Meet Your Retirement Goals First, Then Help the Kids

Should you offer financial assistance to your children?

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Often, the answer is yes to the detriment of both parties.

As a parent or grandparent, this question will arise on more than one occasion as children begin their transition into adulthood or start their own families.

Recently I was talking with a friend who is transitioning into full time retirement. “Maybe I do need to keep working to support our two households,” commented her husband. He was referring to the desire to grant their three grandchildren all of their wants in lightning speed. After that honest conversation they did make changes to elevate their own retirement goals. Sometimes it takes a while to understand the implications of what we are doing.

According to a study by TD Ameritrade, 76% of respondents said they felt obligated to support their adult children financially and 57% said they would give in to those feelings of obligation even if it harmed their retirement. A recent Merrill Lynch survey suggests 6 in 10 Americans age 50 and older, or 62%, are providing financial support to family members. The biggest culprit is housing costs. With rents skyrocketing, tough mortgage requirements, and a tight job market it’s no wonder this represents 20% of all the help given to adult children.

What retirees need to understand are the real risks of inflation, longevity, and sequence of returns to their retirement. With these unpredictable variables rooted in place, the focus should be meeting retirement goals first and offering family financial assistance second.

To do that, you need to have a plan. One of the roles of your financial adviser is to let you know if you are in a position to help or not. At a certain asset level family gifts may be appropriate or even encouraged but at some point there has to be a safety cushion that needs to be respected by all family members.

If you do find yourself wanting to help, consider limiting the amount and the length of your financial support. Identify ways to help that won’t wreak havoc on your budget such as babysitting or making a meal once a week. Spending time with your children could spark conversation needed to solve their roadblocks to success.

To conquer and overcome obstacles continues to be the prevailing path to wisdom, maturity and eventually happiness. Consider what will happen if you don’t offer an immediate solution to your children’s problem? Will the situation get worse or will they find a solution themselves? Sometimes by enabling bad behavior the problem only festers instead of resolving. It is hard to watch the struggle and angst as lessons are learned.

Young adults have youth on their side and more importantly time to work and save for retirement. Retirees need to put themselves first when it comes to retirement so that they can remain financially independent throughout their lives. Perhaps the greatest gift to your children is not to become a burden in your golden years.

If you are interested in this subject read Rick Rodgers’ article from Lancaster County magazine, Helping or Spoiling?

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