Stop 401K Contributions to Pay for Private School?

I’m a big fan of trying to have it all when it comes to financial goals (i.e. get rid of debt while you save for emergencies and your future).

I know some people like the hyper-focused approach where you zero-in on one goal at a time and don’t move on to the next until you’ve achieved the first one. I get that.

But I’ve had success trying to do it all too. And I don’t shy away from telling people to try the multi-pronged approach. I recently received this question from a reader:

“Would you ever advise someone to suspend 401K contributions to fund a child’s K-12 education?”

I’m going to assume they are referring to some type of private education, because everywhere I’ve been in the States, K-12 education is totally free.

Anyway, this person is obviously trying to make a choice between two goals: saving for retirement or using those same funds to pay for the cost of a private education for their child.

It would definitely be a rarity for me to advise someone to do this. Here’s why:

I’m a Big Believer in Public Education

I understand that some people feel like a private education is necessary, but I don’t see it. I went to one of the worst public schools in Louisiana (ranked 444th out of 642 elementary schools in the State), and I went on to graduate Magna Cum Laude with a Masters degree from a respected state university. I passed the CPA exam, have had a rising career in financial services, and now I own a successful small business.

I firmly believe that school is what you make of it. I believe that as long as there are books, teachers, supportive parents, and a willing student, then a good education will take place. Whether you are paying for it directly or through taxes doesn’t seem to make a difference. Studies will support both sides in the private vs public debate. But for me, there isn’t a difference.

Your Retirement (i.e. Future Living Expenses) Should Have Priority

Probably the more important (and financially relevant) reason I would not suggest foregoing 401K contributions is that you are neglecting your own needs. By not contributing to retirement (for 12 years, theoretically), you are putting your future at risk.

Take a step back for a second and think about it this way… When you turn 70 and can’t work for yourself anymore, you will need money to live on, right? This money needs to come from somewhere. If not from you, then who?

As I always say about retirement savings, it’s not about accumulating wealth, yachts, and beachside villas as much as it is about putting food on your table and keeping the heat on.

Additionally, by not contributing to your 401K you are probably also missing out on employer matching contributions (i.e. free money).

Lastly, once you stop contributing to your 401K, I tend to think it’s hard to get back going again. I don’t have data to support this, but if you let one expense come before your retirement needs then you will continue to do so. There’s always another expense that comes along. Kids will only get more expensive.

You Can Do Both

This doesn’t have to be an either/or thing. You can save for retirement and put your kid in private school, if you so desire. You just need to make your mind up that the two are worth fighting for. Can you cut back on other expenses? Can you increase your income, either at your job or through a part-time opportunity or business? Can you wait a year and save up some tuition while waiting to increase your income?

My advise is to stick with the 401K contributions and if it’s that important to you that you send your child to private school, then by all means go for it. But don’t default to stealing from your future need to pay for a current want for your child.

What do you think? Is private school worth the cost? Is it worth sacrificing your own retirement needs?

Image by Michael 1952