Many families today are faced with a difficult dilemma — “Do we save for our children’s college education, or do we save for our own retirement?” Historically, when retirement income was derived from a number of sources — company pension, Social Security and personal savings — this was an easier task. For many workers, a company pension may prove unlikely and Social Security may be inadequate. As a result, years of investing in a company-sponsored retirement plan and/or into an Individual Retirement Account (IRA) may be required.

The question comes for many, though, should we save for our child’s (or children’s) college education or our own retirement? Many experts recommend that parents pay off high interest rate debt, establish an emergency fund, purchase adequate life insurance and take advantage of the employer match in their retirement plan before contributing toward college education. This is not a selfish decision — merely a practical one. In 2006, the average annual cost at a four-year public university had risen to $12,796. In comparison, an adequate retirement income may require a pool of assets in excess of $1 million. In most cases, waiting until the children are out of college in order to start saving for retirement is not feasible.

Although options for funding retirement are limited, many avenues are available for college funding. Consider these options:

• Financial aid. Programs are available for different income levels. Be sure to fill out the Free Application for Federal Student Aid — FAFSA — to see if your child qualifies.
• Advanced Placement (AP) and dual credit. Your student can receive college credit for qualifying courses and tests.
• Student loans. These are often cheaper for the student to acquire. Parents (or grandparents) can always assist in helping pay them off.
• Grants and scholarships. These funds may be based on specific criteria (ethnic, religious, academic, etc.). Many go unused each year.
• Alternative programs. Consider two years at a community college or vocational school combined with living at home to substantially lower costs.
• Delay college. Encourage your student to work for a year while raising funds, or utilize a work/study program while attending college.
• Tax credits. Use the Hope and Lifetime Learning tax credits when filing your income tax.
• College savings programs. Investigate prepaid tuition programs, state-sponsored 529 plans and the Coverdell ESA to prepare for future college costs. Invest any “extra” funds from inheritance, monetary gifts, tax refunds or pay raises to contribute to these programs.

The bottom line? You can borrow for college, but not for retirement. Retirement readiness will require commitment to adequate savings over the long haul.