Sacrificing your retirement savings to send a child to college benefits no one—not even the student.
Yet parents wonder what they should do to help their children pay for a post-secondary degree. Some consider raiding their retirement accounts, such as their 401 plans and individual retirement accounts, while others stop investing for retirement altogether to fund a college savings account during some of their best earning years. A few will choose to co-sign student loans instead, which is equally as dangerous.
How to tackle the issue: Financial advisers warn parents to never commit more of their finances to education than retirement. But there are ways to make it work for those hoping to help their children earn a Bachelor’s degree with as little debt as possible while also eventually retiring comfortably.
Take for example, a parent 10 years away from retirement looking to take $50,000 out of an individual retirement account . Assuming an average return of 5% as well as 0.25% in investment fees, that parent would lose out on more than $29,000 over the next decade if she made that withdrawal for her child’s college education, according to Andrea Feirstein, managing director of AKF Consulting.
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