’s just that when the student is built up as high achiever, they want to go to a 4 year college.
      I don’t think we’ll save up for a graduate degree either. There are even more options when you get to that level. You can be a TA and get tuition assistance.

  39. I was fortunate to get a good head start on the retirement accounts before we had our 3 yo, but now college is definitely an equal priority, if not greater. Unfortunately the last 20+ years college expenses have been increasing much more than the inflation rate, making it important to get an early start on saving. You don’t have quite the long-term period to let your investments compound as with retirement, and at the recent rates of college inflation the growth of your investments won’t as much outpace the expense you’re trying to save for. Hence, for me I’m trying to put aside a few big chunks the first few years of her life to start growing stat.

    And remember, I believe you can tap your Roth IRA for education expenses w/o penalty, so the two aren’t mutually exclusive.

    • I forgot about the Roth IRA. I’ll add it to the main article now. We are trying to front load the 529 as much as we can as well. It’s tough to save a lot, though.

      • A tax favored Coverdell Educational Account acts similarly to a Roth IRA and allows you to do active investing in that account. It is set up on behalf of the student in order to pay for educational expenses only. I found out about this kind of late as you can only put up to $2000/year until the child turns 18 and then no more funding. In order to build the account I actively do Covered Calls (stock purchase plus sell a one month option). I also do this strategy in our two Roth IRA’s (wife and mine). Any gains in the account are tax free. Just another option especially if you like to actively invest.

  40. Our goal is to pay for 4 years of in-state tuition, but we are prioritizing our retirement over paying for college. We’re only expecting to save about 120k and make up the rest from “current” funds at the time. And anything we can’t make up, she’s going to have to come up with.

    • Putting 3 kids though college is difficult. I don’t know how any regular family can do it. Hopefully, they’ll get some scholarship or financial assistance to help out.

  41. I opened a 529 plan before my son was even born…and I do make contributions to it monthly…but it’s not a lot. I still think retirement comes first…there will always be student loans for college, but no retirement loan for you.

  42. I’ve got about $170 in a 529 for my 18 month old. I don’t have any plans to contribute much until our mortgage is paid off at which point we will be 100% debt free. Of course, any cash gifts we might receive will go straight to 529. So we will probably start adding significant contributions in about 2 years from now but only after maxing out any pre-tax retirement options available to us. By the time junior goes to college we should already be FI for several years with zero debt. If there is not enough in the 529 plan we should be able to easily handle it. Besides, I paid for my own undergrad and grad degrees (part-time work, scholarships, working as grad assistant etc) and everything turned out fine. Junior will already have it much easier than me and I DO want him to contribute something so that he understands the value of money early.

    • I agree with that last part. Since my spouse and I are both very frugal (and were also brought up that way), I would like to actively involve our (future) kids in the savings process as well. After some initial contributions, maybe come up with some sort of matching system where for every dollar they earn, you’d match it.

    • Thanks for your comment. That sounds like a good plan too. Everyone has their own plan. Having the kid work is a good idea. We’re planning the same. I didn’t make much money at all when I was an undergrad, though.

  43. A friend’s mom worked in college library & her children were able to attend tuition free for 2 years. The mom also attended classes & achieved 2 masters, (each degree included a pay raise). Said friend then worked for a Co that would reimburse per grade ex; A =95%, B=80%, C=65%.
    Definitely my Biggest regret is not having set aside tuition money. Any amount of money would have helped. Hindsight is 20/20 & looking back we could have easily scaled back on expenditures. We should have had automatic direct deposit for some amount.
    Spouse & I both paid our way through using credit cards & paying them back religiously each month. We really would have benefited if we had credit cards offering points/cash back. We also lived home until we had degrees. Spouse has Master.

    • Oh wow, that’s a great idea. I’ll put that in the main article.
      Great job getting your degrees. The credit card seems like a hard way to pay for it, though.

