We want to give the best opportunities to our children, and that includes providing them with a solid education. A college education gives your children a leg up in the world, and helps to ensure their financial stability and happiness for the rest of their lives. It’s no wonder you may feel determined to take drastic measures to pay that tuition bill.
But don’t allow your desperation to drive you toward a major financial mistake. Withdrawing funds from your retirement savings is one of the worst mistakes you can make with regard to your savings for retirement. The cost of doing so may be greater than you may think; you don’t simply lose the capital that you withdraw, but also all of the compounding interest which would have accumulated over the rest of your life. You may also face a stiff penalty in the form of fees. One impulsive decision could cause you to delay your retirement, or retire with far less money than you really need.
The good news is that there are plenty of other ways to fund a college education. Even if you don’t think your child would qualify, you may be surprised at how many scholarships, grants, loans, and work study programs are available even to people with fairly generous incomes.
Begin by speaking to a financial aid counselor at your child’s school. Keep in mind that even if options are limited in the first year or two of their education, there may be additional scholarships or grants available to upperclassmen once your child makes progress toward their degree. If you have another child entering college in the next few years, your options for financial aid may also be greater at that time.
If college is still a few years away, start planning now. Talk to your financial advisor about establishing a 529 savings plan for college, and you can set aside tuition money with taxes deferred. Whatever you do, don’t raid your retirement fund; there are other ways to pay for college, but only one way to fund your retirement.