Father helping daughter with homework at kitchen table

Should I Save for Retirement or College?

by Lorraine K. Zenge, Private Wealth Consultant, COUNTRY Trust Bank

Paying for a child’s college education is a goal for many parents, along with other financial goals like saving for retirement and buying a home. When there are so many priorities, it’s hard to know what to tackle first. Here are some things to consider as you make that decision. 

Time is the key

 Saving for retirement is a critical priority for most, and one that some put on the backburner, thinking they can start saving later after they’ve taken care of other financial commitments. But when you start saving for retirement is vital because of the magic of compound interest. Let’s review this example of Joe vs Katy:   

Katy made saving for retirement a priority. She contributed $4,000 annually to a tax-deferred account earning 8 percent, from age 25-35.  She made no additional contributions, and by age 65, had accumulated over $680,000.  

Joe began saving later.  He contributed the same $4,000 annually to a tax-deferred account earning 8% but contributed from age 35 all the way to age 65.  At that point, he had accumulated just over $532,000.   

The difference is time.  Katy had the benefit of more years of compound interest. 

Saving for college can be more challenging than retirement because there is less time to save.  Most people have 40+ working years to save for retirement, and through disciplined, consistent saving, a nice nest egg can be accumulated.

For college, though, it’s a different story. Parents usually have approximately 18 years to save, and if you’re like most parents, you’re hoping your kids graduate in four years. This means, should your children choose to go to college, there’s limited time to save and a very short time to distribute the funds, making investing and distributing your savings more challenging. 

How to reduce college costs

There are many ways to cut college costs such as:

  • Considering lower-cost schools 
  • Applying for scholarships and grants 
  • Utilizing a community college for the first two years
  • Attending a school close to home and commuting 
  • Military service  

It’s also important to have an honest conversation with your student about your budget and their expected financial contribution. Finally, there are a variety of college savings options that offer their own unique benefits; some also offer the option to save for things other than college. 

At the very worst case, there are loans available to assist with financing.  However, there are no retirement loans.  Having your own retirement savings in order before allocating funds for college is a way you can “put on your oxygen mask first,” so to speak.  

Can I save for retirement AND college? Can you have a solid retirement and a college education for a child?  The answer is yes.  It just takes planning and making choices. 

It may require additional savings, trimming expenses, working longer, or a hybrid-retirement where part-time employment is part of the solution.  As with most of life’s important goals, it’s about time, setting priorities, and balancing a multitude of choices.   

Get the guidance you need from a financial advisor  

People who reach their financial goals rarely do it alone. A COUNTRY Trust Bank Financial Advisor can help put together a plan for improving your financial wellness and balancing your future goals. Learn more about our planning services and contact a representative today. 


Updated 5-10-23

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COUNTRY Financial® is a family of affiliated companies (collectively, COUNTRY) located in Bloomington, IL. Learn more about who we are.

COUNTRY Financial® and our representatives cannot give tax or legal advice.  Any information we provide reflects our understanding of current tax laws. Tax laws are subject to change and reinterpretation.  We recommend you consult legal and tax counsel of your choice before making any decisions regarding your personal planning needs. 

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