The second most traumatic college planning mistake many parents make, is using their existing retirement funds to pay for college. In other words, many parents take distributions or loans from their company’s 401k or other retirement plan, usually to avoid taking out student loans. To add insult to injury, many parents also fail to continue saving into their 401ks or IRA’s during the college years.
What makes this mistake so huge is the fact that most parents typically do this somewhere between age 40 and 60. That leaves a painfully short amount of time to make up the depleted funds before retirement kicks in for mom and dad. For many parents, they don’t realize until it is too late, that borrowing against their retirement actually postpones it for 5-10 years!
If you find yourself on the fence with the decision to raid your retirement plan, just remember this tidbit of wisdom: You’ll always have an easier time getting a student loan than a retirement loan!
