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University Costs Can Disrupt Your Retirement Plans

University Costs Can Disrupt Your Retirement Plans

January 22, 2023

Beware – the cost of your children’s university education can compete with funds you need for retirement, writes Peter Watson.

The closer you get to retirement the more focused you can become on paying down or eliminating personal debt including a mortgage. Plus increasing your savings that will be necessary to provide a revenue source after your employment income stops.

The speedbump is the cost of your children’s university education. Timing is an issue because by the time children head off to university, you are close to retirement. You only have a short time period to build up retirement funds.

Your potential university cost will vary depending on several factors, but we will assume $25,000 per year for a four-year degree. That is a total of $100,000 per child.

How many children do you have, and will you provide financial support after their first degree?

Planning is very important but on a practical level raising children, having a career and a normal life takes all your time.

We suggest when children are very young that parents have a conversation. Discuss some of the points mentioned in this column.

Do you hope your children will go to university? Will you provide financial support? How much is that likely to cost?

And finally, how are you going to generate your “children’s University nest egg?”

The perfect formula is to balance your life needs during your entire adult life. Planning retirement that considers the cost of educating your children is critical.

One final comment. When children leave for university, parents acknowledge how quickly they grew up. That is true.

Because life happens so quickly it is in your best interest to determine your personal priorities. Then develop a financial strategy that will make that happen.

Peter Watson, of Watson Investments MBA, CFP®, R.F.P., CIM®, FCSI offers a weekly financial planning column, Dollars & Sense. He can be contacted through