newsminer.com

Like many parents, my husband and I dream of the day we’ll watch our children graduate from college. Although it’s also many years away, we can picture ourselves retiring and spending our golden years traveling to tropical destinations.

I decided to visit one of those online investment calculators to see approximately how much money we’ll need to save. When I saw the staggering figures, the vision I had of me and my husband sipping Mai Tais on the beach in Maui quickly changed to us sharing a McValue Meal on our lunch break from work.

We have three children under the age of 9. Sending them to college will cost about $600,000. What’s more — retirement will cost us well more than $2 million.

Like many Americans, our retirement accounts and our children’s 529 plans recently took a hit. Although we have many years to recover our losses, this knowledge doesn’t do much to ease our concerns. We are among 47 million Americans with kids under the age of 18 who are trying to figure out how we will pay for our children’s college without having to move in with them when we retire.

In October 2008, the College Board stated that the cost to attend a public college is more than $18,000 per year. This figure includes tuition, fees, room and board. The average cost to attend a four-year private college is more than $37,000. If inflation trends continue, these costs will increase by 5 to 7 percent annually, according to money.cnn.com.

The disheartening truth for many is that saving for both college and retirement is challenging enough when 401(k) and 529 plans are thriving. But when plans take a hit, parents have to decide which is a priority.

This is an emotional decision for most parents. Who doesn’t want their children to have the best life possible, with every advantage? It can be difficult to come to the realization that sending one child to a private college will use up roughly 15 percent of retirement savings. Many people don’t realize how modestly they will be forced to live once the money is gone. Michael Greco, a financial planner with GCI Financial Group, tells parents what they’d rather not hear, “There are loans for education, but nobody is going to come along and foot your retirement bill.”

According to Fortune’s money manager, if you’re 45 and earning $100,000 and hope to retire at age 65, you’ll need $2.6 million to live on 80 percent of your preretirement income. This is assuming you’ll only live to age 90 and make

6 percent a year on your savings in retirement.

Greco said it doesn’t have to be an all or nothing deal. With effective planning, many parents can save for retirement while helping their children achieve the dream of earning a college education. How much of their children’s degree they’re able to pay for should be determined in advance. A public university obviously is the least expensive option, but if a child has his or her heart set on a private school, parents can agree to pay part of the bill and assist in finding grants and loans to help pay the rest.

Financial planners advise that money earmarked for children’s education expenses should be placed in either a Coverdell Education Savings Account or a 529 savings plan. Both plans allow you to withdraw funds for educational expenses without paying a penalty or taxes.

The Coverdell allows you to invest in stocks, bonds or mutual funds, but the maximum you can invest per year is $2,000 per child. In contrast, the 529 has parents choose from a predetermined menu of mutual funds but allows them to contribute up to $120,000 per year until the account reaches $310,000. This is a great option if you have relatives who would like to make one big contribution.

Another option is to invest in a Roth IRA. When you withdraw the money for education expenses, you will pay taxes on it but will not pay a penalty. If your child receives a scholarship, you can leave money in the account for your retirement. Retirement plan assets also are not considered to be available for college expenses. So when your child is considered for financial aid, your chances for qualifying will be greater if your money is sitting in a Roth IRA instead of a bank account. The downside to the Roth IRA is that you only can contribute $5,000 per year, and your income must be within a certain range.

In addition to having your children apply for scholarships, financial aid and student loans, financial advisers also suggest having your kids set aside 25 to 50 percent of their own earnings for college. Parents who get their children involved early in saving for college claim that their children take school more seriously and work harder to maintain high grades. Advisers also recommend that you share account statements with your kids so they can see how their money is growing.

If your children’s toys could fill up your garage, you might consider asking relatives and friends who regularly send gifts to donate money to your children’s college fund instead. This might sound tacky, but my parents know that while toys bring my children immediate happiness, it’s usually short-lived. They like knowing they’re contributing to a meaningful part of my children’s future.

Though my husband and I would love to send our children to Yale — all expenses paid — in the end, we might fall back on doing what we always do, which is the best we can. We both had to work our way through college, so as tempting as it is to hand everything to our children on a silver platter, it’s good to remember that we appreciate most the things we worked hard for.

To do your own retirement projection, go to www.troweprice.com or cgi.money.cnn.com. To find a college-savings calculator, visit www.savingforcollege.com.