As I shared in a recent Wall Street Journal article, the importance of cutting the economic apron strings for adult children (or, more accurately, keeping them cut) is a difficult, but critical part of retirement planning for today’s seniors. It is entirely understandable for any parent to want to help their children in a time of need—I’m a father myself, so I understand the impulse. The reality is, however, that dipping into your savings to help out a child going through a temporary rough patch can have far-reaching implications.
While it’s not uncommon for parents to wonder if children will be angry with them if they fail to pitch in financially when times are tough, an open and honest conversation can go a long way towards easing the tension and helping adult children and their families understand just what kind of a sacrifice is involved. Another way to look at it is this: if you compromise your retirement, it’s your kids who are ultimately going to be on the hook to help you out. In helping to ease their financial burden today, you might just be kicking the can down the road and saddling them with more significant financial obligations tomorrow.
Even a modest regular contribution can have an outsized long-term impact on your retirement finances. As I reminded one of my clients who recently faced these circumstances, an annual gift of as little as $1,000 can make the difference between running out of money at age 72 or age 100! The truth is, as difficult as it is to watch a family member going through economic difficulties, sometimes the smartest thing to do is to help them weather the storm on their own. There are many ways to support them that don’t involve significant financial investment—while not ideal, giving your time and insight or helping your kids temporarily downsize their own finances will teach valuable lessons without putting your financial future up in the air.
So, save your money—help your kids to make the adjustments they need to get through tough times, and protect your retirement savings. It may not be easy, but it’s the right call.