Hi, everyone. Good afternoon, and thank you for joining today's workshop. I'm Amy Lynn, a marketing strategist within the retirement business here at Principal. And I hope you're all well and having a fantastic start to the summer. I'm really excited about today's workshop on balancing retirement savings with college expenses, and I'm even more excited to introduce you to our speaker, Jean Chatzky.

Jean is, honestly, a powerhouse in the financial world. She's the founder and CEO of HerMoney and runs these great coaching programs called Finance Fixx and Investing Fixx. If any of you have picked up The New York Times or Wall Street Journal bestseller list, you've probably already seen her name. She's won awards for journalism and broadcasting, and she's incredibly passionate about helping people understand their finances better.

So today, Jean is going to walk us all through how to tackle one of life's most challenging financial balancing acts, that's saving for retirement, while trying to help put your children through college, two things I'm sure many of us are struggling to balance. So the hope is that you'll leave here today with a better sense of how to prioritize retirement savings, how to break down college costs to fit within your goals.

And we're going to talk about the power of 529 plans and some other college savings options. While Jean is presenting, please feel free to drop your questions in the Q&A chat. We're going to have some time after her presentation to address those questions as we can. And I think with that, we're ready to kick things off, Jean. The floor is yours.

Hey, everyone, I'm Jean Chatzky, and I'm so happy to be here with you today, tackling one of life's most challenging financial balancing acts, saving for your own retirement, while also trying to help put your child or children through college. So many of us eventually find ourselves at that intersection of challenges, trying to do both at the exact same time, and I know firsthand just how overwhelming it can be.

The good news is, you don't have to choose between these two incredibly important goals. With a strategy, you can actually work toward both.

What we'll cover in today's webinar are a number of things, the importance of saving early, or at least as early as possible; why you should prioritize retirement savings; fitting college into the picture; the power, which is substantial, of a 529 college savings plan; and other savings options that you may want to consider.

Let's start with a little perspective. According to the College Board, tuition at a public four-year school is $11,610 per year for in-state students, or $30,780 for out-of-state students. At private colleges and universities, that number jumps up to $43,350 per year, and that is just tuition.

The Center for Education Statistics puts the total average cost of attending a four-year college in the US today, including tuition, room and board, at about $153,000 over four years. That is a hefty price tag. Meanwhile, financial professionals at Principal suggest saving 15% of your income, including employer contributions toward retirement.

Now, that's assuming you are able to start saving in your 20s. If you're starting in your 50s, you're going to need to increase those savings targets in order to retire comfortably. In other words, it's pretty clear we have our work cut out for us.

So how do we balance those competing priorities? Today, we're going to cover some key strategies that can help, and I, for one, am so excited to dive in.

You have heard it all before, but the most powerful financial tool at your disposal, it's time. The earlier you start saving for anything, the better off you'll likely be. So pay yourself first, and do it automatically. Compound interest is your best friend. That's true of both college and retirement.

Here are two simple examples. If you start saving $200 per month in a college fund when your child is born, assuming an average return of just 6%, which is far less than what the markets have earned lately, you'll have about $77,000 by the time they turn 18. But if you wait until they're 10 years old to start saving, you'll only have $26,000. That's a pretty significant difference.

Likewise, for retirement, if you start saving just $200 a month for retirement at age 25 and you earn an average annual return of 6%, by the time you're 65, you'll have around $398,000. But if you wait until you're 40 to start saving that same $200 a month, you'll end up with only about $114,000. That's the magic of compound interest, and it's why starting early makes such a massive difference.

So which gets priority, college or retirement? Generally, retirement does and for a very important reason. Because what you can't do is sacrifice your own retirement for your child's college education. There are loans that you can take out for college, but there are no loans for retirement.

Plus prioritizing your retirement, it's not selfish. It's responsible. And it protects your child or your children from potentially having to support you later in life. But saving less or saving nothing at all toward your retirement in favor of college, it's a mistake for several reasons.

