As parents, we want to help our kids no matter what their age. The problem is the world of retirement planning has changed and we want to retire someday!
To retire even at 65 is tough.
It’s even harder if you are still supporting adult children. The story of Mark and Christina Rotondo, the New York couple who took their son to court to evict him from their basement is a sad tale.
Back in the day, companies provided pensions so you could choose your retirement date, pick an option and you’d know exactly how much you’d be getting in a monthly check. That check would be deposited in your bank account every month for the rest of your life. Sweet, right?
Fast forward to today.
You save in a 401(k) or some kind of contributory retirement plan at work. Your company may match your contribution (mine matches 100% up to 6% of my salary – which is great.) A profit sharing contribution may show up in the 401(k) as a bonus. That’s all well and good but it’s hard to know how long that money will last.
Do you need a million dollars to retire? Two million? What if you need a new car or a new roof? How are you going to feel about taking a lump sum out of your pile of money to do that?
It’s hard to know if you have enough money to last the rest of your life when you retire.
A financial planner can help map out your retirement strategies, of course. In the meantime, one solid financial strategy that everyone can implement is to help their kids become financially independent.
Here are a few ideas on how to help your kids without ruining them financially:
Let them take care of the “needs”
Think about it this way, give extras and not necessities. One of my friends pays for her married adult children’s medical insurance. She is covering their “needs.” If this is for a short time period, say four months, ok. Longer than that, she is subsidizing her adult children. (Could this create co-dependence? You bet!)
When your adult children cover their expenses, it gives them confidence.
I remember when I graduated from college and started my first job. There was a voice in my head, a very strong one, saying, “You aren’t going to make it on your own.” Well, when I was able to support myself by paying my own rent, utilities, and other basic expenses, that negative voice in my head went away.
Granted I lived in a flat in downtown Sacramento with a mattress on the floor, yard sale furniture and bathed in an old claw foot tub with no shower. But I did it on my own. If my parents had paid my rent or some other basic expense, I wouldn’t have gained the confidence that I could make it on my own.
Be generous with extras
Treat your family to a vacation, a local festival or dinners out with you. This way you provide “the little things in life” to help take the edge off. My neighbor pays tuition for her granddaughter’s private school. This is an extra!
My friend feels great because her two granddaughter’s get to go to a wonderful school and she gets to treat. They could easily go to public school with no extra expense to the private school tuition is an extra. The daughter can freely accept the gift and feel solid that she can “make it on her own.”
Put your needs first
This sounds selfish but in this day and age, you have to be. If you are giving your kids money or like the Rotondo’s giving your kids a rent-free space to live (without charging for expenses,) you could be harming your own retirement.
Here’s the math for your retirement:
If you are giving your kids $300/mo, (either by letting them live rent-free or by subsidizing their life,) you could be investing that money for your retirement. If you invested $300/mo for 10 years and earned 6%, it would grow to $49K!
If you took out 6% per year, you’d have about $3K for life.
Invest $300/mo for 10 years at 6% and then take out $3K a year for life.
Pretty sweet. Makes you want to sign up for Airbnb and rent out your basement, doesn’t it?
Check out my related post on Forbes.com – How Can You Ever Retire When Your Son Is Living In Your Basement?
Or if you have younger kids and grandkids, check out this post on Helping Kids Be Money Smart.
All that said, sometimes our adult kids need a leg up.
One of my friends is 68 years old and had to take custody of his three granddaughters, one is an infant and the other two are elementary school age. Sometimes our kids really need our help. In that case, we “cowgirl up” and do whatever is necessary.
We just don’t want to unwittingly “enable” our kids. Especially when it affects our retirement, too.
