College Corner | The Cost of College While Saving for Retirement

Retirement & College

Creating a retirement strategy is an important financial goal for many investors. But what if you also wanted to help a child or grandchild with higher education costs? Can you have two priorities with your investing strategy?

To see what this looks like, let’s take a look at two investors–one preparing for retirement only (the blue line) and the other pursuing the twin goals of retirement and college (the red line).

Life Savers

In our two options, let’s assume both individuals committed to investing $700 per month for 35 years. They placed the money into an account that earned a hypothetical 6 percent a year, year after year.

After 35 years, the retirement-minded individual would have a little more than $1 million. But what about the parent who also wanted to help pay for college?

After saving for 15 years, that parent continued to save $700 a month but diverted $350 a month to invest in a college savings plan. After 35 years, the college-saver had accumulated $663,665 and pursued their twin goal of paying for college.

Were both strategies effective? The better question is, “Did both individuals pursue their goals?” With a strategy in place and 35 years of disciplined investing, both arrived at their destination.

Saving Smarter, Not Harder

Helping someone pursue the dream of a college education can be rewarding, and it doesn’t have to look the same for everyone. Here are a few strategies that can help:

• Start Small: If you have concerns about taking money away from retirement, consider saving a smaller amount for higher education. After all, anything helps.
  
  
• Use Financial Aid: Many financial aid options may be available to your children or grandchildren to help offset the costs of college. Some examples are scholarships, grants, loans, and work-study programs.
  
  
• Communicate Goals: Communication is always a good idea. Being open and transparent about your financial priorities and the needs of your future college-goer can help.

Saving is a noble endeavor, whether for retirement or a college education. The good news is that the two are not mutually exclusive. We can discuss your goals and how you can do one, the other, or both.

• The SAT/ACT Anticipated 2024–25 Test dates begin August 24, 2024, and close June 7, 2025. You can find the exact dates soon at collegeboard.org.¹
  
  
• The 2024–25 Free Application for Federal Student Aid (FAFSA®) form is available for submission from July 1, 2024, to June 30, 2025. However, States and schools can also have their own FAFSA deadlines. Be sure to check those deadlines by contacting your chosen institution's Office of Financial Aid.²
  
  
• College fairs and visits can be a wonderful resource when deciding on your institution. Many institutions offer guided tours or attend fairs for future students. For the most up-to-date information bookmark: www.nacacattend.org
  
  
• Early decision deadlines vary slightly from school to school, but most fall on November 1 or November 15. Always check the deadlines of your top schools before applying.
  
  
• Other deadlines differ drastically depending on the institution of your choice. Bookmark the most recent deadline page offered and check it often.

The College Affordability and Transparency Center is a resource established to provide some guidance to students and families regarding the costs of higher education.

This platform provides data on tuition and net prices across different institutions, allowing prospective students to compare colleges based on affordability. Through its tools and reports, the Center aims to increase transparency in college pricing, highlighting institutions with the highest and lowest tuition fees and net costs.

By offering these insights, the College Affordability and Transparency Center empowers families to understand the financial landscape of higher education better and explore options that align with their financial capabilities and educational aspirations.

<sup>1. Collegeboard.org, 2024

2. Studentaid.gov, 2024</sup>