Wikinvest Wire

Retirement or college?

Friday, September 18, 2009

Where we used to live in Northern California, news came recently that a couple just put their retirement home up for sale (purchased in 2007, ouch!) after the recession had taken a toll on the business owner's income while the college tuition bills just kept coming.

As said business owner was of the view that the U.S. economic slowdown was nothing more than a "media-created" event as recently as a year ago, his plight will not elicit any sympathy from these quarters but, based on this story at CNN/Money, he is surely not alone.

As much as a college diploma may assist today’s youth with their future employment, paying for that education is giving their parents a severe headache. New surveys released by Fidelity Investments, the College Savings Foundation, and Sallie Mae have found that parents understand they’re not saving enough, are worried about it, and are even planning to delay their own retirement to pay their kids’ tuition..
...
Make no mistake, college is expensive. This year’s numbers aren’t out, but college costs have risen 23% since 2000, after inflation. It’s great that many parents are willing to delay retirement a few years. But if it comes down to a decision between retirement savings and college savings, don’t feel guilty for making your kid finance his education or work his way through school. If you’re able to save more down the road, you can always help him pay off his loans, but no bank is going to lend you money to supplement your retirement savings if you come up short.
The approach to saving for both retirement and college that seemed to work so well earlier in the decade (i.e., figuring that your rising home equity will not only fund your kids' education but your golden years as well) is, sadly for many people, not working so well anymore.

5 comments:

donna said...

The problem is a lot of those college savings were, with the retirement savings, in the market, and now both are gone. So you tap one to fulfill the other. It sucks, but hey, the kids don't have jobs, either -- easier to keep them in college than put them on the streets or force them to live at home doing nothing. Unemployment among twenty somethings is around 20%. We are going through this now with two kids in college. There is simply nothing else to do but get them through somehow, whatever it takes.

Pretty much everyone going through this figures the market at some poiint will take off again, and the retirement savings will come back up. But, the kids have to have education and jobs NOW.

Anonymous said...

Yes, EDUCATION costs have been rising dramatically. It's not just college but K through 12 where we are continually asked to pay more property tax.

I don't believe it when our government tells us the CPI increased only 2% (or whatever) in some given year. Do they even consider college tuition and property taxes when they compute the CPI?

This is one reason TIPS aren't the great deal they seem because the government keeps underestimating the CPI.

One more thing, government loans are a major factor in increasing tution costs. The loans are being used to bid up the cost of tuition.

The upper limit on student loans was raised yet again this year. I'd rather see the government grant this money directly to only those colleges that agree to keep their tuition costs down. Oh, and when those student loans can't be paid back, who is going to take the loss?

Anonymous said...

Where did the idea arise that all kids get a free ride in college?

I worked my way through 4 years of college, working part time in winter, and full time in summer.
Graduated in 4 years with a degree in Business,and learned a lot about the wisdom of hard work.Served me well when I worked for others, and even better in my own business.

Anonymous said...

Exactly - used to be people paid their own way or if they were even somewhat bright, could get a scholarship. Youth unemployment has always been high but at the same time those with a good attitude and strong work ethic can find a job in any economy.

If parents are sacrificing future financial security for their kids' college education they better be pretty darn sure their kids will be willing to make similar sacrifices down the line.

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