Last month, during a regular financial coaching session, I interviewed a couple who were harboring a shameful secret. Not only had they refinanced their house four times, but they had put their retirement dreams on the back burner. After saving less than they should for a lifetime, they were quickly easing into panic mode. In short, they didn’t have enough money to retire, despite being in their 60s.
[See: 10 Ways to Get Ready for Retirement After Age 50.]
The couple placed blame on the fact that they were supporting adult children for many years. They paid for some of their college education and even gas in their cars. These kids were ages 28, 26 and 21. In other words, they were full-fledged adults.
Torn parents with tough decisions. According to Joseph Carbone, a financial planner at Focus Planning Group in Medford, New York, aging parents supporting adult kids is actually fairly commonplace. For some reason, the mentality around supporting adult kids has shifted over the last decade — and not necessarily for the better.
While each situation is different, several underlying reasons play a role. With average student loan debt for 2016 graduates sitting at $37,000, many parents want to help their kids avoid debt. Weddings might be financed on the backs of cash-strapped parents as well.
Then there are young adults who hit hard times. National unemployment for millennials is higher than the average of other age groups, making good jobs few and far between. Further, many educated millennials languish in low-wage jobs that hold them back from building wealth.
All of these issues combined have created the backdrop for the situation we’re in now. By and large, far too many parents are putting off retirement savings to help their kids. Unfortunately, disastrous consequences are on their way.
When parents choose kids over retirement. There are myriad problems that come with supporting adult kids as you reach retirement, including your limited resources as a parent. Unless you’re absolutely rich, there’s only so much money to go around. In many cases, supporting your kids draws away from the financial resources you’ll need later, says Joshua Brein, a financial planner for Brein Wealth Management in Seattle, Washington.
Worse, you might be helping kids build bad habits. “Giving money to your kids might mean setting them up for failure,” says Benjamin Brandt, a financial advisor for Retirement Starts Today in Bismarck, North Dakota. If you never let your adult kids make a mistake and recover on their own, they might never learn the art of resilience. They may even learn to rely on you to solve all their problems.
If you financially support your adult children for years, you could approach retirement age with a shocking lack of funds. “Once you run out of retirement funds, you will gradually become an impoverished burden to your already needy children, says Brandt.
[See: 10 Costs to Include in Your Retirement Budget.]
Why you should put your retirement goals first. No matter how old your children are, the lesson is the same: You have to make retirement savings a priority. Once a roof is over your head and everyone is adequately clothed and properly insured, your priority should be getting your retirement on track.
With college, weddings and life happening all around you, this may not be easy. Still, it’s important to keep things in perspective. Remember, your kids have a lifetime to figure out how to get ahead; you no longer do. “Students can take out a loan for college, but parents can’t borrow for retirement,” says Jamie Pomeroy, a financial planner for Financial Gusto in Minnesota. The same can be said for weddings, housing and everything else your adult child needs to thrive.
Fortunately, there are plenty of ways to help your kids that won’t leave you broke in old age. If your kids are approaching college, for example, you can guide them through the process and help them save money without funding their education. “Students can find less expensive options to obtain a college degree,” says Renee Collins, a financial advisor for RKC Tax and Financial Services in Flossmoor, Illinois. They can complete their general education courses at a local junior college, then transfer to a four-year public institution. They can also work during school and take out low-cost loans to cover the rest. If you’re in the financial position to help them repay their loans later, you can always choose that route.
When it comes to weddings and everything else, the best advice you can give your kids is to tone their expectations down. While weddings can cost tens of thousands of dollars, you don’t need to spend that much. You don’t even have to foot the bill if you don’t want to.
Offering your kids emotional support might also help. Talk through their problems with them, and help them find the best ways to cope. Sometimes good advice is what your kids need most. Fortunately, doling out some wisdom won’t cost you a thing.
[See: 10 Financial Perks of Getting Older.]
If you hope to retire, you have to put your goals and dreams first. By saving for retirement early and often, you can position yourself to have a nest egg you can rely on when you’re ready. Also remember, helping adult kids now isn’t the long-term solution it’s made out to be. If you don’t help yourself now, they’ll have to help you later.
“If you asked most college students whether they’d rather borrow money for tuition now or have their parents live with them for the last 15 years of their life, I’m guessing most would prefer to take out the loans,” says Grant Bledsoe, a financial planner at Three Oaks Capital Management in Lake Oswego, Oregon. “I’m guessing most parents would say the same.”
Jeff Rose is a certified financial planner, U.S. combat veteran and the founder of GoodFinancialCents.com.
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Parents: Fund Retirement Before You Help Others originally appeared on usnews.com
