The Challenge of Family Savings: College vs. Retirement

Balancing saving for college and retirement has grown increasingly difficult in the recent generation, according to a research paper from Putnam Investments. The paper, called “College or Retirement? How to Calance Two of Life’s Biggest Savings Goals,” indicates a variety of reasons for this dilemma concerning families throughout America.

The increasing responsibility on individuals to provide their own retirement is cited as the main reason for this change. In 1985, 60% of assets for retirement were represented by employers’ benefit plans. Today, however, two-thirds of retirement assets are provided by individual contributors.

With record numbers of students going to college, the availability of student loans has decreased. In addition, lenders are leaving the market, as 50 private nonprofit lenders have left this business within the past 10 months. Coupled with the decline in housing values, which leaves less equity to leverage for loans, parents have fewer options available to them for funding and saving for college. Also, a demographic trend of having children later in life leads families to save for both retirement and college at the same time.

Putnam’s chief of retail marketing, Elaine Sullivan, said that there is now a need for new savings strategies that offer realistic approaches to achieving both goals: simultaneously saving for college and retirement.