Today, saving for both college and retirement can be more challenging than ever. In part, because people are living longer-which means more money has to be set aside for the added years you can expect to live. In addition, many parents are waiting longer before starting a family-and that means fewer years between their children finishing school and normal retirement age.
Add in already high college costs and it becomes evident that, for most parents, saving for your own retirement and your children's college education can be a daunting task to accomplish.
However, with some careful planning, it is possible to take the sting our of college costs and save more for retirement.
Start Early. Your greatest ally in saving for both retirement and college is time-the earlier you start investing on a regular basis, the less money you'll likely need to put aside. That's because your money will have more time to grow and to weather market fluctuations. Even small amounts of money set aside in regular installments can make a big difference over the years due to the effects of compounding.
Balance risk and reward. The bear market that followed soon after the new millennium began changed the way many people save for retirement and college. Some parents saving for a child's education have opted out of stocks entirely, even for younger children who won't incur college expenses for many years. That could be a mistake. Studies show that over the long run, the return on bonds and cash haven't always kept up with inflation, let alone college costs-which have risen about twice as fast as inflation. a custom asset allocation plan-the correct mix of both stocks and bonds, specific to your goals-may provide the best opportunity for growth over the long term while managing risk. What's more, as we've seen, bear markets don't last forever. Moving back and forth based on what markets do in the short term often means missing out on the rebounds. It's better to maintain an even keel through all kinds of markets, which requires discipline. That's easier to do when you have a plan.
Incorporate your goals. It's important to establish a sound investment plan you can follow over the long haul no matter what the market direction is in the short term. Begin by identifying and quantifying your various goals, including college and retirement, as you plan for future spending needs. Then, figure out how much money you can put toward each goal. Reasonable estimates on how much money you may be able to earn on your investments can help you create a more realistic plan. Additionally, by combining your goals together into one portfolio, you'll establish a "big picture" view of your overall asset allocation. That way, you can manage the total risk you're taking on at any given time.
Seek professional advice. Do yourself a favor and take advantage of professional financial advice about the right way to invest for both college and retirement. Ideally, you don't want to sacrifice one goal for the other. Our Investment Service Center Team can help you set up an investment strategy that makes the most of tax-advantaged investment accounts for retirement and college. After establishing your portfolio, they can work with you to adjust one goal or another as your needs or time frame change.
To schedule an appointment with Nate Wyatt or Will Rahjes of the Investment Service Center, call 308-537-7577 or schedule online HERE