Fred Harteis News Articles - College? Retirement? How to handle two big financial challenges

Fred Harteis News Articles - Is it possible to save for retirement and for a child's education at the same time? Sure, but it requires a pretty decent income and lots of disciplined saving. And even then it's no picnic.

Indeed, as a practical matter, Most people have enough trouble just saving adequately for their retirement. Throw in college education and it just becomes too overwhelming. Too often the result is that people don't address either goal adequately, or they get so discouraged that they sometimes give up altogether, figuring it's hopeless.

Have an emergency fund First, build a cash reserve, or emergency, fund. Have about three month's worth of living expenses in a very safe and readily accessible account - a money-market fund, savings account or perhaps an ultra-short-term bond fund, something with an average maturity of no more than two years.

The idea is to have a buffer that acts as a first line of defense against financial setbacks, a stash you can fall back on to cover unexpected expenses you can't fund out of your paycheck or to carry you until you find a new job in the event you're laid off.

You can give yourself a bit more wiggle room by opening up a home equity line of credit that you could tap when your emergency fund is on the verge of being tapped out.

Put as much as possible in retirement accounts After you've got your emergency reserve funded, start plowing as much as you can into your 401(k) or other retirement savings plan.

You, apparently, have embarked on this part of the plan before accumulating the emergency stash. I think it's better to do it the other way around, or, if you can manage it, build your cash reserve fund as you save at least something for retirement. But the most important thing is that once you've got that cash reserve together, you want to fatten up those retirement accounts.

Ideally, you want to contribute at least enough to your 401(k) to take full advantage of whatever match your company offers. But if you really want a shot at a comfortable retirement, probably shoot for socking away 10 percent to 15 percent of your salary in your 401(k).

If that's more than your plan allows, then do the max and try to make up the rest by opening up an IRA or even a taxable mutual fund account.

If you get started early enough - say, in your 20s or early 30's - contributing this amount should give you a good shot at an income that, combined with Social Security, should fund a comfortable lifestyle in retirement. If you don't get started until your 40s or later, however, you should try to ramp up your savings even more.

Unless you think you can get by on Social Security - your only hope for a comfortable retirement these days is to save rigorously throughout your career.

With college expenses, on the other hand, there are several alternatives. Your kid may qualify for financial aid. You may be able to hit up the grandparents for help. Students can earn part of their tuition, or take out college loans. You could borrow against your home equity. You could even dip into your retirement accounts or other savings if you really, really need to.


Enhance your family's current financial situation by building a reserve fund and then set the stage for your future financial security by saving for retirement. If you can still manage to after that, then do whatever you can for your kids' education.

Source: Cnn.com

About Fred Harteis: Fred Harteis leads Harteis International. Fred Harteis has a background in agriculture and has created many successful business ventures.