Reducing retirement to help pay for college

[Anonymous]

Yes, we didn’t save enough and only recently hit $200 HHI. Oldest is off to college next year (two kids who will not overlap) and we will cash flow approximately 80%. I think we may need to cut down on our retirement contributions (have been maxing out).

Question: Who should reduce?
Partner A is mid-50s and around 7 years older than Partner B. Partner A has higher income/higher job security and will probably work another 15 years. Partner B’s career is more tenuous.

1) Reduce both equally? Some other proportion?
2) Reduce Partner A?
3) Reduce Partner B?

No need for comments about paying yourself first, community college, etc.

[Anonymous]

By maxing do you mean you are putting in the annual limit to your 401k? Or getting the employer max? Or putting money in 401k and additional avenues?

Are your finances joint? Your relationship is stable? If all money is shared, I'm not sure why it matters who reduces. Presumably you will share whatever is drawn down the road and will inherit each other's should one partner die.

[Anonymous]

Anonymous wrote:By maxing do you mean you are putting in the annual limit to your 401k? Or getting the employer max? Or putting money in 401k and additional avenues?

Are your finances joint? Your relationship is stable? If all money is shared, I'm not sure why it matters who reduces. Presumably you will share whatever is drawn down the road and will inherit each other's should one partner die.

We are both contributing the annual 401k limit (with catch-up for older partner), have some employer match, and contribute to Roth most years.

Finances are joint but I guess I am wondering about the impact of number of years for contributions to grow before disbursement, etc.

[Anonymous]

How much have Partner A and Partner B saved so far in retirement? If you are Partner B, I'd want to save more since your job is more tenuous and you'll likely live longer, but in any case, without specific numbers, it's hard to give relevant advice.

[Anonymous]

Save to the match in both accounts, after that I don't think it matters where you cut back. Even if you get divorced, it's not like retirement is held separately from marital property.

[Anonymous]

How much do you have saved for retirement? Any pensions? Will you get social security? It is hard to advice without some numbers. If you have 3M in retirement already, your probably fine to slow down for 5 years. If you have less than 1M I think you need another game plan for college, like in state options, etc.

[Anonymous]

when you say maxing out, do you mean also doing catch-up contributions? after 2025 (unless they move the target again), catch-up contributions will be on a roth, after-tax basis, so that may make the catch-up easier to eliminate/redirect.

neither partner should reduce past any employer match. both partners should investigate if their employers offer student loan repayment programs. usually they come with commitments to stay with the employer for some number of years but in the case of my employer the plan included parent plus loans.

[Anonymous]

As long as you file joint taxes, it does not matter who reduces their contribution. The only caveats would be if one of you would lose a match if you reduce or one of you is subject to Highly Compensated Employee restrictions and is better to keep that spouses' contribution low.

If one of you has much better options available (lower expense ratio, better investment choices), that could swing a decision too.

If you divorce, it will be split 50/50.

[Anonymous]

you can borrow for school, you can't borrow for retirement.

[Anonymous]

Anonymous wrote:you can borrow for school, you can't borrow for retirement.

+1 You are putting your retirement in jeopardy, OP, which may cause your kids to have to take care of you in the future.

If in your retirement your finances are strong, you can help pay down the student loan debt, but the reverse is harder.

[Anonymous]

Save to the match, eliminate any Roth contributions first, and then make a decision on what feels fair or on who has the better investment options.

[Anonymous]

Anonymous wrote:As long as you file joint taxes, it does not matter who reduces their contribution. The only caveats would be if one of you would lose a match if you reduce or one of you is subject to Highly Compensated Employee restrictions and is better to keep that spouses' contribution low.

If one of you has much better options available (lower expense ratio, better investment choices), that could swing a decision too.

If you divorce, it will be split 50/50.

This is all true, but the saying, "possession is 9/10 of the law", is also true. I prefer to keep the recommended portion of my earnings in my own retirementment. In the event of death (or divorce), owning the account is more straightforward.

[Anonymous]

It depends on how you invest your 401k. Compound interest is your friend, and it's great that you've maxed it out.

Reduce whoever has the worse performing 401k account or has lesser amount.

[Anonymous]

A 55 year old can “plan to work another 15 years” all they want, life often has other plans for them. So that’s not a great backup plan.

Cash flow what you can without reducing any savings. Have them take loans, which you can help pay if you are able. There is no other way that doesn’t jeopardize your future, especially with one older parent and one in a tenuous job.

[Anonymous]

I would not reduce retirement - you can take out loans for college but not college. BUT I digress...

who cares who reduces? am I missing something? My friend who was recently divorced told me that when you divorce the retirement funds get split equally no matter whose name it is in.