Number one, time is your greatest asset. You want to take advantage of as many years of compounding growth potential as you can get, which is why it's so important to keep your retirement contributions steady. The more time your money has to potentially grow, the less you may need to save later.

If necessary, you can reduce contributions temporarily, but don't stop them entirely. According to a recent Principal survey, nearly 80% of retirement savers restart contributions after stopping due to a financial setback.

Reason number 2, employer matches. If you stop contributing to your 401(k), you'll miss out on that all-important free money from your employer. Third, retirement accounts are shielded from the FAFSA. The FAFSA is the Free Application for Federal Student Aid. Money in retirement accounts does not need to be reported on the FAFSA, so keeping your retirement on track can actually help your child qualify for more aid.

So how do you make certain you're prioritizing your retirement savings? First, use your resources. Principal offers resources, such as access to financial professionals and budgeting tools to help you create and stick with a plan. Financial professionals specialize in helping people find this balance and can help you make a smart, sustainable plan.

Next, automate your retirement contributions so that you don't have to think about them and consider increasing the amount by 1% each year until you're maxing out. Also, reframe the narrative. Talk to your kids about shared responsibility. Part of your job is securing your own future in retirement, and part of their job is engaging with the many tools that are available to help fund their education.

And check in on your numbers often. While it's nice to be able to set and forget your savings and investments, you're going to want to check in on your account balances at least a few times a year. You don't want to inadvertently find yourself saving more for college than you do for retirement, or forgetting to contribute more to retirement whenever you get raises or bonuses. Being intentional, that's the name of the game.

And remember that by putting on your own financial oxygen mask first, you're not being selfish. You're making a smart, strategic choice that has the potential to benefit your whole family in the long run.

If you're able to get on track for retirement and invest for college simultaneously, consider yourself fortunate. I recently chatted with Mark Kantrowitz, who is really the preeminent scholar on all things paying for college. He's the author of the books, How to Appeal for More College Financial Aid and Who Graduates from College? Who Doesn't? And he weighed in on exactly how much you should consider saving.

He shared some great news. You don't need to save every dime you'll need for your child's education. Instead, he suggests aiming to save 1/3 of the expected college costs ahead of time. Even if you think you can save the full amount of their education, it's more important that you fund your own retirement.

To fully cover college costs, you'll cover one of the remaining thirds with a mix of financial aid, including loans or scholarships, and another third out of your current income, which is likely to be near its high point when your child goes off to school.

Let's run the numbers. If we use that $153,000 average four-year price tag from before, then saving a third of that before college means you'll set aside $51,000. Then, just as a hypothetical, the remaining $102,000 might be covered a little something like this.

We'll say $45,000 in scholarship and financial aid, plus $57,000 as a mix of $7,000 per year from parents' income over four years. That's $28,000. $5,000 per year from your student's part-time work, which over four years, translates to $20,000. $9,000 in student loans. That's the total for four years.

So while that $153,000 figure may have seemed insurmountable, breaking it down into this, into bit-sized pieces, I hope it seems more doable.

How confident are you that you'll be able to cover a third of the cost of your child's or loved one's college education? If you're worried that your child won't go to college, Kantrowitz says, don't. With your savings in a 529 college savings plan, you actually have a lot of flexibility.

So let's dive into that. I suspect many of you have heard of 529 plans. You may even have one, in which case, great job. 529s are State-sponsored, tax-advantaged savings accounts specifically for education expenses. They're often the default college savings vehicle in our country, and that's for a handful of reasons.

First, they offer tax free growth potential. Your investments grow tax free and withdrawals for qualified education expenses, which include everything from tuition, of course, and some room, board, and books, but also, extend to computer equipment and dollars for student loan repayment, and those withdrawals are not taxed.

Second, flexibility. You can transfer the account to another child, grandchild, or even to yourself, if the original beneficiary doesn't use the funds. Third, State tax deductions. While there are no federal tax deductions or credits for 529 contributions, there are some benefits available on a State-by-State basis.

