As a father, I need to provide a quality education for my son and I need peace of mind during my retirement. How can I consistently juggle saving for retirement and saving for my son's education?
– Dave, age 53
"I go back to the ‘put the oxygen mask on yourself first’ analogy," says Ryan Viktorin, CFP®, Fidelity vice president and financial consultant in Framingham, Massachusetts. "Dad has limited time until retirement, while his son has his entire career to try and help pay for college. I would suggest exploring financial aid to see how much you’d qualify for and consider student loans for the son."
Scholarships or relatively lower-cost community colleges or in-state universities may help with education costs too. But there aren't really many ways to get assistance in retirement.
The question is: How much can you afford to save for education without risking your own retirement? The answer will be different for everyone based on their unique circumstances. If you're not sure, consider working with a financial professional to run the numbers for you—then you can see what the impact on your retirement could be if you saved a little more for education and saved less for retirement.
To get a sense for how you might want to prioritize your savings, start by understanding where you stand in relation to your goals. If you aren't sure, Fidelity's calculators may be able to help.
- For Fidelity customers: Create a retirement goalLog In Required. You'll also be able to set up other financial goals and track your progress. By answering a few questions, you can see how much you may have in retirement and how much you may need.
- If you’re not a customer yet, The Fidelity Retirement ScoreSM can help you see if you’re on track.
To help your education dollars go a little bit farther, consider a 529 savings plan. 529 savings plans are flexible, tax-advantaged accounts designed specifically for education savings. Contributions can be invested for growth potential and withdrawals of earnings are tax-free when used for education.
You can also ask friends and family to donate to your education fund in lieu of gifts on gift-giving occasions like birthdays, holidays, and special achievements. To learn more, visit the College gifting page.
Focusing on your retirement stability doesn't have to be the last word on the matter. "If things are going great and Dad has a surplus at any point or in retirement, he can always help his son pay off the education," Viktorin says.
I am having trouble paying down my debt and saving money because it seems like there's always a need to either use my credit card or dig into my savings. What is a good way to pay down debt and save? Should I pay down the debt first and save second or vice versa?
– Parker, age 32
"To me this is a conversation about expenses. If you’re constantly using credit cards and/or dipping into savings to pay for things, I would look at the expenses to try and see where you can trim. Credit card debt can get away from you fast because the interest rates are so high," Viktorin says.
"Try and get to a place where your expenses are below your monthly income so that you can save for the future. Pay down credit card debt, build savings back up, and keep spending less than you earn" she says.
How to do that? Create a budget. Take a look at how much money you have coming in and going out each month and then work to reduce your spending.
Read Viewpoints on Fidelity.com: How to balance debt, saving, and investing
Some other things to consider as you're building your financial foundation.
- Make sure you have basic insurance in place to protect what you have. When it's offered through your employer, the cost is often extremely reasonable.
- Consider saving in tax-advantaged health care accounts. If you're eligible, saving money in a flexible spending account (FSA) or health savings account (HSA) can help you save on health care costs.
- If you don't already have one, build an emergency fund. A good goal to aim for at first: saving $1,000 or one month's worth of essential expenses, meaning food, housing, health care and other must haves.
- If you have one, sign up for your workplace retirement savings plan and try to save at least enough to get any match offered by your employer.
- Then put extra money toward high-rate credit card debt. It can make sense to pay down high-interest debt like credit cards as fast as possible before you tackle savings goals. Read Viewpoints on Fidelity.com: The debt snowball method vs. the debt avalanche method
I just turned 50 so retirement is getting closer. I want to know how much I really should be saving for retirement and the best ways to invest my money.
– Avery, age 50
It depends! The amount you personally should be saving for retirement now will be different than the amount your neighbor or coworker should be saving. The goal is to try to save at least enough money to cover all of your expenses, essential and discretionary, in retirement—and potentially leave money to your heirs or charity if that's a priority. To know how much you may need to save, start with how much you have saved already and estimate how much money you may need in retirement.
Fidelity's retirement planning experienceLog In Required can help you quickly decide whether you're saving enough right now to meet your savings goals or if you need to save more in order to maintain your lifestyle in retirement.
One simple way of estimating and monitoring your retirement savings goal is with our age-based savings factors. These are savings milestones expressed as multiples of your current income. Based on our analysis, we suggest aiming to save 1 times (1x) your current income by age 30, 3x by 40, 6x by 50, 8x by 60, and 10x by age 67.1
So for someone who has just turned 50, a good place to start will be evaluating how close you are to having 6 times your annual income saved and when you plan to retire. If you plan to retire before age 67, the total amount you'll need to save will likely be higher. "Remember, these are just general numbers to guide you—going through the retirement planning experience can help customize how much YOU need," Viktorin says.
Learn more about our 4 key retirement metrics—a yearly savings rate, a savings factor, an income replacement rate, and a potentially sustainable withdrawal rate—and how they work together in the Viewpoints Special Report: Retirement roadmap.
The good news is that people over age 50 have the opportunity to save a lot more in tax-advantaged accounts. Investors can contribute an extra $7,500 to workplace retirement savings plans like 401(k)s in 2023 and 2024 and an extra $1,000 to IRAs and HSAs. Plus, someone heading into their 50s may be moving into their highest earning years so may be perfectly positioned to save more than ever with plenty of time until retirement.
Read Viewpoints on Fidelity.com: 50 or older? 4 ways to catch up your savings
As for the best ways to invest, again that depends. Some of the considerations include when you plan to start taking withdrawals from savings and any other sources of income you may have in retirement. With a decade or more before you are likely to retire, you will likely want to keep the majority of your retirement portfolio in a diversified stock portfolio. As you approach retirement, you will likely want to build more stability into your portfolio, balancing the long-term growth potential of stocks with the steady income that bonds can provide.
As an example, here is how a target date fund could be invested for someone retiring in about 10 years. Fidelity's target date funds, Fidelity Freedom Funds (
And you don’t have to do any of this alone. Fidelity has professionals who can help answer your questions and get you where you want to go.