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How to balance getting an advanced degree with retirement savings

Though there can be significant professional and financial benefits to earning an advanced degree, covering the tuition while simultaneously trying to save for retirement can be a challenge.

Is it possible to strike a balance between working toward your advanced degree and keeping those important short- and long-term financial goals — especially saving toward retirement — on track?

It is, indeed — and the following tips can help you make it happen.

Look for lower-cost schools and online programs.  A well-regarded online program can not only potentially create the space to allow you to better manage your professional and academic obligations while you work toward an advanced degree, but also save you a considerable amount of money: The annual tuition for an online master’s degree program at the most affordable accredited universities ranges between $8,700 to $25,000.

Seek ways to further lower the cost of your advanced degree. The average graduate school attendee pays approximately $25,000 toward their degree. And 53% of students pay for at least part of their degree by borrowing. Take advantage of online scholarship tools to help search a wide range of opportunities for which you might qualify to offset the cost of an advanced degree.

Claim education and retirement-related tax benefits. If your employer offers a 401(k) or 403(b) plan, your contributions to that retirement account will be made with pretax dollars. If you’re in the 15% tax bracket, for example, putting $1,000 into your tax-advantaged retirement account could mean you owe $150 less in taxes. Further, depending on your income and tax filing status, you might also qualify for the Saver’s Credit.

Prioritize consistency over quantity. Saving early and consistently for retirement can be as important as how much you put aside. Consider establishing automatic contributions from each paycheck to a retirement account. Thanks to the power of compounding interest — essentially making money on your money — your contributions can add up over time: A person who invests just $100 a month beginning at age 22 into a retirement account earning an average 7% annual return could potentially have $379,000 by age 67.

Invest some of your pay increases into retirement. Once you receive your advanced degree, make the most of any bump in pay by investing a little more toward your future. Even an increase of one or two percent each year in your retirement account could pay significant dividends down the road.

The benefits of higher education can certainly enhance your life in numerous ways — personally, professionally and financially. With these considerations in mind, you can achieve your educational goals without sacrificing your path to a successful retirement.

 

By Stephanie Taylor Christensen