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Parents of college students were surveyed about satisfaction with retirement planning and the use of retirement savings for children's college expenses. Those who had consulted a financial adviser for retirement were satisfied with their retirement planning as were those where the husband had a pension plan. Parents with two children in college were more likely to have used retirement savings to pay for college costs. When the first child contributed less to college, parents were more likely to use retirement savings. Upper income parents were less likely to use retirement savings for college expenses.
Key Words: College student expenditures, Family finance, Financial planning, Retirement, Saving
Background
Retirement Planning
Financial decisions of families at mid-life are likely to be influenced by the cost of children's college education and the need to save for retirement. The 1995 Survey of Consumer Finances revealed that the proportion of all families who indicated retirement was an important reason for saving increased from 18 to 24% between 1989 and 1995 (Kennickell, Starr-McCluer & Sundén, 1997). Liquidity was the only savings motive considered more important than saving for retirement. Saving for liquidity was identified as important by one-third of all families in each of 1989 and 1995. Comparable figures for education were 8 and 11%, respectively.
While many believe that saving for retirement is important, they may be unable to save as much as they want. Workers' confidence in their retirement income prospects dropped sharply during the past year, according to the 1996 Retirement Confidence Survey (Yakoboski & Schiffenbauer, 1997). In 1996, 19% of workers were very confident that they would have enough money to live comfortably throughout retirement compared with 22% in 1995. An additional 43% were somewhat confident in 1996 regarding retirement income compared to 52% in 1995. Although workers believe that their retirement income prospects will depend heavily on their personal savings decisions, only 62% report saving regularly and more than one-third have nothing saved for retirement.
In the past, workers have come to depend on employers to provide much of their retirement income. But, the expectation that employer-provided pensions would form the basis for retirement income is changing and probably reflects trends in pension coverage (Woods, 1994). Data from a series of studies (1979, 1983, 1988, 1993)...