Save for College or Retirement?

It's a common question and most people answer college because it's much closer than retirement.

It's admirable to want to send your kids to college and they graduate loan free The problem with the logic is that you can borrow for college, you can't borrow for retirement.

Right now, it's hard to get a loan with a job. Can you imagine, what it would be like without a job? Sure you could borrow against your home, but how will you pay it back - with Social Security? Ha, some of us will be lucky if we get any Social Security at all.

Yes, you want your kid to graduate without loans. Maybe that's what your parents did for you or maybe they didn't and you had to struggle to pay them off. We all want better for our children and education is a great place to start, but that doesn't mean you should fund their college fund before your retirement.

If your company has a 401k match, you should at least be putting in enough money to receive the FREE funds from your company. You should do that at a minimum before even thinking about putting money away for college. Make sure your retirement money is working for you by setting up your asset allocation manually or choosing a Target Date Fund.

The general rule of thumb is that you subtract your age from 100 to determine what percentage of your portfolio should be in stocks. People are living longer, so some people say use 110 or 120. A Target Date Fund will do this automatically for you - you pick the fund by the year you plan to retire (fund dates are usually every 5 years).

Keep in mind there are multiple ways to fund a college education (scholarships, grants, student loans, & parental contribution), but YOU are the main way to fund your retirement.

If you haven't started yet, start by taking a small percent (maybe 5%) out of each paycheck to fund your 401k. You probably won't notice the money is gone because it's taken out pre-tax and you'll be lowering your tax liabilities.

Note: You will always want to look at the fees of any mutual fund that you want to invest in or get the assistance of you financial advisor.