Which is more important – helping out your adult kids with their financial needs, or preparing to meet your own needs in retirement? Plenty of boomer parents are asking themselves that question these days. They’re struggling to bolster their own often-meager retirement savings while offering financial support to adult children who may be having difficulty getting their lives going in this era of high housing prices, soaring college debts, and a gig economy. If you’re walking this path, or know someone who is, we think this article published on the Motley Fool website a few weeks ago provides good insight into how you can set the right priorities for both you and your family.
“Having kids can enrich your life in many ways, but unfortunately children don’t generally make you financially richer,” writes Motley Fool’s Christy Bieber. “In fact, many parents compromise their own savings and face more challenges supporting themselves during retirement because of the financial demands children place upon them.” As she point out, almost every parent wants to be helpful, but it’s potentially disastrous to put your own financial security at risk, especially with retirement approaching. In her article, Bieber quotes a recent Parenting Survey produced by Merrill Lynch which reveals that nearly three-fourths of parents put the needs of their children ahead of saving for retirement. In order to help parents re-orient their priorities – and maybe find different and more long-lasting ways to help out their kids – this article offers some key steps to childproof your retirement.
Childproof your Retirement by Prioritizing Savings over Paying for College
One of the chief ways parents get their priorities confused is in the area of college costs – “paying for their children’s college tuition and other educational expenses when they can’t really afford to,” says Motley Fool. Some parents go so far as to take out student loans in their own name. “Unfortunately, this is a really bad idea,” the article states. “There are student loans available to your kids to cover the costs of college, but you cannot take out loans to fund your retirement in your 70s and 80s when you need a place to live, food to eat, and money for medications and other healthcare needs.” It may be hard to see your kids taking on debt, but it will be a lot harder on them in the future if you end up broke in retirement and have to turn to them for help. The article suggests parents help their kids make informed choices about how to save on education costs by working while in school, starting out at a community college, and opting to finish at a state university.
Childproof Your Retirement by Teaching Financial Independence
According to Motley Fool, nearly three-fourths of Merrill Lynch survey respondents said they wish they had someone to teach their children about investing. “If you’re hoping to childproof your retirement, do more than just wish that your children had a mentor for important financial concepts. Instead, you should be that mentor.” The article advises that parents start out early, teaching about saving and investing with lessons that are age-appropriate. “If you help children to develop financial independence throughout their entire life, they’re less likely to rely on you in your old age,” says the article, and we wholeheartedly agree. We might also add that it often helps when parents share their own financial mistakes with their adult kids, because an appropriate degree of transparency can help kids avoid those same missteps.
Childproof Your Retirement by Setting Appropriate Limits
The Merrill Lynch survey cited by Motley Fool showed that almost 80 percent of parents give financial support to their adult children, providing an average of $7,000 per year in assistance. According to the survey, that represents an annual wealth transfer of as much as $500 billion from the older to the younger generation. While it’s nice to be generous, says the article, “Offering your kids thousands of dollars is sure to hurt your retirement security.” Parents need to make sure they’re not over-doing their generosity toward adult kids by careful and thorough budgeting. “After your own essential needs are met, then determine if you can give your kids money, and what amount,” Christy Bieber writes. “Let them know in advance what the outer limits of your aid are, so they don’t expect more than you can afford.”
Childproof Your Retirement with Non-Financial Help
There are ways you can assist your adult children without compromising your financial security. For example, providing unpaid child care for limited periods of time can represent a significant savings. In extreme situations, letting them move back home for a time can help them save money, so long as ground rules and move-out dates are clearly understood. Something as simple as helping them make a budget or paying for a session with your financial planner can also be a huge help. “This type of assistance can be worth as much as money to many young people,” says the article, “and it won’t drain your investment accounts too quickly.”
Childproof Your Retirement with Thorough, Comprehensive Planning
As Rajiv Nagaich often says, “Aging is a family affair.” These tips from Motley Fool are designed to help your family stay healthy, teaching kids to stand on their own two feet financially while helping you enjoy a more secure retirement. Remember, the more secure you are, the better off your kids will be. That’s one important reason why we urge you to experience a breakthrough in retirement planning by joining Rajiv Nagaich at an upcoming LifePlanning Seminar. This fast-paced, information-packed sessi0n will allow you to see how all the pieces of the retirement puzzle – your money and savings, your family and relationships, your housing needs, your medical coverage (short-term and long-term) and your legal protection can all fit together, reinforcing one another. That’s the genius of a LifePlan, and it can help you chart your course to the secure retirement you’ve always hopes for.
To find out dates and times of upcoming LifePlanning Seminars with Rajiv Nagaich, visit our Live Events page and register for the seminar of your choice – or call us this coming week for assistance. And here’s another great idea to “childproof your retirement”: invite your adult kids to come along. They’ll be glad they did. And meanwhile, “Age on!”
(originally reported at www.fool.com)
