Families nowadays confront a financial quandary that most families did not face 30 or 40 years ago. Families must simultaneously plan for both their retirement and their children's college tuition.

National studies reveal that most Americans are at risk of running out of money in retirement; this is thanks to a combination of factors which include record unemployment, declining wealth, low savings rates, investment losses and falling home values. A dilemma arises when all of these factors are taken into account and then add in the staggering rising college costs.

When you look at the amount of money that is needed to save for both college and retirement it often becomes an unaffordable number on a monthly basis. Retirement savings surpasses the entire menu of financial worries, including job security, personal debt home values, inflation and health care costs, while college tuition comes in dead last.

Yet despite those lopsided statistics, many families are still choosing to put their children's education first. For most people the opposite strategy would make most sense. There are more options for funding college dreams, including grants, scholarships, work-study programs, federally guaranteed loans. As a last resort you can always borrow if need be for college, but you can't borrow for retirement.

One strategy that may make sense (and cents) is to max out your contributions to your retirement plan (IRA, 401k, 403b) and then contribute excess savings into a college savings vehicle like a 529 plan or Coverdell IRA.   This is a strategy to be sure you keep your hands off your existing retirement funds to pay for college (there are penalties to taking a distribution or loan you're your 401k or IRA). In addition to the possible penalties for taking distributions too early, this action will typically leave a painfully short amount of time to make up the depleted funds before retirement.

CNN Money recently published an article (http://money.msn.com/mutual-fund/the-big-business-of-401k-plans-smartmoney.aspx) that reinforces a lot of things I have been saying about 401k plans.  They are expensive and they have limited investment options. The reason for the awareness is that there are talks that regulatory change could bring more transparency to what 401k plans cost the investor. 

The CNN Money article claims that plan vendors (Fidelity, Merrill Lynch, ING, etc.) take in anywhere from $30 billion to $60 billion a year in fees.  To highlight how muddy the waters really are it was noted that 7 out of 10 workers did not realize they were paying any 401k fees at all.  There is no bill that an investor gets for their 401k plan, nor is there something on their statement that says how much in fees they have paid.

Here is one way how the plan vendor gets away with it:

In many plans the packager charges the employer little or nothing however the packager maintains leeway over which investment choices get included. These packaging choices make up its costs by steering plan investors toward mutual funds -- usually more expensive, actively managed ones -- that route a slice of their fees back to the packager. There is no incentive from offering lower-cost index funds (which statistically outperform high cost actively managed funds) in the plans. I have illustrated these examples in a whitepaper I wrote which notes why it makes sense to rollover your 401k plan. (page 3 in the PDF - http://www.bautisfinancial.com/401kRollover.pdf)

The reason for the awareness and the CNN Money article is that there are talks that regulatory change could bring more transparency to what 401k plans cost the investor.  Transparency would be a great first step to improving the 401k plan, but it is something that has been discussed for years not. It's time to put up or shut up.