Two Goals, One Plan: How to Prepare for Retirement & Education Costs
Retirement planning and education planning are deeply connected and must work in tandem, not compete for resources. When one delays planning for either goal, they may have to reduce or withdraw from retirement savings to pay for education. Early planning helps prevent these situations by spreading savings over years and reducing the need for drastic adjustments.
How Not to Sacrifice Either
Many parents feel emotionally driven to prioritize their children’s education, sometimes at the expense of their own retirement. While the intention is admirable, the long-term consequences can be severe.
Underfunding retirement to pay for college can lead to financial insecurity later in life, increased reliance on children, or the need to work longer than planned. A balanced plan acknowledges that education matters—but not at the expense of future financial independence. Education planning and retirement planning each have specialized financial strategies.
529 Plans—These accounts offer potential tax-deferred growth and tax-free withdrawals when used for qualified education expenses. They reduce the need to tap retirement accounts for college costs, preserving retirement savings.
Employer retirement plans— Many employer plans offer matching contributions up to a specified percentage. Taking advantage of an employer match can help boost your overall retirement accumulation. Prioritizing contributions, especially when an employer matches them, can help boost retirement savings.
Roth IRAs—Roth IRAs offer flexibility because contributions (not earnings) can be withdrawn without penalty. While not ideal as a primary education savings tool, they can serve as a backup option without derailing retirement goals.
College planning and retirement planning are not competing priorities—they are interconnected components of a family’s financial future. By approaching them together, one can create a balanced plan that supports both education and independence in retirement.
Let's Team Up
Our advice is to include your kids in college planning conversations. Help them save and participate in preparing to pay for college. It seems reasonable to have kids help pay for college. It would feel strange to have kids help pay for your retirement. Plan Accordingly!
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Last week’s 3Q26 GDP print and earnings reports from three of the major hyperscalers provided investors with an updated temperature check on the AI trade. The U.S. economy grew at a 3.4% annualized pace, powered by 9.4% growth in business fixed investment, the strongest quarterly growth figure since 4Q20, and resilient consumer spending. The vast sums of money spent on materials, equipment and data center construction are showing up throughout economic data, cementing this capex super cycle as a significant driver of economic activity. This week’s chart shows nonresidential business fixed investment as a share of nominal GDP, highlighting how few parallels there are for the AI buildout’s contribution to economic growth. Its share of nominal GDP has already surpassed the telecom buildout of the 1990s and is exceeded only by the high inflationary period of the late 1970s and early 1980s, which may have been more reflective of a government and consumer spending slump than a capex boom. For now, economic growth continues to be all about the AI buildout. But while the AI buildout’s impact on economic growth is evident, the payoff for the hyperscalers making the investments is less clear. The three major hyperscalers that reported earnings last week each described strong AI demand and growth in their cloud businesses, but much of that growth may already be priced in. Investors are focused not only on whether these companies can beat earnings expectations, but also on how quickly they can monetize their investments and generate positive cash flow. Their ability to do so will shape how the market views them.
With both the economy and markets riding on the same AI theme, it’s increasingly important for investors to reduce concentration in their portfolios and diversify into less AI-exposed areas, such as Europe or real assets.
Chart of the Week: Source: BEA, FactSet, J.P. Morgan Asset Management.
Thought of the Week: Source: BEA, FactSet, J.P. Morgan Asset Management
Abbreviations: Cons. Sent.: University of Michigan Consumer Sentiment Index; CPI: Consumer Price Index; EIA: Energy Information Agency; FHFA HPI: - Federal Housing Finance Authority House Price Index; FOMC: Federal Open Market Committee; GDP: gross domestic product; HPI: Home Price Index; HMI: Housing Market Index; ISM Mfg. Index: Institute for Supply Management Manufacturing Index; PCE: Personal consumption expenditures; Philly Fed Survey: Philadelphia Fed Business Outlook Survey; PMI: Purchasing Managers' Manufacturing Index; PPI: Producer Price Index; SAAR: Seasonally Adjusted Annual Rate
Index: Institute for Supply Management Manufacturing Index; PCE: Personal consumption expenditures; Philly Fed Survey: Philadelphia Fed Business Outlook Survey; PMI: Purchasing Managers' Manufacturing Index; PPI: Producer Price Index; SAAR: Seasonally
Adjusted Annual Rate
MSCI EAFE is a Morgan Stanley Capital International Index that is designed to measure the performance of the developed stock markets of Europe, Australasia, and the Far East.
Bond Returns: All returns represent total return. Index: Bloomberg US Aggregate; provided by: Bloomberg Capital. Index: Bloomberg Investment Grade Credit; provided by: Bloomberg Capital. Index: Bloomberg Municipal Bond 10 Yr; provided by: Blomberg Capital. Index: Bloomberg Capital High Yield Index; provided by: Bloomberg Capital.
Key Interest Rates: 2 Year Treasury, FactSet; 10 Year Treasury, FactSet; 30 Year Treasury, FactSet; 10 Year German Bund, FactSet. 3 Month LIBOR, British Bankers’ Association; 3 Month EURIBOR, European Banking Federation; 6 Month CD, Federal Reserve; 30 Year Mortgage, Mortgage Bankers Association (MBA); Prime Rate: Federal Reserve.
Commodities: Gold, FactSet; Crude Oil (WTI), FactSet; Gasoline, FactSet; Natural Gas, FactSet; Silver, FactSet; Copper, FactSet; Corn, FactSet. Bloomberg Commodity Index (BBG Idx), Bloomberg Finance L.P.
information from FactSet's Pricing database as provided by MSCI. Russell 1000 Value Index,
Style Returns: Style box returns based on Russell Indexes with the exception of the Large-Cap Blend box, which reflects the S&P 500 Index. All values are cumulative total return for stated period including the reinvestment of dividends. The Index used from L to R,
top to bottom are: Russell 1000 Value Index (Measures the performance of those Russell 1000 companies with lower price-to book ratios and lower forecasted growth values), S&P 500 Index (Index represents the 500 Large Cap portion of the stock market, and
is comprised of 500 stocks as selected by the S&P Index Committee), Russell 1000 Growth Index (Measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values), Russell Mid Cap Value Index (Measures
the performance of those Russell Mid Cap companies with lower price-to-book ratios and lower forecasted growth values), Russell Mid Cap Index (The Russell Midcap Index includes the smallest 800 securities in the Russell 1000), Russell Mid Cap Growth Index (Measures the performance of those Russell Mid Cap companies with higher price-to-book ratios and higher forecasted growth values), Russell 2000 Value Index (Measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values), Russell 2000 Index (The Russell 2000 includes the smallest 2000 securities in the Russell 3000), Russell 2000 Growth Index (Measures the performance of those Russell
2000 companies with higher price-to-book ratios and higher forecasted growth values).
Past performance does not guarantee future results.
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