  44. Great site. I just discovered it a few days ago. I am already past the target of 40 (I’m 42). We have a 3 year old I want to sent to college someday but we are focusing on our retirement first. I make 25,000 a year and still have 38,000 in student loans. The way things are progressing, my loan will be paid off when our son starts college. I’m a late starter to saving. It wasn’t until 3 years ago that I could even put money aside for a 401k; I needed every penny. There is a lot to be said about feeling guilty for not being able to save for a college fund but maybe in a few years we can set something aside. For not our top priority is making sure we have enough when we retire. I for one don’t want to work past 65.

    • Ouch, that’s tough. Check out Melanie’s blog. She is in similar position. Just keep at it until you get rid of the student loans. Good luck!

  45. I do appreciate your articles and honesty on your life–the good and the bad. I do wonder sometimes if you really read what you write. The most recent example of funding retirement or college first (obviously they don’t have to be mutually exclusive). You say funding retirement is smart and probably the best way to go and then you say but, you believe in the other way around because that’s what your family has done. If you had examples of where this worked out well you might have a case there but in the examples you site, there was no lasting retirement (if at all) for the elderly and were forced to accept money from the kids. This is not retiring with dignity and I bet you there’s lots of resentment of the young towards the old and perhaps visa versa. Don’t get me wrong, we younger ones have certain God given responsibilities to the older generation but the Bible also talks about leaving an inheritance to the younger. True, an inheritance is not just money, but also a spiritual inheritance and a life legacy that the younger generation can be proud of.

    There is also a whole argument of how we (today) coddle the current generation and provide way too much for them and they lose out on learning to fend for themselves (lots of good life lessons there) and to learn to appreciate the good things of life (by working for it). Our college plan has always been that we will provide up to 3/4ths of college (state public university) money and they will have to come up with the rest. The rest can be through working, scholarships, student loans, etc. but this way they have skin in the game. It has worked out well so far. Our 5th and last will be finishing college in a couple of years. They do have the choice of attending a private and/or more expensive college but our part of the funding remains the same.

    I pray for wisdom for you and your wife.

    • Thanks for your opinion. Everyone has to decide what’s best for their family. None of my family resent funding the older generation’s retirement. It’s part of the package in this family. I like your 3/4 plan. It’s a good idea. Maybe I’ll adopt that and save the 1/4 to get them started in life.

  46. I know being a commuter student and residing with your parents saves a ton. And if your child is undecided, community college for 2 yrs works great too – its not reflected on the final 4 yr diploma. Right after the undergraduate degree, I’d skip the graduate degree and work towards certification to get a license as electrician, plumber, HVAC tech, or similar trade. This combination is more appropriate for the frugal, short career, landlord, FI types. It allows for a diverse set of real life skills.

    • That’s good advice. We’ll keep that option open. If our kid is the entrepreneurial type, we might give him seed money to start a business instead too. He can skip college if he choose. I hope not, though.

  47. Definitely DEFINITELY investing for retirement first…..if we could only do one. I’m a cash flow investor so I hope to do both, but there are a lot more options for students than there are for poor retirees

    • I wonder if that’s really true. Poor retirees can get assistance from many sources. It’s better to be self sufficient of course, but poor retirees seem to do okay too.

      • I live in the Netherlands, which is generally a country considered to have good social security. However, my neighbors did not save up a penny for retirement and they now suffer because of it. Their house (attached to ours, unfortunately) is slowly caving in, and we have paid for two repairs of their roof so that it wouldn’t leak into our house. They are 83 and 85 and every few months new debt collectors ring their bell (and we get to witness that). They get social security which keeps them alive, but their life does not look like it’s any fun.

      • The will both have a degree. My older one will finish in April and he already has a great job that pays more than mine with benefits and a pension plan.

        The younger will graduate in a year and he is hunting for a summer job. If he is underemployed this summer then he will have to take on a lot more debt and I will feel pressure to help him. He will not ask for help but I will feel it anyways.


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