puts you in a better position to save.
By the way, delaying parenthood is not just about saving.
Professional women who wait until age 35 to have children
earn an average of $50,000 more than those who have children at 20, according to Elizabeth Gregory, author of Ready:
Why Women Are Embracing the New Later Motherhood.
Older moms also tend to have more work experience,
often putting in more than a decade to establish their careers.
That can give them the clout to structure postpartum jobs
that wouldn’t be available to 20-year-olds with limited work
experience. That leads to less time out of the work force,
higher incomes, and more savings.
And you’ll need more savings if you do have
kids—especially for their college expenses.
But having children or committing to sending
them to the best schools money can buy
shouldn’t derail your retirement planning.
Look at College as an Investment
The notion that college is an “investment” has
been used to justify spending almost any amount
on getting a degree. Instead, parents should
evaluate an investment in college just as they
would an investment in the stock market and
consider how well it might pay off. Your chil-
dren “are going to college as a financial invest-
ment in their future earnings,” as Edelman puts
it. “That means you have to apply financial crite-
ria to the decision—not just about whether to go,
but where to go and how you do it. If your kids
want to enter a profession that is not financially
rewarding, you have to make sure that you
obtain that education at the lowest possible cost.”
That may mean going to a state school
rather than a private one, spending two years
at a community college and living at home,
or delaying college for a year or two to work.
Get a Bead on Where You Stand
Most people have no idea where they stand with retirement
planning, because they’ve never done the math to determine
whether they’ll have enough. That’s understandable to some
degree, since retirement calculations are complex, requiring
speculation about inflation, interest rates, and longevity, plus
a bit of long-forgotten algebra.
Web-based retirement calculators can help. My favorite of
these online tools is Kiplinger’s Retirement Savings Calcula-
tor, because it is clear about the assumptions that are being
made about your investment returns and how much you think
you’ll need to live on. Better yet, if it turns out that you don’t
have enough saved already, this calculator will tell you just
how much you need to sock away each month from now until
your projected retirement date to have the savings you’ll need.
Consider Delaying Retirement
If the previous exercise leaves you depressed and certain
that you’ll never be able to save enough, realize that delaying
retirement, even by a year or two, can have a dramatic impact
on your retirement readiness. That’s partly because Social
Curb Your Enthusiasm
Once the kids are done with school and out
of the house, parents are likely to have far more
money to spend if they’re still working, says
Geoffrey T. Sanzenbacher, assistant research
director at the Center for Retirement Research at
Boston College. Normally, they do spend it, too,
but instead of on the kids, parents now seem to
be splurging on themselves—taking more expen-
sive vacations, remodeling the house, or buying
better cars, for instance.
If you’re a little behind on retirement savings
already, this boost in spending is likely to set you back even
more. That’s because people tend to get accustomed to a
lifestyle and feel the need to maintain it in retirement. The
richer the lifestyle, the tougher it is to finance.
“If you can take that time when the kids are gone to cut back
on your household expenses even a little bit, it can help you in
two ways,” Sanzenbacher says. “It can allow you to save a little
more and get you accustomed to spending less.”
KATHY KRIS TOF, author of Investing 101, is an award-winning
financial writer and journalist.
COSTS OF LIVING,
Average cost of standard
of raising a child
through age 17 for a middle-income couple
of one year at a private four-year
room and board
Source: College Board
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