Why Retirement Savings Should Trump College Savings

Sept. 22, 2009 — -- Parents, please repeat after me: Retirement comes first, college ranks second. Again: Retirement comes first, college ranks second.

What I mean is when it comes to deciding where to focus your savings efforts, it's usually best to make retirement a priority over accumulating tuition dollars.

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I say this assuming most readers are like me and must set financial priorities. Their incomes allow them to put aside only a certain number of dollars each week or each month.

If you find yourself in this category, then put more dollars in the 401(k) and less in the college savings fund. By no means am I saying you should save nothing for college. It's more a matter of emphasis.

The basic reason I say retirement deserves greater emphasis is that your sons and daughters have more options when it comes to financing higher education than you do when it comes to covering living expenses in your old age.

For 18-year-olds, there are scholarships, grants, loans, public universities, community colleges and more than 45 years of income-earning potential. For retirees with no savings, there's Social Security, Medicare and little time to make up for past mistakes.

Liane Warcup, a financial planner in Geneva, Ill., tells her clients with young children to make sure their retirement savings are on target before they think about saving for college.

"Many of these only have 15 to 20 years left to save for retirement, and they need every extra dollar to help strengthen their retirement plan," Warcup says. "In contrast, their children have a much longer time horizon to handle college expenses."