Finding Financial Balance: Navigating College Costs and Retirement Savings

College has never been more expensive, with annual costs averaging nearly $60,000 at private institutions and even public institutions topping $27,000 a year.¹ For many families, those numbers aren’t just daunting — they redefine how parents think about their long-term financial goals.

With tuition costs rising and student debt reaching record highs, parents are under increasing pressure to support their children’s education without compromising their own financial security. Recent updates made under the One Big Beautiful Bill Act (OBBBA) are also changing the landscape of education savings and planning, including new flexibility for 529 plans and other funding options.

Understanding these shifts, and how to integrate them into broader financial strategies, can help advisors guide parent clients through investing in their children’s futures and protecting their own.

What Do Recent 529 Plan Updates Mean for Advisors and Families?

A 529 plan is a tax-advantaged vehicle designed to help families save for educational expenses, covering anything from K-12 education to student loan repayment. There are two main types of 529 plans:

• College savings plans, which allow funds to grow based on the performance of the underlying portfolios
• Prepaid tuition plans, which let families lock in tuition rates at participating institutions

For most families, the savings plan is the preferred option for its flexibility, investment options, and ability to adapt as circumstances evolve.

In recent years, legislative changes, including updates under the OBBBA, have made 529 plans more flexible than ever. No longer limited to just college tuition and fees, the law broadens what qualifies as an eligible expense under these savings plans, now including a wider range of K-12 costs like tutoring, educational materials, and testing fees. It also expands coverage to professional certifications and workforce training programs, recognizing that education today extends far beyond traditional four-year college.

For advisors, this expanded versatility is an opportunity to take a fresh look at how 529 plans fit into clients’ overall financial plans. Rather than treating education savings as a separate bucket, advisors can help integrate 529 strategies into estate and tax planning. That means making sure contributions and withdrawals align with tax rules, setting realistic savings targets, and adjusting plans as family goals or financial circumstances change.

In doing this, advisors can help clients make the most of their savings plans while still focusing on the bigger picture of their financial future.

Balancing Education Funding and Retirement Planning

The OBBBA’s updates may offer families more flexibility, but they don’t solve one of the most persistent financial challenges for parents: balancing their children’s education costs with their own retirement goals. Even with new planning opportunities, many families still face the difficult question of how to divide limited savings between college funds and long-term security.

Advisors play a pivotal role in guiding these difficult conversations. By helping clients identify their priorities and model different scenarios that show the trade-offs, advisors can demonstrate the long-term impact of their decisions. What happens if college savings are prioritized too heavily, or if retirement contributions are delayed too long?

For many parent clients, the most sustainable approach begins with securing their retirement first, then contributing what they can toward a 529 plan or other education savings once a safety net is in place. It’s important to remember that while there are many paths children can take to receive college funding, like loans, scholarships, and grants, parents have far fewer alternatives for financing retirement.

To help clients find balance, advisors can implement what experts call the “Y.E.S.” order of operations:

• You: prioritizing saving for retirement and building an emergency fund first
• Education Savings Accounts: contributing to 529 plans or other education savings accounts only when retirement savings are on track
• Savings: creating savings accounts for non-educational expenses, like first homes, weddings, and other life events

Balancing the reality of a parent client’s financial situation with their desire to support their children can be complicated. Parents may feel torn between helping with college expenses and staying on track with their own financial security. Studies show that nearly six in ten Americans have delayed retirement due to these competing financial goals.² Yet without sufficient retirement savings, the financial burden can eventually fall back to their children.

Advisors can help clients avoid this outcome by framing the conversation around long-term balance. By leveraging the new opportunities under the OBBBA and modeling how different savings strategies affect both education and retirement outcomes, advisors can empower clients to make informed decisions. In doing so, advisors can position families for success across generations, ensuring that parents and children alike have the financial foundation to pursue their futures confidently.

More on Retirement Planning

• Get insights on financial literacy from the Retirement Income Literacy Study
• Give your clients the gift of knowledge with a free education program, The Retirement Course®
• Become a retirement expert with our Retirement Income Certified Professional® (RICP®) Program