Find a Middle Ground Between Saving for College and Saving for Retirement
Sorting out financial priorities in your family can be a tricky balancing act, and seeking professional tax accounting solutions Brookfield families trust can help you make smarter financial decisions. The contribution limits for tax-favored retirement savings plans continue to notch upward. This may cause parents to ask the following question: Should I max out my 401(k) account or IRA — or should I set aside more funds for my child’s higher education?
In 2026, the amount you can sock away into your 401(k), 403(b) and most 457 plans is $24,500 (up from $23,500 in 2025). If you’re at least 50 years of age, you can put away up to $32,500 in 2026, thanks to catch-up contributions.
If you save money in a traditional or Roth IRA, the amount you can contribute for 2026 is $7,500 or $8,600 if you’re age 50 or older. This is up from $7,000 for 2025 or $8,000 if you’re age 50 or older.
While you’re contemplating how much to put into your retirement fund, you may also be wrestling with the looming question of how to fund your child’s college education. No parent wants to think of their future college graduate emerging with a diploma and a ton of debt. Nor do you want to sail into retirement with substantial debt of your own and insufficient savings.
Start with the Basics
Until the early 20th Century, one of the reasons people had children was to create a support system for when they (the parents) could no longer support themselves. Assuming that’s not the position you’d like to find yourself in, avoiding it begins with some fundamental financial planning, ideally with guidance from professionals offering tax accounting solutions Brookfield residents can rely on. The basic task is to determine the retirement income you’ll need, and how much retirement savings you’ll need to accumulate by the year you hope to retire. Be sure to consider all income sources, including Social Security. The search term “retirement savings calculator” will swamp your internet browser with links to free tools, some better than others, but they’re a valid way to get a ballpark figure.
Next, study up on college costs — both the “sticker price” and the bottom line after accounting for potential financial aid and scholarship opportunities. Sometimes, when various discounts and grants are factored in, the actual cost of a college degree from a private institution may come out below that of your own state’s university.
Seek Professional Help
There’s a thriving industry of private college selection counselors who can be helpful in identifying schools that have an interest in students with particular backgrounds, life experience, academic interests, and athletic and musical skills. Finding a good match might dramatically lower the cost of attending such a college or university.
These professionals can also help you navigate the process of seeking financial aid, including how to optimize the positioning of your income and wealth status. Retirement savings may or may not be taken into consideration. For example, the standard Free Application for Federal Student Aid (FAFSA) doesn’t ask about qualified retirement plans. In contrast, the College Board’s “CSS Profile” does expect parents to include that information and considers the value of retirement savings when determining financial aid. Not all schools require that you submit a CSS profile; for some, it’s optional. But many do.
The size of your retirement accounts is just another variable considered by colleges using the CSS Profile. The mere fact that you have retirement savings is to be expected and won’t disqualify your child from receiving financial aid. However, if instead of maxing out on retirement savings plans, you kept more in college savings accounts such as a tax-favored 529 plan, those assets would be factored into financial aid decisions. Working with experts in tax accounting solutions Brookfield families trust can help you balance retirement planning with education savings in the most tax-efficient way possible.
When you’ve gathered the basic forecasted retirement savings and college cost numbers together, you can run some scenarios — perhaps with help from a financial planning professional.
Leverage the Power of Compounding
Over time, compounding investment returns and interest income will play a big role in deciding how to strike the right balance. For example, with compounding, getting an aggressive early start with your retirement saving might make it easier for you to pull back a little and shift some dollars to college savings later. If possible, take full advantage of any employer matching contributions to your retirement account by saving at least the maximum amount eligible for those matching contributions.
The tax implications are also important, which is why many families seek professional tax accounting solutions Brookfield residents depend on for long-term financial planning. Finally, there are important parenting philosophy considerations. Know the lessons your children may need to learn about financial responsibility. Having you pay for their entire college education could put your retirement at risk or cause you to work longer than you hoped or are able. As parents, you may want to consider whether covering all your children’s expenses is helping them or perhaps giving them a false impression about your financial situation
There’s much to think about. But the sooner you can get a handle on the matter, the better you and your children will be when those tuition bills start coming in.