Planning for your kids college fund while also planning for your retirement at the same time can seem like a daunting challenge. However, there are ways that you can accomplish both tasks at the same time. It all depends on when you think you will need the funds to pay for both events.
Here are a few tactics for approaching this important financial intersection:
Tactic #1- 401k Plan
Your 401k plan is the most common way to plan for your retirement. However, you can also use this account to help pay for your child’s college fund. This is because you can put the money away tax-free until you withdraw it.
Another good reason to use this account is that it accrues compounding interest until you retire. Your employer will even match some of your contributions. These are all ways that you can grow your money when you are thinking toward the future.
Tactic #2- 529 Plan
A 529 savings plan is a great way to save for your child’s education. This money is also tax-free until it is taken out. You can accelerate the amount of money in the account by asking grandparents, friends and other relatives to make contributions to the account. The money cannot be taken out of the account until the child is 18, unless you want to pay a steep penalty.
It’s no less important than installing wireless alarm systems in your home to protect valuable heirlooms, bonds and other assets. You know that the money will always be there for your child’s education. You also know that you have many different people you can call upon to contribute other than yourself.
Tactic #3- Buy Stocks And Mutual Funds
Investing in the market over the long haul isn’t nearly as scary as it seems. You will generally get a 10 percent return for each year that you have your money in the market. Keeping your money in the market for a decade should see your money double on average.
Investing in mutual funds is a safe way to invest your money because it relies on diversification to ensure that the fund is always growing.
Saving for both your retirement and your kids’ college fund is a daunting task. Inflation is making it impossible to pay for both without a lot of planning. However, there are still good options for making your money stretch far enough to accomplish both tasks.
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Our college funding plan is that I got a job at a private university that has 100% tuition waiver for employees and immediate family. Our 20 yo daughter has a PT job and pays cash for everything that the wiaver doesn’t cover. Our son is a HS senior and will go there as well. I know we’re very lucky having this benefit.
Jess, that’s an awesome situation for your family. Congrats!