Should my priority for savings be my own retirement or my children’s college education?

Ideally, you should fully fund both but that simply is not possible for many federal employees.

One way to look at is that your retirement might last for 30 years or more, where a child’s college education optimally will last only four for a bachelor’s degree—and possibly several more for an advanced degree. Obviously, not every time frame is that short but the bottom line is that you’ll be spending money much longer in retirement than you will while your child or children are in college, and you should save accordingly.

Also consider that there are many sources of help to finance a college education besides your own savings, including grants, scholarships and work-study programs. And remember, you (or your child) can borrow to finance a college education, but you can’t borrow to finance your retirement.

On the other hand, as a federal employee, you have the advantage not common in the private sector of having a defined benefit retirement plan that provides a solid baseline of retirement income. That’s one reason why it’s so important to keep abreast of how much of a retirement benefit you are building up through FERS or CSRS. It may be that you will need to save aggressively through the TSP or other means to have the retirement income you’ll need. Or it may be that you are on a track to meet that goal and have the luxury of increasing savings for college and avoiding the potential need for student loans.

2021 Digital Almanac

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