Typically, financial experts advise parents not to use funds from their 401(k)s or IRAs to pay for their child’s college costs, and individuals not to take from their own retirement. While you can borrow money for college, they note, that option doesn't exist for funding a retirement.
Some 22% of Americans have less than $5,000 in retirement savings, according to Northwestern Mutual’s 2019 Planning & Progress Study. Just 5% have between $5,000 and $24,999 saved, while only 16% have saved $200,000 or more. The Federal Reserve recently reported that 25% of U.S. adults have no retirement savings at all.
Student loans are a big part of why many adults aren’t already saving for retirement. By the time they reach 30, those with education debt have half as much saved as those without, according to the Center for Retirement Research at Boston College.
The better solution for Americans is “do not borrow heavily for college,” Jon L. Ten Haagen, president of Ten Haagen Financial Services in Huntington, N.Y., said. “Go to work for a few years so you can pay for college or work part-time while going to college to keep expenses down. Go to a state school for the first two years and get the basics done, then you can decide if you really need college, or perhaps a trade school will work better for you. I have found that most college students do not use their education for the job they have,” Ten Haagen added.
Democratic presidential candidates are offering a variety of policy proposals to address the student loan crisis. Former Vice President Joe Biden and Sen. Amy Klobuchar (D-Minn.), are proposing two tuition-free years of community college, while Sens. Bernie Sanders, (I-Vt.) and Elizabeth Warren, (D-Mass.) have proposed that public universities be tuition-free and student loan debt be forgiven.