Retirement and college are both very expensive, and both times where you aren’t exactly going to want to work to pay your way through it. The following is a look at some of the ways you can save for college and retirement.
1. Know how much you need. Before you can come up with an appropriate strategy for saving for college or retirement, you need to have a general idea of how much you want to earn. For example, you may find that you planned enough for tuition at your school of choice, but what about housing, books, extra curricular, etc.? Be thorough about how much you will need, otherwise you will never come up with a strategy that will work properly for saving for college or retirement.
2. Use programs. There are a number of programs developed to help you maximize your retirement and college savings plans. Do not try to just stick money away in a bank account, consider these programs, as they are in place for a reason, inflation being one of them.
3. Diversify. Do not put all of your eggs in one basket, as the saying goes, otherwise you may find yourself saving for years, with little to show for it when all is said and done.
Here are a few of the afore mentioned programs:
College savings programs:
Upromise: This is a college savings strategy that was developed to make saving for college easier. There are other programs like this one, this is just an example. Basically Upromise has partnered with other companies to help you earn for college. You sign up for free, and you get benefits (much like credit card reward points), when you spend with certain retailers, etc. For example, if you get life insurance through NY life, they will donate $50 to your Upromise account to help pay your tuition. You simply link your account to your credit and debit cards, etc.
IRA: A Roth IRA is your best bet if you do not exceed the income limitations of $95k if filing singly and $150k if filing joint. These can be used as a way to earn tax free money through investing, and use it to pay college tuition.
Automatic savings plans: This is where you save money automatically out of each pay check to a high yield account to help you save for college faster.
529 plan: This is a college savings plan that offers withdrawals that are free of federal tax. There are no income limitations or age restrictions.
Retirement savings programs:
401k: This is a retirement savings plan that offer contributions matched by your employer. The money you invest can be used as a deduction from your income taxes. Also, because your employer matches, it can be easier to save more.
IRA: A traditional or Roth IRA can be used to create retirement accounts. They are either tax deferred or tax free, and allow you to save and pay less taxes, or no taxes on your earnings.
Investing (using an IRA, self directed IRA, or on your own): Investing is a fantastic way to help you earn for retirement.