Most parents want to be there to help their children succeed in all aspects of their lives. Some will go above and beyond to ensure a comfortable lifestyle for their children. However, being too helpful financially could jeopardize your own lifestyle by delaying or even preventing retirement.
A New York Times study found that about 40 percent of millennials receive monetary help from their parents to cover normal living expenses — around $3,000 per year on average. If you’re in this situation, continuing this sort of assistance could place your own plans at risk.
Learning to say “No”
It’s best to lay the ground rules for support before your child leaves for college. Let them know what help they can expect and when it will end, whether after graduation or after a specific goal, such as a permanent job, has been reached. Discuss options such as finding roommates to help with expenses.
If you’ve been providing assistance for some time and are concerned now about its effect on your own financial future, this might be the time to take a “tough love” stand on continued financial help. Don’t put off having an honest discussion with children you’re supporting to let them know you need to put your own needs first. By taking action now, you could be preventing a situation in which your child has to support you in the future.
If you’re currently helping out with living expenses, decide where you want to draw the line. You may feel comfortable covering only certain expenses, such as a cell phone bill, or you may decide to cover a larger expense such as rent but for a limited amount of time.
If you’ve been paying for your child’s college expenses, you may be tempted to continue contributing that same amount toward their student loans. But if you’re 50 or older, and retirement is just around the corner, you should consider using that amount to increase your retirement contributions. Keep in mind that you are allowed to contribute an additional $6,000 per year to a 401(k) and an additional $1,000 per year to an IRA. By keeping a budget and factoring in all your expenses before you reach retirement, you will find yourself living more comfortably in the future.
Choose investments wisely
To make sure your ducks are in a row, review current investments using available online tools that help you estimate your retirement income. Consider diversifying into less risky products; for example, a gold IRA provides a more stable source of wealth building without the volatility associated with stocks. Gold and other precious metals have historically increased in value over time, making it a safer investment.