Save for retirement before kids’ college

Every year, investment firm T. Rowe Price does an annual survey called “Parents, Kids and Money.” Buried in that survey I found some alarming factoids: More families have college savings than retirement savings, and more than two-thirds of families said they prioritized saving for college over retirement.

If this describes you, it’s time to rethink your priorities. Saving for retirement is a necessity. Saving for college is something optional that you do after you make sure you’ll have food and shelter in your old age.

It seems obligatory to mention that I do not have children. Some readers who do have children will tell me that I just don’t understand, as parents do, that their kids come first.

Actually, I do understand that. And I applaud you parents for everything you’ve given up to keep your children happy, healthy and safe: You are heroes, parents, every one.

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What I’m saying is, when you did all that, you did your job. Now you need to take a little time to focus on you.

Taking care of yourself is part of being a good parent. If you don’t do it, your kids will have to, and they may not be up to the job.

This is simply common sense. But the evidence suggests that this bit of common sense is eluding a lot of parents.

The T. Rowe Price survey is, of course, just one data point – but it mirrors conversations I have had over and over in my years of writing about personal finance. “We’ll save for retirement as soon as the kids are out of college,” said someone whose last kid will graduate when they are 57. Or “I’m just not going to be able to retire,” they said with a shrug. “I’ll have to work until I die, but at least the kids will be started off right.”

This is magical thinking. Fifty-seven is a good age to start planning what you will do in your retirement, but it is a terrible age to start saving for it. You have almost no time for the money to grow.

Nor can you count on being able to work until you drop in the harness. It’s a splendid idea if you can manage it – but a lot of people can’t manage it. They get sick. Or their company makes them redundant, and they can’t find a new job (age discrimination is terrible, and should be fiercely combated, but it is nonetheless a reality you need to take into account in your own savings plans). Or their spouse gets sick and needs more caretaking than can be accommodated by their career.

You’re probably then going to have to ask the kids for help, just at the time when they’re dealing with the financial and emotional struggles of starting their own families.

This is madness. Your kids can get scholarships or borrow for college; you cannot use these means to finance your retirement. You certainly can’t borrow so cheaply, with government-capped interest rates on the loans, and a bevy of repayment plans designed to keep the monthly bill affordable.

Will payments on student loans be a struggle for your kids when they’re starting out? Perhaps. But those loan payments come at a time when one’s financial needs are smallest and lifestyle expectations the lowest. And even my hefty six-figure loan (mostly repaid on a salary that barely cracked the mid five figures, and with no income-based assistance from the government) cost me a lot less per month than supporting an adult or two.

Once your retirement assets are where they should be, given your age, and you are putting away an annual sum designed to keep them increasing at the necessary rate, then you can open up that 529 account for the kids’ college and start funneling money in. Until then, focus on giving your children, and yourself an even more precious gift than debt-free college: not having to worry about what will happen to you in your old age.

Megan McArdle is a Bloomberg View columnist.