Rethinking Competing Funds for College and Retirement

We live in a time of skyrocketing inflation topping decades of unbridled higher education costs. Is the tension between funding your retirement and funding (at least partially) your children’s college education keeping you up at night? You’re not alone.

Your Retirement vs Your Child’s College

Hands down, saving for retirement outweighs saving for your child’s college education. Consider that retirement goes beyond sipping beachcombers at sunset; it includes your sunset when working is not an option. Young people who are candidates for college are usually (not always) capable of working at least part-time. Programs abound for funding trade schools or other higher education.

Funding retirement is on you, alone. And retirement should last longer than college!

My wife and I ate a lot of $0.08 ramen noodle packets and $0.99/lb bologna sandwiches in college. At that age, we could stomach it. That’s not a diet we relish in retirement.

If this is an either-or decision, then funding your child’s college education could hasten your dependence on your child during your sunset.

Retirement accounts offer additional perks compared to college savings accounts. Employer-sponsored retirement plans often include a matching contribution, i.e. free money. Your marginal tax bracket is likely higher than that of an entry-level employee. So your tax savings will be substantially greater than that of your (hopefully) employed graduate.

Reduce your child’s post-secondary education budget

Community colleges offer massive savings on tuition and avoided out-of-town living expenses. They offer vocational training that is highly marketable, so within two years your child could be self-supporting in a rewarding trade. And that’s one less mouth to feed at home. If you haven’t heard of Mike Rowe’s “Dirty Jobs,” then check out his shows and see what high-paying trades your children could learn.

Talk to your community college admissions

Assuming your child’s trajectory is vocational-technical or college, find out what your community college requires for admissions. Many want homeschooled children. Looking ahead, if your child’s scores on the college admissions test (SAT or ACT) are decent, some community colleges don’t require a General Education Diploma, commonly called the GED.

Knowing this, if you decide to homeschool, you can avoid subjects that are fluff to focus on what matters, freeing up more of your time—and theirs. For example, two of our kids started college at age 15, knocking off three years of homeschooling while accelerating their academic progress.

Before enrolling in a community college, ensure that all of your credits will transfer to your intended 4-year colleges.

Community College: A $2,000,000 Decision

Short-term advantages of choosing a community college over 4 years at a university:

  • Starting at a community college saves not only tuition money (roughly two-thirds the cost of state universities) but also the costs of living away from home.

• CEI $2,780/semester X 4 semesters = $11,120

• BSU $4,030/semester X 4 semesters = $16,120

• Savings = $5,000

• BSU Residence Hall with meal plan at $10,000/academic year x 2 years = $20,000 not including travel expenses.

• Savings by attending CEI before transferring to BSU with an Associate’s degree and as a junior = $25,000.

  • Attending a community college supports a hybrid approach to transitioning from living at home to moving out from under the roof of one’s parents. This hybrid living approach can avoid expensive lessons associated with living on one’s own with previously unknown roommates while adjusting to the rigors of college.

Long-term advantages of choosing a community college over 4 years at a university:

  • Short-term savings avoid the life-long opportunity cost of higher tuition and living away from home over the first two years. In the above example, the student saved $25,000. The opportunity cost over the rest of the student’s life, say another 45 years at an average stock market return of 10.5% is $2,234,820. Of course, most students will not or can not set aside the $25,000 savings after their sophomore year to then invest all at once. But this example should reinforce the concept that today’s decisions can have compounding consequences.
  • The current undergrad subsidized student loan interest rate is 3.73%. Say our example student had to borrow the $25,000 difference in tuition and living expenses between the community college and the state university. A 10-year loan would incur an additional $4,990 in interest. That $5k in interest, in turn, has an opportunity cost.
  • Nobody cares where you attended your first two years of college. Employers look at who issued your 4-year degree. There is no earnings disadvantage to completing your first two years of higher education at a community college.

Bottom Line

Saving for your retirement trumps funding your children’s higher education. As much as you might want your kids to have minimal college loans, redirecting retirement savings to college tuition could scramble your retirement nest egg over the course of decades of lost growth.

Besides, the understanding of needing to repay a college loan while embarking on independent life should help your young adults focus on an education that will actually equip them for a career that pays well now in a growing market.

Resources Worth Reviewing:

Check out Garth Hassel’s video, 7 Habits of Highly Effective Retirees, at:

Access a link to his book, Keep Your Life: Plan Your Endgame So Loved Ones Stay Loved Ones, at:

Check also one of my Articles, Married? Is Your Endgame 100% or Just 50%?

  • garth@garthhassel.com
  • (208) 497-5347