College Fund vs. Retirement Fund

Q: I am worried about saving money for retirement while planning expenses for my children's college years. Is there a way to do both?

-- Beth Hanson, Anaheim, California

A: If you're faced with the thorny dilemma of put
ting money aside for your children to attend the college of their choice or saving for your own retirement — you are not alone! Before making a decision, here are a few things you should know:

What do college and retirement cost?

• College costs go up every year, and typically rise faster than inflation. For example, the cost of attending San Diego State University today is about $13,000 per year (fees, room, board), $16,000 at UCSD, and $40,000 for the University of San Diego. There will, of course, be other expenses: books, transportation, clothes,
  recreation, etc.
• Calculating your financial needs in retirement is a bit more complex. One way to do this is to determine your current cost-of-living (housing, utilities, medical, transportation, food, recreation, debt payment, other) and compare this with your estimated retirement income. The difference is what you will need to eliminate from your lifestyle or "downsize" when you stop working. Another way of estimating your retirement needs is to apply the 70-to-80-percent rule, which says, retirees will need between 70 and 80 percent of their current income to maintain their current lifestyle in retirement.