Abney Associates Ameriprise: Saving for Retirement and a Child's Education

Abney Associates Amerprise: Saving for Many on-line calculators are available to help you predictyour retirementincome needs and your child's college funding needs. Retirement and a Child's Education FIGURE OUT WHAT YOU CAN AFFORD TO PUT ASIDE EACH MONTH After you know what your financial needs are, the next step is to determine whatyou can afford to putaside each month. To do so, you ll need to prepare a detailed family budget thatlists all of your income and expenses. Keep in mind, though, that the amountyou can afford may change from time to time as your circumstances change. Once you've come up with a dollar amount you'll need to decide how to divvy up your funds. Saving for retirement and a child's education at the same time You want to retire comfortably when the time comes. You also want to help your child go to college. So how do you juggle the two? The truth is, saving for your retirementand your child's education atthe same time can be a challenge. Buttake heart-you may be able to reach both goals if you make some smart choices now. RETIREMENT TAKES PRIORITY KNOW WHAT YOUR FINANCIAL NEEDS ARE Though college is certainly an important goal, you should probably focus on your retirementif you have limited funds. With generous corporate pensions mostly a thing of the past, the burden is primarily on you to fund your retirement Butif you wait until your child is in college to start saving, you'll miss out on years of tax-deferred growth and compounding of your money. Remember, your child can always attend college by taking outloans (or maybe even with scholarships), but there's no such thing as a retirementloan! The first step is to determine whatyour financial needs are for each goal. Answering the following questions can help you get started: For retirement: How many years until you retire? • Does your company offer an employer-sponsored retirement plan or a pension plan? Do you participate? If so, what's your balance? Can you estimate whatyour balance will be when you retire? How much do you expect to receive in Social Security benefits? (You can estimate this amount by using your Personal Earnings and Benefit Statement now mailed every year by the Social Security Administration.) • What standard of living do you hope to have in retirement? For example, do you IF POSSIBLE, SAVE FOR YOUR RETIREMENT AND YOUR CHILD's COLLEGE AT THE SAME TIME Ideally, you'll want to try to pursue both goals atthe same time. The more money you can squirrel away for college bills now, the less money you or your child will need to borrow later. Even if you can allocate only a small amount to your child's college fund, say $50 or $100 a month, you might be surprised athow much you can accumulate over many years. For example, if you saved $100 every month and earned 8 percent, you'd have $18,415 in your child's college fund after 10 years. (This example is for ilhustrative purposes only and does not representa specificinvestment) want travel extensively, or will you be happy to stay in one place and live more simply? • Doyou or your spouse expect to work part-time in retirement? If you're unsure how to allocate your funds between retirement and college, a professional financial planner may be able to help you. This person can also help you select the best investments for each goal. Remember, just because you're pursuing both goals at the same time doesn't necessarily mean that the same investments will be appropriate. Each goal should be treated independently. For college: • How many years until your child start college? • Will your child attend a public or private college? What's the expected cost? • Doyou have more than one child whom you'll be saving for? • Does your child have any special academic, athletic, or artistic skills that could lead to a scholarship? • Doyou expect your child to qualify for financial aid?