As a parent, you probably want to do everything you can to support your children and help them get a good start in life. Unfortunately, this can sometimes lead to decisions that end up jeopardizing your own retirement security.
Before you decide to prioritize the financial needs of an older child over your own future, there are a few key things you need to consider.
Why prioritizing financial aid for older children could be a big mistake
The reality that parents need to consider when deciding where to put their limited funds is that they probably don’t have many other options for funding their retirement besides saving.
While it is true that they will receive Social Security income in their later years, Social Security only replaces about 40% of pre-retirement income. That’s nowhere near enough for most people to live on, and the average profit of $ 1,657 in 2022 would only add up to $ 19,884 in total for the year – barely above the federal poverty line. .
Retirees generally no longer receive pensions from employers. So, with a pressing need for income to supplement social security, retirement savings must be a top priority. Unfortunately, if parents focus on college savings or helping adult children financially, they could end up losing themselves.
And while their children likely have other options, like borrowing for school or living at home or in a cheaper neighborhood in early adulthood, parents don’t necessarily have the same range of options for face a retirement savings deficit.
The options they are considering exercising, such as working longer to catch up with their retirement savings, may not always materialize if they end up being forced out of the workforce earlier than expected due to unemployment or unemployment. health problems.
What you should do instead
Ultimately, parents cannot and should not sacrifice their retirement savings to support their adult children, no matter how emotionally compelled they feel to do so.
It doesn’t help anyone – including their children – if parents allow themselves to be unable to meet basic necessities in their later years. In these situations, those adult children that parents wanted to leave without the burden might end up needing to provide more help to struggling parents than anyone else is comfortable with.
Ideally, parents will be able to budget enough to save enough for retirement. and cover the cost of education, as well as offer the other help they want to their older children. If parents start saving for college and retirement early and are living on a tight budget, they may be able to do so.
But if a choice has to be made, it is best for parents to view the investment in their later years as a bill to pay. This means that they must first fulfill this obligation to themselves and can then choose to use the remaining funds for their children. By setting a detailed retirement savings goal and taking advantage of tax benefits for retirement, parents can ensure their needs are met and have a better idea of what to save to help their children.
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