Retirement First, Kids Second - Rodgers & Associates Finance Blog

Meet Your Retirement Goals First, Then Help the Kids

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?