As a parent, you probably want to do everything you can to support your children and give them a solid start in life. Unfortunately, this can occasionally result in choices that would harm your own retirement security.
There are a few crucial factors that you need to take into account before deciding to put an older child’s financial needs ahead of your own future.
LONDON – FEBRUARY 27: An elderly man handles in his pension book at the post office February 27, 2003 in London. Although employees’ contributions to pensions have risen by about 25 percent, he UK faces a pension crisis as employers have justified higher investment costs against contributing to pensions. Trade unions have become very concerned following the closures of many plans that would have guaranteed a fixed income upon retirement. (Photo by Graeme Robertson/Getty Images)
Parents Should Prioritize Retirement vs. Children’s College Tuition
While parents would receive Social Security benefits in their later years, Motley Fool said these only replace around 40 percent of their preretirement income.
Another Motley Fool report added that the average benefit of $1,657 in 2022 would provide just $19,884 in total for the year, which is just above the federal poverty threshold and far from adequate for the majority of people to live on.
Meanwhile, a new NerdWallet report obtained by WILX showed that 20 percent of parents with children under 18 have not begun saving for their children’s college education.
With that, Family Wealth Strategies financial expert Aaron Ulrich said in a Yahoo! Finance report that parents should prioritize their own needs, including their retirement.
After retirement, he recommended parents to refrain from taking out loans to pay for urgent needs since such debt may undermine their long-term retirement plans.
Ulrich asserted that, in the long term, parents who prioritize retirement savings over child tuition are doing better.
What Parents Should Do
Even though they may feel an emotional need to do so, parents cannot and should not forsake retirement resources in order to support their adult children.
For parents who are unable to pay for their children’s college expenses without taking on debt or jeopardizing their retirement, Cecilia Clark from NerdWallet offered a number of solutions.
Take them to community colleges: Students may enroll in community colleges there for a lot less money and then transfer those credits to a four-year university.
Fill out a FASA application: Apply for a FASA application to explore what financial help could be available for your child. The Free Application for Student Aid (FASA) is accessible annually on October 1.
Clark said in the same WILX report that the children eventually has the choice of grants, scholarships, and, if necessary, loans. She added that parents don’t have such alternatives to pay for their benefits.
“You don’t have those options to fund your retirement. You don’t have those options to make sure that you stay financially healthy now.”
She suggested that you set retirement as a top priority before determining how much you can properly save aside for your child’s education.
