If you are like most people, there isn’t anything you wouldn’t do for your kids. Be cautious with this thinking, however. Research has shown that 45 percent** of parents who have financially supported their adult children say it has negatively impacted their retirement savings. Racking up student loans or paying your adult child’s living expenses long term could put your own savings at risk and you could end up needing help in the future.
Build a plan to pay yourself first, live within your means, and take advantage of the power of compound interest. With proper planning, you should be able to balance supporting your children with your retirement goals.
Pay yourself first
Make retirement contributions your number one priority. Design a plan that meets your retirement goals and timeline and don’t defer from the plan. Once you make your contribution, you’ll know how much is left over that can be set aside for your child. This is good for your future and sets a positive example for your child about the value of saving and managing money.
Live within your means
If there isn’t enough for retirement and college, for example, you may need to reconsider college or find creative ways to pay for it. Talk with your child about what the family can realistically afford. Your son or daughter may need to help cover expenses by working while in school or choose alternate paths such as living at home and attending community college for the first two years. While this may not be their desired path, it will still get them to the end goal of earning a college degree. It’s never easy to say “no” to our children, but sometimes we have to.
Remember the power of compoud interestWith retirement, time is your greatest ally. Saving early allows investments to compound for a longer period of time giving you a greater chance of success. Remember, if you are able to take care of yourself later in life, your entire family will benefit. If not, your kids may end up needing to take care of you which could detract from their own retirement savings. It’s a cycle that is in your power to stop.
Whether you’re nearing retirement, or are only just beginning to think about it, we’re here to help. As the financial advisor through CUSO Financial Services, L.P. (CFS) at 1st United Credit Union, Rahil Machiwalla can answer any questions you may and can help with your planning. He is available to chat by phone or can meet you at any 1st United branch. Schedule your appointment with Rahil today.
**Source: LIMRA Secure Retirement Institute Study.
*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the Credit Union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The Credit Union has contracted with CFS to make non-deposit investment products and services available to Credit Union members. Please consult a qualified tax advisor for specific tax advice.