Why it's a mistake to put your kids' college savings ahead of your own retirement

Parents often aim to cover the full cost of their children's college education, with 41% of American parents planning to do so in 2025, a rise from 37% in 2024, according to Fidelity Investments research. While this is beneficial for the children, it may not be the best move for parents. Liz Windisch, a wealth adviser in Denver, cautioned that putting aside the entire college bill for children can be detrimental to parents' own future.

Nearly 9 in 10 parents cite their own student debt as motivation to help their kids, and more than half say paying off loans delayed their retirement savings. However, funding college through retirement accounts or cutting retirement savings is not recommended. Parents can take out loans for college, but not retirement. College costs are substantial, ranging from $4,000 at community colleges to over $45,000 at private universities.

Many families plan to finance tuition by withdrawing from retirement accounts or reducing retirement contributions as their children near college age. However, this can be detrimental to parents' financial security. While student debt is serious, sacrificing retirement security for 100% college coverage is not advisable. The college choice should be a financial decision, considering tuition, overall costs, financial aid, and debt.

Families should compare costs and financial aid packages at each school, the likely debt amount after graduation, and the potential long-term care expenses in retirement. Parents should prioritize maximizing tax-free contributions and tax-deferred compounding in retirement savings accounts like 401(k)s, IRAs, and spousal IRAs to ensure a strong financial position for their own retirement, even while helping their child graduate in a strong financial position.