A recent survey found that half of parents who are financially helping their adult children are doing so at the expense of their own retirement savings.
Fifty one percent of the survey’s respondents said they were sacrificing their retirement either a lot or at least a little to continue to help kids who were already 18 or older.
To this I say: Put your own oxygen masks on first, people!
Help them by helping yourself
Perhaps it sounds selfish to prioritize your retirement over your kids’ financial well-being. But I assure you, it isn’t.
Because this isn’t just about making life easier for yourselves. This is still about your kids. If you sacrifice saving for retirement to help you kid now, that increases the chances that you won’t have enough money when you get older. At which point, your child is probably going to feel compelled to help you financially.
Money that could go to their own retirement or to your grandkids’ college funds — or toward paying down those irksome student loans that they might still have — is now going to be diverted to you.
So you’re going to be stymying their ability to save for themselves and/or their children — or to get themselves out of debt. Is that what you want? Probably not.
So just remember that it’s a matter of taking care of yourselves first so that your kids don’t have to take care of you later.
You can’t finance retirement
I understand — inasmuch as a non-parent can ever understand — not wanting your kids to struggle, especially if you feel like you can help. But clearly, a lot of these people can’t actually afford the assistance they’re giving.
As Angela over at Tread Lightly, Retire Early told me, one of the best lines she ever heard was “You can take out student loans. You can’t take out retirement loans.”
While that’s not completely true — reverse mortgages and HELOCs are potential (if bad) ways retired folks can help themselves in a pinch — the sentiment is valid.
Young people with 40-year careers ahead of them will be able to cope with their student loans. Maybe not well, but certainly better than someone who ends up retiring still in debt, facing 20+ years of a fixed income, potentially being unable to work and still trying to pay said debt.
So yeah, your kids may struggle with the ridiculous cost of college and be mired in debt when they graduate; and that’s awful.
It’s not as awful as your being penniless when you’re potentially no longer able to support yourself through work.
Find other ways to help
This isn’t to say you can’t help at all.
It’s fine if you want to offer your kids a place to live if they can’t get a job right out of college. Or keep them on your cell phone plan to help them save a few bucks. If they’re in the area, drop by with groceries every so often.
But don’t pay their rent if it means underfunding your 401(k) or IRA — or not having either one at all. Don’t cover their car payment (yes, apparently this is a thing) if you’re struggling to put away money for yourself. After all, the average car payment is nearly $500. Over the course of a year, that’s almost a fully funded IRA!
Exception to the rule
Of course, this is all assuming ordinary circumstances.
If your child is unable to support himself due to chronic illness or other issues, then obviously you may need to help them out.
Goodness knows, my mom endangered her finances plenty supporting me when I was waiting for my Social Security Disability case to come through. She certainly wasn’t saving for retirement during that time.
Even after my case was approved, my monthly payment was so low that she paid for part of my rent, just to ensure I had the funds necessary for medications and other expenses. All of this while she was going through a divorce with limited funds. Like I said, she definitely wasn’t saving for retirement at that point, but she didn’t feel she had a choice because I was essentially helpless financially.
Exceptions are few
But most kids aren’t helpless. Most of them are able to work, which means most of them can support themselves. Maybe not easily, but they can do it. That means you need to focus on your own future.
Be there for them emotionally — and perhaps even physically if they need to move back in with you — but don’t endanger your retirement.
It may feel like you have the money to spare because the money is technically available. But unless you’re already funding retirement accounts, you can’t afford to help them if they have any other options.
Keep it temporary
And if they don’t have other options? Fine, help them. But make sure there’s a plan in place for them to get back on their feet. Make sure they’ve cut expenses and are actively looking for work. Or that they’re otherwise taking actions (education, retraining, etc.) to let them support themselves in the future.
In short, make sure they know that the situation is temporary, and that you can’t be there for them financially long-term.
Because you don’t want the roles reversed in the future. Which means you need to help yourself first whenever possible. Even when you might feel selfish doing it. In the long run, you’re ensuring both of your futures.
Even when they’re young
Of course, this caveat about saving for yourself first doesn’t just apply to adult children. It’s great if you want to save for your kids’ college costs. With astronomical college tuition, it’s certainly understandable.
But you shouldn’t be funding a savings plan — or even just a savings account — if you’re not also funding your retirement. If you’re not taking advantage of your employer match or just socking away money in an IRA, I think it’s a bad idea to put money aside for their college.
No matter how worried you are about heinous student loans, you shouldn’t be prioritizing their future over yours. Again, you need to take care of yourself now so that they don’t have to take care of you later.
Every dollar can matter
I wonder if part of the issue is that people just don’t know how much they’re going to need in retirement. Or perhaps they underestimate compound interest.
So they might not understand the danger of even a small amount of sacrifice when it comes to retirement savings.
But the fact is that even $100 a month can really add up over a couple of decades with a good market return. It’s even more if you’re talking about an employer contribution match.
This means that even a small amount of help could mean missing out on a lot of money. In other words, you may be putting your future self in financial peril to help people who can probably get by on their own. Maybe not as comfortably as everyone would like, but they can get by nonetheless.
Remember: You don’t want to rely on them in your old age, so they may not be able to rely on you right now. That’s not selfish. It’s what’s best for everybody in the long run.
Would you sacrifice retirement savings to help your kids? Are you already doing it?