Retirement costs of helping adult children


Many families are still working through the negative impact that COVID-19 had on their pocketbook. One of the biggest challenges is helping other family members, namely parents and adult children. If you are part of the sandwich generation where you may be supporting three generations, then hard economic times may impact you three times harder than some.

As far as adult children who may have been out of the house before COVID took away jobs or housing, they may now be back bunking with you. Even if they are living in their own place, if you continue to pay for cell phones, car insurance and health insurance, it could greatly rob you of your own retirement plans.

It is common for many families to keep kids on the family cell phone package and car insurance coverage. Many families are also torn about replacing health insurance if their kids lost a job or their benefits were reduced.

According to a recent poll, 79% of parents admit to helping their adult children to pay living expenses or reduce debt.¹ Some parents paid off student loans, helped with rent and cars as well as helped to reduce their adult child's other debts.

Small expenses also add up, and you may not realize how much. Paying a cell phone bill of $60 a month for five years could cost you over $14,000 in retirement savings based on a 6% annual rate and being 22 years from retirement.²

Larger expenses, such as paying rent for three years, could slash your nest egg by almost $50,000, assuming a monthly rental assistance of $400.²

Big-ticket items can be devastating if you need to help cover expenses for five years and even borrow money for college. This could hit you for $227,000 in retirement savings over time, according to Today's Families Consumer Survey.

This becomes a vicious cycle as more parents could become a burden to their child later on, especially if they had to fork out savings just prior to retirement. Half of parents financially helping their adult children say it is putting retirement savings at risk, according to Bankrate. This could reduce funds set aside for retirement or even reduce the ability to continue to save at the same rate. The closer the parents are to retirement age, when they can't replenish savings with earnings, the more difficult it is to recover.

Lack of health care is one of the major contributors to unforeseen expenses and even bankruptcy. While it is impossible to plan for a situation with job loss, housing shortages and skyrocketing health care again, any proper financial planning could improve planning for emergencies. First work on keeping expenses within 80% of your income. This will help cushion those unexpected expenses and hopefully keep you on track for your own goals. Next, meet with your financial advisor and devise a plan to help family members without annihilating your own retirement. 2.

Patricia Kummer has been a Certified Financial Planner professional and a fiduciary for over 35 years and is Managing Director for Mariner Wealth Advisors, an SEC Registered Investment Adviser.


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