Some States offer a direct income tax deduction or credit for contributions to their State-run 529 plans. Others offer a tax parity benefit, meaning you can contribute to any State's 529 plan and still receive a State tax deduction or credit in your State.

This offers more flexibility for families who might prefer an out-of-state plan with better investment options or lower fees. Unfortunately, the rules do vary widely by State, and it can get complicated. So check your State's guidelines to make sure you're able to snag all the benefits that you can.

Fourth, there's a new Roth IRA rollover option. If your child doesn't use the full 529 balance as of 2024, you can also roll some unused funds from a 529 into a Roth IRA, per the SECURE 2.0 Act of 2022. Rollovers would also be tax and penalty free, but be aware, there are many rules to follow.

The 529 must have been open for at least 15 years. Your rollover amount can't exceed the annual IRA contribution limit, and you can only roll over $35,000 per beneficiary, for example. Note, be aware that 529 plans owned by grandparents are treated differently when you apply for college than those owned by parents.

Recent changes to the FAFSA, which, again, is the Free Application for Federal Student Aid, means that grandparent-owned 529s may actually be more advantageous for those applying for need-based financial aid. Previously, taking money out of a 529 owned by a grandparent was considered cash support for the purposes of calculating financial aid, but now, those gifts are not required to be reported, while 529 assets in the parent's name are counted.

Last note on 529s, funding these accounts does not have to fall on your shoulders alone. A November 2024 survey from savingforcollege.com, which is a website that offers a helpful guide to 529s revealed 94% of parents said they would like their children to receive contributions to their college savings funds as holiday gifts. But 41% of those parents only let friends and families know this if they are asked outright for a gift suggestion. Don't hold your tongue.

Additionally, some 84% of grandparents surveyed said they'd open their own 529s for their grandchildren. And of those who hadn't, 68% wouldn't hesitate to contribute to one that was opened by the parents. Other family members may be very happy to help as well. Even small contributions over time can make a very big impact.

Even if you haven't saved as much as you'd like by the time college rolls around, it's good to know you still have options. Number 1, of the most cost effective moves you can make is to talk to your child about attending community college for the first two years, just to get their core classes out of the way. At that point, they can transfer to a four-year institution of their choosing.

Many four-year schools already have agreements in place to accept students and their credits from particular community colleges, if they're able to maintain a certain grade point average. This is particularly important if your kids have graduate school in their sights. That's because there's likely more borrowing in their future.

And if community college is not for them, that's fine, but encourage them to cast a very wide net in their college application process, including both affordable schools and schools that are likely to look at them as top candidates. The latter puts your kids in line for merit aid, which, unlike other forms of financial aid, does not have to be repaid.

Number 2, you consider taking out student loans. Again, looking at Mark Kantrowitz's data, he recommends only borrowing the amount that's covered in undergraduate Stafford loans. And I know this may not always be possible, but it's a good goal to keep in mind. And if you're the kind of person whose brain needs a maximum amount in dollar terms to keep in mind, we have one.

Kantrowitz says never borrow more than you expect your child to earn in their first year out of school. It's really important to talk to your kids about what repayment is likely to take out of their first paychecks in dollars, and what that will prevent them from doing when they want to do things like moving to a big city or getting their own apartment.

Just a few definitions for those of you who are not familiar, Stafford loans are low-cost federal student loans that are offered by the US Department of Education to help eligible students pay for higher education. They come in two types-- subsidized, where the government pays the interest while the student is in school at least half time, and unsubsidized, where interest accrues during all periods.

Borrowers must complete the FAFSA to qualify, and repayment typically begins six months after the student graduates, leave school, or drops below half-time enrollment.

Number 3, look at scholarships, work study programs, or part-time work. Have your child apply for as many scholarships as possible, even if it seems like a long shot. Making them feel like applying for scholarships is their job is important. It's a way for them to earn money, and every dollar gained is one less borrowed. Also, encouraging students to pursue part-time jobs or participate in work study programs can meaningfully offset college costs. And having a job can be invaluable when it comes to students building time management skills, as well as professional experience.

