Why it's a mistake to put your kids' college savings ahead of your own retirement

Why it's a mistake to put your kids' college savings ahead of your own retirement

Kerry Hannon · Senior Columnist

Thu, September 3, 2026 at 1:00 PM GMT+3 6 min read

Many parents have the lofty goal to cover the full cost of their children's college education.

A record share of parents in the US — 41% — plan to pony up for their kids' entire higher education bill, up from 37% in 2024, according to new research from Fidelity Investments.

That's great news for the kids. But it's rarely a wise move for their parents.

"Unless parents have fully funded their retirement — meaning that they have already saved all of the money they will need — footing the entire bill for children' s education is rarely the best move and can be detrimental to parents' own future," Liz Windisch, a wealth adviser in Denver, told Yahoo Finance.

The motivation is genuine. Nearly 9 in 10 parents say their own student debt motivates them to help their kids, and more than half say having to pay off their loans delayed them from starting to save for retirement.

But how they plan to come up with the funds to pay their kids' tuition bills is troubling.

Many plan to finance their children's college education by withdrawing from a retirement account. They're also cutting what they're saving for retirement as their children get closer to college.

"While it's noble that parents want to help their children feel more financially comfortable, we don't recommend doing that at the expense of their own financial security," said Cory Latham, Fidelity's managing director of 529 college savings. "Your child can take out a loan to cover college costs, but you can't take out a loan to cover your retirement."

That's the heart of the matter. No measure of generosity and self-sacrifice is worth it — for you or your kids — if you end up unable to support yourself after you stop working.

Consider all the costs

First, what will those future college bills look like when the time comes?

Average annual college tuition in the United States in 2026 ranges from about $4,000 at community colleges to over $45,000 at private universities, according to the Education Data Initiative. And the annual cost of attendance at more than a dozen colleges is now six figures, after accounting for tuition, fees, room and board, books, transportation, and other incidentals.

Of course, there are many variables, including whether your child enrolls in a public university in the state where you live (which means lower tuition), financial aid such as grants and scholarships, and where they live once classes begin. Living at home can drastically lower room and board expenses.

"Often parents are thinking about their children before themselves, and sometimes that sacrifice can come at a steep cost for their kids," said financial planner Lazetta Rainey Braxton.

"While they are helping their children by paying for college expenses, they may have the expectation that the adult child will help them during retirement, particularly with long-term care costs and needs."

Those outlays may amount to far more than you can imagine.

For retirees, even if you are on track to have more than $1 million in your retirement accounts, you might be seriously unprepared for future medical costs.

Healthcare, for instance, is one of the biggest expenses as you age — and the costs keep escalating.

On average, a 65-year-old who leaves the workforce this year may need $185,500 in savings to cover out-of-pocket healthcare expenses throughout retirement, according to Fidelity. That does not include long-term care expenses, over-the-counter medications, and most dental services.

An apartment in an assisted-living facility averaged $82,899 a year in 2025, and costs go up as residents age and need more care. Units for dementia patients had an average rate of $103,412.

Talk to your kids

To be clear, student debt is nothing to take on lightly.

The average student borrows more than $35,000 to pursue a bachelor's degree, according to a recent analysis by the Education Data Initiative, and it often takes two decades to pay off the debt.

Student debt isn't "desirable," said Ryan Haiss, a certified financial planner in Garden City, N.Y. "But I generally don't want parents sacrificing their own retirement security in an effort to cover 100% of college costs. … It has to fit within the family's broader financial plan."

Prestige aside, the college or university your child attends should foremost be a financial decision. Since tuition and overall college costs vary drastically by school, parents and children should go through the numbers together, Haiss said.

"Getting accepted into a school doesn't necessarily mean it makes financial sense to attend if doing so requires the parents to jeopardize retirement or the student to take on a potentially crippling amount of debt," he said. "Families should compare the cost and financial aid package at each school, how much the student may ultimately need to borrow, and what that debt could look like after graduation."

Ultimately, the goal should be to help your child graduate in a strong financial position without jeopardizing your own retirement, he added.

Your tools for smart planning

It all comes down to planning with open eyes.

Start by taking advantage of retirement savings accounts with tax benefits, such as a 401(k) or other company retirement plan, and put enough in to earn the maximum matching contribution if your employer provides one.

For those workers without access to an employer-provided plan, set retirement funds aside in a low-cost IRA. IRAs often have no or low administrative fees and offer a broad range of securities and a Roth option. Married couples with a non-earning spouse should consider funding a spousal IRA.

The endgame is to maximize tax-free contributions and tax-deferred compounding — the longer, the better.

"Many people think they will just save for retirement after they finish paying for college, but retirement isn't funded with contributions alone," Windisch said. "Retirement investments need time to grow, and with the potential impact of layoffs and illness, parents may find those high-earning years saving for their own retirement don't always last."

For the college savings bucket, most advisers recommend investing in a 529 account, which offers tax advantages and is designed solely to pay for education expenses. Money in the accounts grows tax-free.

The latest entry to help new and future parents save for their children, but not specific to education, is a Trump account, a tax-deferred investment account for children also called a 530A.

The federal government is providing $1,000 for children born in 2025 through 2028. Parents, families, friends, and employers can contribute up to $5,000 per year per child. The money grows tax-deferred and can be used for qualified expenses such as education or a first-home purchase.

Said financial planner Braxton, "The best gift that parents can give their children is being financially stable and comfortable during their retirement years."

Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including "Retirement Bites: A Gen X Guide to Securing Your Financial Future," "In Control at 50+: How to Succeed in the New World of Work," and "Never Too Old to Get Rich." Follow her on Bluesky and X.

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