Planning for college: Are parents budgeting $200K in 529s plus $20K+ per year in extra spending?

It’s hardly a secret that the cost of college has been going nowhere but up. And a lot of parents are struggling to balance saving for college while funding a retirement account.

In this Reddit post, we have someone who’s wondering how parents manage to save for retirement while also saving $200,000 for college. And what’s getting to the poster is that they’re reading that many parents save $200,000 for education and still end up shelling out another $20,000 or more per year anyway.

The fact of the matter is that there can be costs related to college outside of tuition and fees that a 529 plan won’t necessarily cover. So it’s important to look at the big picture. It’s also important to make sure you’re not sacrificing your retirement security for the sake of funding a college education.

College costs to plan for

Most parents know to save for college expenses that include tuition, fees, books/supplies, and room and board. But you may want to allocate funds to cover additional expenses. Those might include:

• A car for your students and any associated ownership costs, including auto insurance
• Cell phone service
• Utilities not included in room and board
• Food not included in room and board
• Money for travel to and from home (it’s not always possible to drive)
• Money for incidentals and “fun” spending

Some of these expenses are not considered qualifying 529 plan withdrawals, so it’s important to house your savings in the right account. Taking a 529 plan withdrawal for non-qualifying expenses could lead to a costly penalty.

How to juggle the expense of college while saving for retirement

Many parents struggle to balance college and retirement savings. The tricky thing is that while retirement should take priority, you typically get more time to save for it than college.

Let’s say you have a child at age 30. At that point, if you want them to go to college at a typical age, you have 18 years to beef up your 529 plan. On the other hand, you might have 32 or 35 years to fund your retirement nest egg.

That said, while it’s pretty easy to borrow money for college, it’s not as easy to borrow money during retirement to pay your expenses (at least not affordably). So it’s important to not neglect your long-term savings.

This doesn’t mean that borrowing for college is fun. But if you can’t manage to cover all of your kids’ costs, do try to remember that they have their entire lives to pay their student loans back. And they can also take steps to keep their college costs down, like choosing community college for a year to knock out requirements or opting for a state school instead of a private one.

Ultimately, though, it’s a good idea to talk to a financial advisor about balancing both goals. A financial advisor can review your income and various timelines to help you develop a savings plan that addresses your desire to put your kids through college while ensuring that your financial needs in retirement are taken care of.