It's funny to think about how much our financial perspectives change as we go through life. When I was young, I thought anyone with extra money was rich. In high school, I envied my classmates whose uniforms always looked brand new and who could afford LL Bean backpacks and Adidas gym shoes. (When you go to a Catholic school and wear a uniform, the extent of your style expression lies solely on your bag and shoes. And, of course, how perfectly ironed your pleated wool skirt is.)
Now that all seems so silly. I graduated from high school and onto bigger worries, such as being able to obtain enough student loans to attend college. That evolved into worrying about how long it would take me to pay off my student loans. And now, I have a bigger worry on my mind: retirement.
Let me start by saying that I could care less about retiring early. I'm one of those weird people that loves work -- especially when my work is writing. I hope to be writing for many years to come, until my feeble hands can barely hold a pen or type on a keyboard. However, I'm fully aware that retirement isn't always voluntary. Forced retirement due to ageism and extended medical leave happens.
In other words, retirement is something I know I need to reckon with, whether I like it or not.
Looking back, noticing the changes in my financial perspectives has led me to an understanding of how I want to manage my finances moving forward. And knowing what I know now, I believe it is far more important to save for retirement than it is to save for college. Here's why.
Student Loan Debt = Tax Benefits, Elder Care = No Benefits for Your Expense
Don't get me wrong -- I'm not a fan of student loan debt. In fact, I'm making biweekly payments on my loans to pay them off faster. That said, I get one benefit every year from my student loans: a tax write-off on the interest paid. It's not as good as not having debt, but it's better than nothing!
Elder care costs don't have such clear benefits. Tax cuts can be acquired by children claiming their parents as dependents, but it's not always an easy process. And if you're paying for your own elder care, then you won't benefit from that. I don't know about you, but I'd rather save money for an expense that isn't tax deductible than an expense that is.
Student Loans Have Relief and Forgiveness Options, Elder Care is Set in Stone
There are a multitude of forgiveness and relief options for federal student loans. In fact, you can even defer or forbear your payments during times of economic hardship. While this may not slow down interest accrual, at least there are options for relief in times of need.
But where are the relief options for elder care? There's no way to suspend payments on a nursing home or assisted living if you run out of retirement funds. Even if you're lucky enough to never need those services, there are still expenses to be covered in retirement that don't have much flexibility, such as food, mortgage or rent, medical care, and so on. Given the amount of unknowns that can come up in retirement, I'd prefer to be as prepared as possible.
Young Professionals Have More Time than Older Adults to Earn Money
As much as I don't want to saddle my future children with debt, they will have a lot more time to earn money (even if they're paying for student loans) than I will to save for retirement. By the time I pay off my loans and save a good amount for their college fund, I might be 40 years old before I can even start saving for retirement. Add in the costs of having kids in the first place and potential home ownership and you can tack a few more years onto that retirement savings delay.
With the way compound interest works, that delay can cost tens of thousands of dollars.
But if I funnel all extra money into paying off my student loans and saving for retirement, then I'm more likely to be financially solvent in retirement; which leads me to my next point...
I Don't Want to Be A Burden on My Future Children
More than anything, I don't want to be a burden on my future children. If they can graduate with some expenses but also the knowledge that their money earned is entirely their own, then they can get a major head start on their financial futures. But if they have any fear that I might need help from them, what will that do to their ability to prepare for their own futures?
I don't want my future children to neglect their dreams because they're worried about taking care of me. I want them to have the flexibility to go after whatever they want in this life and have as much control over their finances as possible. By ensuring that I won't need their help because I was responsible about my own future, I can give them true freedom to build their own lives.
Elder Care Costs Can Be Unlimited; Student Loan Debt Can Be Controlled
Although college tuition is escalating at epic proportions, there are ways to control the costs. I can help my future children expand their education and pursue hobbies that could lead to scholarships. And if scholarships don't cover the whole cost, there are more options, like staying close to home (to forego dorms and pay in-state tuition), choosing a public university over a private university, and taking extra classes each semester to graduate early.
Elder care costs aren't so easy to plan for. Who knows what kind of things can happen in retirement? Illnesses come along and medical costs often know no bounds. If nursing homes or assisted living become necessary, that's an added cost that can last for an indeterminate amount of years. Then there's the simple factor of inflation, which can make a large retirement savings last half as long as expected. Compared to the unknown costs of elder care, college tuition suddenly seems a lot more controllable.
Why A Debt Payoff Expert Prefers to Save for Retirement
Given the high cost of student loan debt, it might seem crazy that I would prioritize saving for retirement over college funds. (Even more so considering that I work for a company that helps people pay off their debt.) But I believe in a holistic approach to debt freedom.
There's an entire generation of adults stuck in between student loans, parental care, and college funds for their children -- with little hope of meeting their own retirement needs. Add to that the fact that many millennials aren't even being offered retirement benefits from their companies anymore and we're looking at a scary cycle of debt for generations to come.
I say we should stop the cycle of going from new debt to new debt, evolving from one financial worry to the next. Let's create a way to help future generations build better futures for themselves. And with the way things are going, they're a lot more likely to see positive progressions on student debt than they will for retirement costs and elder care.