Number 4, look at direct PLUS loans and private loans for parents. Direct PLUS loans and private loans each come with their own sets of pros and cons. PLUS loans offer fixed interest rates. They are currently 9.08% through July of 2025, and flexible repayment options, which can provide peace of mind for parents who value predictability.

However, interest starts accruing immediately, and the loans carry a 4.228 origination fee. The best way to think about that origination fee is that it effectively adds about 1% to the interest rate when compared to a private loan with no fees over a 10-year term. So that means the true cost to compare is closer to a 10% fixed rate. Note that PLUS loans are federal education loans, which means they have different provisions for deferment and forbearance, as well as more repayment options than private loans.

In contrast, private loans may offer lower interest rates, especially if the borrower or co-signer has excellent credit. They also typically don't include origination fees. That said, the terms vary widely between lenders, so it's crucial to shop around. A full list of private lenders can be found at privatestudentloans.guru.

One important note on PLUS loans, Kantrowitz cautions that the current administration is considering repealing the Parent PLUS and Grad PLUS loans as part of a budget reconciliation bill and replacing them with higher aggregate limits on federal direct Stafford loans of $50,000 for undergraduates, $100,000 for graduates, and $150,000 for professional degree programs.

And one other important note on all parent loans, Kantrowitz does not recommend that parents take out loans if it can be avoided. He dug deep into the numbers and found that you're better off saving for college than borrowing for college, assuming that the savings and loan payments will reduce the amount saved for retirement. The only way one ends up with more money for retirement is that if you assume somebody else is repaying the parent loans.

Number 5, look at home equity loans, or HELOCs. A home equity line of credit, or HELOC, is an option for homeowners willing to use their home's equity as collateral in exchange for liquidity. The pros are that you can find a potentially lower interest rate than with student loans.

On the con side, it puts your home at risk if you can't repay the loans. You can get a HELOC from your current mortgage lender, but you might be able to find a better deal elsewhere, so do your research. Read all the fine print on loan fees, interest rates, repayment terms, and any potential limitations and risks. Most HELOCs come with a variable interest rate, so you need to be prepared to manage fluctuating monthly payments.

A word of caution. Never take on debt that puts your financial future at risk. Your child has decades to pay off their student loan. You have a much shorter window to build your retirement savings.

I hope that in our time together, you've seen that paying for college and retirement at the same time can absolutely be done. If I had to leave you with a set of action items today, I'd say start saving as early as you possibly can for both college and retirement. Compound interest is your very best friend.

Consider a 529 plan, and let your whole family know that contributions are at the top of your wish list for gifts. As soon as your child hits their teenage years, start talking to them about what they want to do professionally, along with the cost of college and the importance of choosing an affordable school, as well as pursuing scholarships. Make them feel like they have agency and that you're all in this together.

Finally, and most importantly, make a pact with yourself to consider increasing your retirement contributions every single year, even when juggling college costs. Even a 1% increase every year can really add up over time.

Thank you so much for joining us today. I know we have some questions, so let's dive in.

Jean that was a wonderful presentation. Thank you so much for sharing those valuable insights. And you're right, we do have some really great questions from our audience. So I think we can go ahead and dive into those.

That sounds great. That sounds great, Amy. Thank you guys so much for being here. Thank you so much for having me.

Great. So the first question we have is, is it better to reduce retirement contributions to help pay for college or to take a student loan?

So here's the deal. You can take loans for college. As I said earlier, there are no loans for retirement. And for that reason alone, I give the edge to student loans, as long as you borrow smartly. Because once you fall behind on retirement saving, it can be really, really hard to catch up.

But as we've been talking about, you want to be responsible with that student debt, which means trying to cap it at no more than what your child expects that they're going to earn their first year out of college. That can be a smarter route, particularly because of preferential interest rates than shortchanging your own future security.

