Invest Retirement

Saving For Retirement And College: All Your FAQ Answered 

Kathryn Tuggle  |  October 6, 2020

What's the best course of action for parents who feel caught between retirement and college? A look at actionable steps for moving forward. 

Note: This content is part of a paid partnership between Citizens Bank and Her Money Media

At best, weighing your financial goals can seem like a juggling session; at worst, it can seem like a juggling session when you don’t know how to juggle. And two of the priorities that can seem most at-odds with each other are saving for retirement and your child’s college. 

HerMoney spoke with Christine Roberts, head of student lending at Citizens Bank, and Jason Friday, CFP and head of product management at Citizens Bank, about the best course of action for parents and guardians who feel caught between retirement and college — and actionable steps for moving forward. 

How do you balance/prioritize saving for a child’s college and saving for retirement, especially if you have a limited amount of funds? 

There’s an oft-cited piece of advice that still applies here: You cannot borrow for your retirement. It’s natural for parents or guardians to want to take care of their children, but in many ways, this is like the airplane safety advice to put on your own oxygen mask before your child’s. If you have to choose between saving for your retirement and saving for your child’s college tuition, prioritize retirement. 

“Parents really struggle with that, and as a parent… I can attest that it’s a hard struggle,” says Roberts. But, she notes, here are “many vehicles” through which it’s possible to borrow for college, publicly and privately, and a lot of options: You can take out a Parent PLUS Loan, your child can borrow via federal or private student loans or you can co-sign on what they borrow. Above all, keep in mind that there virtually aren’t borrowing vehicles that can sustain through retirement, says Roberts. 

Friday added that it is possible to save for education in a Roth IRA since withdrawals for higher education are tax- and penalty-free. “Just keep in mind that any distribution from an IRA and 401(k) are considered income and could impact your eligible financial aid package in future years,” he says. 

Is there anything you need to know about contributing to a 529 and a 401(k) or IRA at the same time? 

Starting contributions as early as possible in both savings vehicles will “dramatically decrease the overall amount needed to fund your goal,” says Friday. When it comes to taxes, both accounts can help you make the most of your savings. A 529 allows post-tax contributions, tax-free growth and withdrawals for qualified expenses, says Friday, while a 401(k) or IRA allow pre- or post-tax contributions and tax-free growth. (Remember that whether your distributions are taxed depends on whether you initially contributed pre- or post-tax dollars.) 

It’s important, says Friday, to “be aware of the impact of each type of account when applying for financial aid.” A 401(k) or IRA isn’t factored into FAFSA calculations, while a parent-owned 529 is considered a “parental asset” on the FAFSA. A grandparent-owned 529 isn’t considered an asset by the FAFSA until there are withdrawals — that money is considered income for the beneficiary, which could significantly impact financial aid. Friday’s recommended rule of thumb? “Use [a] parent-owned 529 early and grandparent-owned 529 in later years. There is a two-year income lookback for FAFSA, so the income tax impact of a grandparent-owned 529 plan may not be factored until the beneficiary leaves school.” 

At what point should you begin to look seriously at student loans? 

When your high school student is starting to think seriously about where they may want to go to college, it’s a good time to sit down and have “the talk” — the one about college finances, that is. Be open about how much (if anything) you’re able to contribute. That way, your child can set realistic expectations about tuition — as well as how to prioritize applying for grants, scholarships and student loans. 

Roberts suggests using websites like and CollegeRaptor, which can show you potential school sticker prices based on your individual academic performance, planned major, financial situation and more. As part of the planning process, this can help highlight the difference between what you have and what you need in order to cover the cost of school, and that’s a good starting point for the student loan process. Keep in mind that many providers offer refinancing for parents through Parent PLUS Loans — Citizens is one of these, says Roberts, and parents can refinance the loans while their child is still in school. 

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