Saving for College and Retirement on One Income

If you’re living in a one-income household and trying to save for your children’s college education and for your retirement, here are a few strategies to consider:

• Create a budget based on your household’s base salary. The amount of a year-end bonus is often unpredictable because it’s influenced by a variety of factors, such as personal or team performance and company financials. So, create your budget and savings strategy around your base salary. That way you can set realistic goals and consistently invest dollars for the future.
• Make the most of employer-sponsored retirement savings plans. Many employers offer automatic enrollment and salary deferral to help make it as easy as possible to contribute to an employer-sponsored retirement savings plan, such as a 401(k) plan. If your employer offers to match contributions, contribute the amount needed to ensure you get the full match. If you don’t, you’re leaving “free” money on the table.
• Save more during more prosperous years. The truth is that some years are financially better then others. When you do get a bonus, invest more into your college and retirement savings vehicles.
• Create flexibility. For example, consider using a Roth IRA instead of a 529 plan to save for your children’s college education. Doing so gives you the flexibility to tap into the account for college without incurring penalties — or to use the money for retirement if needed.

Since every financial situation is unique, consult a financial advisor for help creating a budget and a financial strategy that’s right for your situation. In addition to helping you create a solid financial foundation, your advisor can help you adjust your financial strategy to help meet changing needs throughout your lifetime.