And just realize it's a cycle. So by putting the priority on your own retirement savings, you're actually helping to protect your kids from having to support you down the road, which is something that no parent wants to see happen.

Finally, just a word about those parent PLUS loans, they can be really costly. They can be hard to discharge. If loans are needed, really focus on those federal student loans in the student's name first. They have much more flexible repayment terms.

That's great insight, and I love the tip about not taking more debt than you think they're going to make in their first year. I love that tip. That's great. Our next question is around strategy, and it is asking if it is a good strategy to have my son take out loans for college that we will pay for him after he graduates. They are trying to maximize their 401(k) contributions during their last eight years of employment, and their son will be in high school as a senior next year.

Yeah, so this can often be a better strategy than taking on parent PLUS loans yourself because as we've been saying, they come with higher interest rates, and they come with fewer repayment options. When your child, when the student takes out the loan, it not only preserves your ability to max out those 401(k) contributions in those critical final years, remembering that those are the years when your catch up contributions really have muscle and can make a big difference.

If you decide that you're going to go this route, if you plan to repay the loans for your children, I would say you want to memorialize that in writing, document that agreement. Consider signing a written agreement so that you ensure that everybody knows what's happening here and that everyone is on the same page about who's responsible for what.

And I would encourage your kids to contribute something, even if it's a small amount, so that they have skin in the game. It builds financial awareness. It builds accountability. I think it's a little bit of a nudge to get them through college in four years, rather than five years or six years. But as we've been saying, try to stick to that rule of thumb of not overborrowing.

Yeah, it's a great thing to keep in mind. I think you can easily lose track of that when you start looking at some of the numbers that may come through. We have another question. I want to make sure that my wife and I have flexibility on how we could spend the money we save for our children in case college isn't a route they end up choosing. What options should we look into that gives us that?

This is such a good question, and I think it's especially a good question now because we see trends of kids looking at different alternatives post high school. So I believe the 529 is still an option that you want to consider. They do offer more flexibility than ever before, and that's thanks to some changes in the rules.

It makes it so that 529s are not just for traditional four-year college anymore. There were some rule changes in 2024, and now, up to $35,000 in unused 529 dollars can be rolled into a Roth IRA for the beneficiary, which gives your child a start on retirement savings, instead of going down the road where those unused funds are going to be penalized, where they are pulled out of the account.

If one child doesn't need the funds, they can also be used for another beneficiary in the family, so a sibling. But you can also use it yourself. If you have aspirations to go back to school, you can use the money that you put into a 529 for your child, making yourself the beneficiary, and use it for your own continuing education.

And if none of those options apply, remember, non-qualified withdrawals do come with a penalty, but it's a penalty of 10% on the money that you've earned, not of the entire balance. And I think sometimes people think that the entire balance is going to be penalized, and so they worry about it a little more than they should.

No, that's great insight. I have learned so much in the short time that we've been with you today. I think that's really all we have for questions, unfortunately, or all the time we have for questions. But I'm taking everything that I've learned today as I head out later to take my oldest on some college visits, so this could not have been more timely.

Thank you so much for joining us, Jean. Again, thank you for the questions that we were able to answer from the audience. And thank you, again, to Jean for helping provide a clearer picture on how we can work towards both goals efficiently and with confidence.

Thanks so much, Amy. Thanks for listening, everybody.

Before we close, everyone, I do want to remind you that we will be sending out an email in the next few days. That's going to include a link so that you can watch the replay. And you can download the handout we've talked about. If you'd like to download the handout now, you can do so by navigating to the handout section of your webinar toolbar.

And if you've asked a question in the chat that we did not have time to answer live, please feel free to stay on. Our representatives are working to answer as many of your questions as possible. It has really been a pleasure hosting for you today. Jean, it's been a pleasure talking with you. And thank you, everyone, for joining us, and I hope everyone has a great afternoon.