Why You Should Be Saving For Retirement Now

I was so frustrated to read in the 2022 Retirement Confidence Survey conducted by the Employee Benefit Research Institute that more than 4 in 10 parents who are working say they are reducing what they are saving for retirement because they are also saving for a child’s college education.

I have to tell you, that is a retirement planning failure in my book.

There is no circumstance where it is smart, or even okay, to put college costs ahead of retirement. To do that is to fail your kids. Yes, you read that right. I am telling you that when you shortchange your retirement savings, you are setting up your kid for plenty of stress down the line. That teen of yours today will one day be the 30-something/40-something/50-something adult raising their own family. The last thing you want to do is be in a precarious financial state that at best makes them worry, and at worst requires them to help support an older you.

I know you have no intention that would ever happen. But I am telling you that can indeed be how things play out if you don’t make retirement saving your biggest priority.

• You won’t make up for lost time.

I know you’re thinking you will refocus on retirement savings once the kids are in college. But that’s a dangerous assumption. Are you sure you will still be working in the same high-paying job that will make it possible to turbo charge your retirement savings? The reality is that many people are laid off from career jobs in their 50s. Just something to consider.

• Working longer is not guaranteed.

Please don’t assume you will continue at a high-powered career job well into your late 60s (or beyond). That’s just not how it works out for most people. Illness, a layoff, burnout, or needing to step up and care for a loved one can all get in the way.

What is more likely is that you will step away from the big career job and downshift to a part-time or less demanding job. That’s fantastic! But a part-time job will likely not provide you with the income to add to your retirement savings.

• You can’t make up for lost compounding.

Every dollar you don’t save in your 30s, 40s and 50s is a dollar that can’t compound. A $10,000 investment made at age 45 will be worth around $32,000 at age 65, assuming a 6% annualized return. Invest the same $10,000 at age 55 and it will be worth less than $18,000.

• There are no loans for retirement.

I need you to seriously think about this. If you land at retirement without the money saved up to support the life you want (and deserve) what will you do? Don’t walk away from that question. You must stand tall right now, for the sake of your well-being and for your kids’ well-being, and answer the question.

Without the money you need your adult kids may need to step in and help. They will do that without question, out of love. But you and I both know it will be a burden you don’t ever want to impose.

I hope that helps you see why you must prioritize retirement saving over college savings. That’s not failing your kid. That’s protecting (future) them!

Here’s what you owe your kids right now: an honest, clear conversation about paying for college. Once a child is a teen, you should lay out what will and won’t be affordable. Then you band together as a family and start researching schools where your kid will be such a catch that the financial aid package will be robust.

If anyone does borrow for college, it should only be the student. And borrowing should be limited to federal loans. The limits on undergraduate federal loans make it likely that someone who graduates should be able to pay off the loan within 10 years, which is a good goal.

That said, please do not force a child to attend college. The worst outcome is to be unmotivated and leave school without a degree but with the debt. And don’t overlook that there are plenty of great careers that require a two-year associate’s degree, which can be obtained through a budget-friendly community college.