Consider This Before Delaying Retirement for Your Kids’ College

With college enrollment just around the corner, many parents are wondering how they will shoulder not just the financial burden of tuition, but also provide housing, transportation, social activities, and other living expenses for their not-quite-grown children.

According to a recent Bankrate survey, roughly half of all parents say they’re putting their retirement at savings risk to help their children handle college costs. But more and more experts caution parents to think long and hard before making that choice. Here’s what you need to know and why.

Your retirement needs should come first. Conventional wisdom tells us we can’t help anyone unless we first help ourselves—that’s why, on a plane, we should put on our own oxygen mask before helping others. The same is absolutely true for your retirement savings plan. If you’re taking on additional debt or delaying retirement plan contributions to help your grown children make ends meet, the long-term impact will be harmful if not disastrous for mom and dad. Remember, time is on their side, not yours.

To illustrate: A $30,000 lump sum given to your child to help cover the cost of college amounts to a $59,000 loss had you instead invested that same $30,000 in your 401(k) to grow at a rate of 7% over 10 years.

Your kids can borrow for college, but you can’t borrow for retirement. Taking out student loans may not be what you envisioned for your child, but they exist for a reason. Having some “skin in the game” is a valuable incentive for a student to get the most out of their college education. On the flipside, as parents are transitioning into retirement, it’s not prudent or practical to take out loans to fund their living needs when they are no longer earning a paycheck.

Your help may not actually be helping. “Tough love,” “hard knocks,” “life lessons.” No matter how you say it, there is a lot of truth in the notion that our children need to experience the real world—the good and the bad—for themselves in order to flourish in adulthood. As you may remember from your own college days, nothing says “it’s time to grow up” quite like that first outrageous utility bill or unexpected medical expense.

The bottom line: It’s understandable to want the best for your kids. And if you’re one of many parents who simply isn’t ready to cut your child off cold turkey, know that there are ways to tackle this problem. As you begin to explore the costs of funding a college education, talk to your Bartlett advisor. They can help you plot a financial course for this phase of life that won’t set you back permanently for the next one.