There is a building trend for families when it comes to financing higher education such as college or grad school; it involves the financial implications parents, their college aged children, and the cost of higher education.
When thinking about college as a parent, the first thing that comes to mind is financing this education in order to secure a future for a child. While this incentive is grounded in good faith, it may not be the correct choice for many aging couples.
Financing college has become somewhat synonymous with student loans. Many can vouch for this association because plenty of college graduates are experiencing the burden of making payments with interest. In order to reduce these pressures, many parents decide to partially finance their kid’s path to a degree.
As previously stated, this is clearly with the intention to aid in securing a future with financial stability. While helping pay for college is respectable, what many people do not consider is the impact this has on some middle aged couples.
So what else does a middle aged parent have to worry about besides their child’s future? Themselves. Planning for and reaching retirement is one of the most important financial goals of an adult. Without a decent retirement fund, many couples or single parents may find themselves in a hole later in their lives. One way to increase the chances of putting off retirement is to pay for a degree (either fully or partially), and student loans are becoming an increasingly heavy burden for parents.
A recent study administered by Discover Student Loans reveals that over half of parents in the year of 2016 plan on helping pay student loan debt. That means that over half of the parent population considers taking on additional financial burdens instead of focusing on retirement. These statistics are alarming because they may only increase in the future with the rising importance of student loans.
As a general guideline endorsed by many financial advisors, those over the age of 50 are recommended to save at least six times an annual salary. This means that someone making a total of $80,000 a year is recommended to have at least $480,000 in retirement savings. To put the issue in perspective, most people over the age of 50 have less than $120,000 saved for retirement (and that is assuming they make $80k). For a salary of $40,000, the recommended retirement savings is $240,000 which is still more than double the actual average today.
The main take home message is older workers and parents do not have enough in savings in general, and student loans are only exacerbating this issue. This puts pressure on the overall population to make correct decisions. The only problem is this decision is based on choosing yourself over your child. Either way one of them is going to take the fall if a beneficial middle ground is not found financially.