Independent Women’s Forum Policy Director Hadley Heath Manning discusses why Republicans need to do a better job touting the U.S. economy and how lawmakers are looking to help Americans save for retirement.
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Michael Moyer, senior wealth strategist at PNC Wealth Management says absolutely not.
“I am a very strong believer in a higher education and the opportunity that it affords,” he says. “But I believe that your own retirement is the foundation of your financial future. It is very important for your retirement planning to take precedence.”
Take advantage of your 401(k)
Most companies offer a 401(k) plan or an equivalent retirement savings plan. Moyer’s advice is to start funding the retirement account in your 20s and early 30s. He says the earlier you start saving, the better.
If your employer has a 401(k) match, Moyer says you should take advantage of the full amount being offered. He stresses that you should never walk away from free money. Most companies will offer 4% or 5%. A research report from Financial Engines says a typical employee who fails to receive the full match misses out on $1,336 of potential money each year.
“Your children will be busy building their lives, their families and their own retirement savings,” he says. “If you sacrifice your own retirement planning completely and only fund education for your children, that doesn’t make much sense.”
Invest in a 529 plan
Moyer says 529 plans are a smart choice for parents who want to save for their child’s college education expenses. 529 plans are flexible – if one child doesn’t need the benefit, it can be switched to another one. He says grandparents, relatives or even very friendly neighbors can make contributions to a child’s 529 plan.
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“There may be other resources for them – grants or work-study,” he says. “Children can always take loans out for college, but you can’t necessarily take loans out for retirement. Your children will have their entire lives to pay back any loans they need for education. They might have a 40, 50-year career or longer ahead of them to pay their loans back. Whereas with your retirement planning, you only have a limited time to put aside what you need.”
Cut discretionary expenses
Whether it’s cutting the daily trip to the coffee shop or taking the train to work instead of driving; Moyer says you should look for creative ways to cut back your daily spending.
“It doesn’t matter if you are a high net worth client, moderate income or just starting out,” he says. “It’s amazing how much cash flow you can free up to start dedicating funding sources to your children’s education and prioritizing your retirement savings.”
Are you looking for other areas you might be able to cut costs? A Bankrate.com survey found that each week on average, the typical American dines out, purchases lottery tickets and buys prepared drinks at least three times a week. On average, we spend $2,944 a year on these financial vices.
If you’re still not sure how to tackle saving for retirement and your child’s college education, Moyer recommends working with a certified financial planner. He says a financial professional can help you figure out how to fund your retirement and college appropriately, without neglecting your cash flow ne. Throughout the process, your golden years should always be the priority.
“Financial planning really comes down to basic economic principles – allocating scarce resources to help clients prioritize objectives and achieve as many of them as possible in a balanced way,” Moyer says. “Speaking with someone will help you prioritize your goals and objectives. You need to think long-term and strategically. Think about your own goals and the goals you have for your family. Sometimes introducing an independent advice driven approach and not dealing only with emotions will help you set those priorities.”