Don't put off your plan for saving

August 28, 2005|By KNIGHT RIDDER/TRIBUNE

The primary concern of most parents is to make sure that their children live healthy lives filled with as much opportunity as possible.

And while many parents are on top of contributing generously to college funds for their kids - some even before the children are born - it's important that mom and dad don't get so caught up in providing for their children's education that they neglect their own retirement savings.

Putting off saving for retirement until after your kids have left the nest can mean the difference between a retirement you really enjoy and one filled with strain and financial burden.

Duane Meek, senior vice resident for Retirement Plans for Nationwide Financial Services, offers a breakdown:

"A 30-year-old parent who began saving for retirement when the first child was born could have saved more than $750,000 if he or she had invested about 6 percent of his or her salary in a 401(k) and received a 3 percent employer match with a modest annual return of 7 percent.

"Conversely, a person who began saving after sending his, or her, child to college would have saved only a little over $185,000 at retirement. That's 300 percent less money to live off of during the golden years." (This calculation assumes the parent retires at 67 and had a starting salary of $35,000, which increased 3 percent each year until retirement.)

Here are some of Meek's additional tips for both retirement and college:

Start early and take advantage of the power of compounding. Saving a little now might not seem like much, but the earlier you start, the closer you are to achieving your financial goals.

Make it automatic. It's much easier to save extra money when you pay yourself first.

Invest extra money. Make that extra income from a bonus, tax refund or inheritance work for you by putting a portion of that money into your child's college fund.

Ask for relatives to help. Instead of having family members buy gifts for birthdays and holidays, ask them to contribute to a college savings plan.

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