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College Savings before Retirement Savings?

I read today that T. Rowe Price has released a survey that found over half of the two thousand parents polled said it was more important to save for their children going to college than it was to save for the parents’ own retirement[i]. For perspective, the polled parents all participated in retirement savings plans and had children under age 16 so the survey was unaffected by those with no college costs in the offing.

Putting aside all the interesting questions this survey raised and the even more interesting and often perplexing (to me) responses, one thing seemed clear. The parents almost universally felt that their children would/should go to college. Why?

As a graduate of both college and graduate school and as a veteran of several different employers and employment situations, I can very safely say that college is not for everyone. I can also say that the value of a college education is going to vary widely both in terms of the recipient of the education and the institution providing it. Of course, there are studies to support all sorts of positions and opinions on the return on investment in a college education but, once again, the bottom line is that it varies and is not entirely predictable.

Separately, the other big issue I saw in the survey is the obvious crying need for education of the parents about the whole concept of paying for college.  These included issues with
·         Savings - nearly a third were unaware of the existence of Section 529 plans and most had serious misconceptions and misperceptions about this planning tool;
·         Importance of NOT making withdrawals from their qualified retirement savings plans for their children’s education – the cost in terms of taxes, penalties, lost growth – all in the face of the huge cost of retirement;
·         Alternatives such as choosing NOT to acquire huge debt for themselves or their children by instead deciding to defer or spread out the education expense, attend a less expensive institution, have the child utilize all potential sources of assistance other than debt and so on.

This whole area of discussion is clearly one where parents and their children would benefit by getting good information and exercising good judgment before getting bogged down. If getting a college education is going to be a good thing, its cost must be manageable and the decisions should be made with thought given to every aspect.


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