Should you prioritize 401(k) or college fund?

Every parent wants to give their child the best start in life. But for many working families, the question isn’t just whether to fund their child's college education — it’s whether doing so could quietly jeopardize their own retirement. It’s an uncomfortable tradeoff, one often fueled by guilt, emotion, and the fear of falling short in either role: provider today or planner for tomorrow.

As inflation bites and daily costs pile up, these decisions feel even heavier. Groceries are more expensive. Gas prices swing unpredictably. Mortgage rates are higher than they’ve been in over a decade. In this context, long-term financial planning often takes a backseat to near-term obligations — and that includes saving for college, a goal that carries deep emotional weight for many families.

But if you ask personal finance author and radio host Dave Ramsey, the order of operations is clear: prioritize your 401(k). Retirement, he argues, isn’t optional. College is. That advice might seem harsh at first. But from a planner’s perspective, it’s deeply rational — and potentially life-saving for your financial future.

In a recent Q&A shared with TheStreet, Ramsey reiterated his long-standing view that saving for retirement should come before setting aside money for your children’s education. His reasoning hinges on a simple fact: you can’t borrow for retirement. While students can pursue scholarships, grants, work-study jobs, or even take out loans to finance their education, retirees don’t have similar options. If you fall short in your 401(k), you can’t apply for a grant to make up the difference — and Social Security alone often isn’t enough.

Ramsey puts it bluntly: “Taking steps to begin saving for retirement comes before setting aside a college fund for kids, because everyone is going to retire someday. Unless, of course, they happen to die before reaching retirement age.” His tone may be dry, but the point is sobering. Retirement is a certainty. College is a choice.

This isn’t just theoretical. If you’re in your 40s or 50s, you’re likely staring down both of these goals at once. Maybe your eldest child just started high school while you’ve only recently begun contributing to your retirement seriously. Or perhaps you’ve spent the last decade prioritizing your kids’ needs — private school tuition, enrichment classes, summer camps — and now feel behind on your own financial security.

In either case, the math doesn’t lie. Retirement savings rely on compound interest and time. Every year you delay makes it harder to catch up. Starting to save at 35 with consistent contributions gives your money time to grow. Waiting until 45 or later — even if you contribute more — leaves you with less runway and a heavier burden to fund the same goal.

For most families, there simply isn’t enough discretionary income to fully fund both college and retirement at once. That’s why clear prioritization matters.

Many parents resist Ramsey’s advice not because they doubt the math, but because it feels emotionally wrong. Shouldn’t you sacrifice for your children’s success? Isn’t education the greatest gift a parent can give?

Yes, education is a gift — but giving it shouldn’t come at the cost of your long-term security. Helping your children graduate debt-free is generous, but not if it means you end up financially dependent on them later in life. When parents underfund their retirement to overfund a college fund, they often trade one kind of burden for another.

Ramsey addresses this tension head-on. “Setting aside a college fund for your kids is a really nice thing to do, if you can actually afford that kind of thing,” he says. “But kids can also further their education by getting good grades, applying for scholarships, choosing a school they can afford and working their tails off while attending classes.”

That’s not parental neglect. It’s realistic planning.

Beyond 401(k)s, Ramsey also endorses Roth IRAs for retirement savings — and not just for their tax advantages. Roth IRAs offer some built-in flexibility that makes them especially helpful for families who may want to support a child’s education without fully sacrificing their own retirement readiness.

For example, contributions to a Roth IRA (but not the earnings) can be withdrawn at any time without tax or penalty. This means if you save aggressively in a Roth, you could, in theory, dip into it for educational expenses — without derailing your retirement entirely. Just know that this flexibility should be used sparingly. If you treat your retirement accounts like piggy banks, you’ll fall short on both goals.

The ideal approach? Use Roth IRAs and 401(k)s to build a solid retirement base. Then, if and only if your retirement plan is on track, consider whether you can allocate additional funds toward education — either in a 529 plan, through cash flow, or via hybrid tools like brokerage accounts.

One of the hardest parts of choosing retirement over college savings is having to explain it to your children. But this is also a teachable moment. It’s a chance to model financial maturity and show them what it means to plan responsibly.

The tone you strike matters. You’re not shutting down their dreams — you’re helping shape them more realistically. You might say something like, “We’re making sure we don’t become a financial burden to you later. That way, you can build your life without having to worry about taking care of us.” Or, “We’ll support you where we can — maybe with housing, textbooks, or travel costs — but you’ll need to find a college path that works for our whole family.”

Framed this way, it’s not a rejection. It’s a recalibration. And it gives your child agency, too. They can apply for scholarships, consider more affordable schools, or choose career training that avoids debt altogether.

There’s a deeper risk Ramsey highlights — and it’s one many families don’t see until it’s too late. When you prioritize college savings over retirement, you create a financial structure where one child’s future is supported while your own becomes uncertain. But what if your child drops out, changes majors three times, or doesn’t get a job related to their degree? What if you sacrifice decades of retirement growth for a tuition fund they don’t even use?

Education is valuable. But overfunding it — without a plan for your own financial stability — can backfire. Many students succeed without their parents paying for everything. Many parents who delay retirement savings, unfortunately, do not recover. As Ramsey puts it, “There aren’t any good ways to retire that don’t require getting your finances ready well ahead of time.” That means planning now — not someday — and adjusting your college expectations accordingly.

None of this means you can’t help your children. If you’re in a strong position — no debt, an emergency fund in place, and a healthy retirement trajectory — then absolutely consider contributing to their education. But start small. You might set aside modest monthly amounts in a 529 plan while maintaining full retirement contributions. Or you might offer to cover specific expenses — like community college tuition or final-year living costs — instead of committing to four years at a private university.

It’s also worth involving your children in this process early. Let them know what you’re saving for and why. Teach them the value of cost-benefit thinking when choosing schools. Help them research work-study opportunities or part-time jobs. Financial aid isn’t just about FAFSA forms — it’s also about expectations.

Every family’s situation is different, and priorities can shift. That’s why it’s smart to review your financial roadmap annually. Are your retirement contributions keeping pace with inflation and market changes? Are your kids’ education plans becoming clearer — or more expensive? Are there tax-advantaged ways to support both goals with limited dollars?

This isn’t about rigid rules. It’s about alignment. Retirement planning shouldn’t feel like a sacrifice. It should feel like a safeguard — for you, and for your children’s future too.

When families prioritize retirement while keeping college planning realistic, they tend to build stronger financial ecosystems overall. Parents retire with dignity and choice. Children graduate with a clearer understanding of their own responsibility and agency. The family grows with a shared mindset of stewardship, not entitlement.

Ramsey is often criticized for being too strict. But on this issue, his framework offers a powerful dose of long-term clarity. Retirement is not a backup plan. It’s the main plan. And when parents honor that, they’re not being selfish. They’re being strategic.

The best financial gift you can give your child isn’t a check for college. It’s a life where they’re never forced to financially rescue their aging parents. Start by making your 401(k) non-negotiable. Then let every other decision — including college — fall into place based on what you can truly afford, not what you feel pressured to promise.

The smartest plans aren’t loud. They’re consistent. And that’s how wealth, independence, and peace of mind are built — one aligned decision at a time.