Hi nrek123,

Our planning guru Michael will give you a thoughtful answer when he gets a moment. In the meantime, I'll give you my take: save for retirement before college. Here are a few reasons why:

-Can't Finance Retirement. College can be funded via loans, scholarships, grants, et cetera. Your retirement cannot be.

-Financial Aid. Retirement account savings generally will not count against financial aid formulas. At least a portion of your college savings will.

-Saver's Tax Credit. If your adjusted gross income is below $53K (joint, or half that if single), then you qualify for a CREDIT (not deduction) that can be worth close to $1,500 on just $4,000 in retirement savings. An excellent piece on this credit is available at http://www.fairmark.com/rothira/retirementsavingscredit.htm .

-Employer matching. Many 401(k) plans will match a portion of the money you set aside for retirement. That's "free money", and should't be passed up. College savings doesn't give you that benefit.

-Better Investment Options. IRAs offer unmatched flexibility and many options for extremely low fees. College savings accounts like Coverdell IRAs and 529 plans have improved, but still don't match that flexibility.

-More flexible withdrawals. Many retirement accounts provide for the penalty-free withdrawal of funds for any number of reasons--including paying for college. College savings accounts generally do not.

-Creditor protection. IRAs and 401(k)s are generally fully protected if you should need to declare bankruptcy. College savings accounts offer some protection, but it is more limited.

Bottom line: with $500 a month to save, retirement should come first. Ideally, you will be able to increase your savings over time. Sometime after that point. it will start making sense to fund college savings accounts as well.