Podcast Episode 236: Challenging Financial Scenarios Families Often Face

Today’s Wisdom:

Family will always be your priority in life but it can also lead to some tough conversations when it comes to retirement planning. Today we’ll discuss some of the common scenarios we come across when working with clients and how we work through them.

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What You’ll Learn:

Much of the work you do saving and investing is to ensure you and your family can enjoy life without having to constantly worry about money. But no matter how well you plan, certain situations can arise that throw off that balance and truly test your priorities.

On this episode of the Money Wisdom podcast, we’re going to look at a handful of these challenging scenarios that face many retirees and pre-retirees and share the way we approach these with our clients.

The first scenario we discuss is one that’s becoming more and more common today. Parents are having to take financial care of their children well into their 20s in many cases and that can put a huge strain on bank accounts. If there’s a situation where kids are blowing up the financial situation for a family, then we’ll let a client know. Our job is to point out the potential consequences to supporting your children at the detriment of your own retirement so that you can make the decision that’s best for you. It’s always our goal to help make sure you have enough money to take care of yourself first and if you don’t have that, it might be best to cut back on how much you’re providing your kids.

Similarly, many people are having children much later in life, which eventually presents another difficult scenario. By the time you’re about ready to retire, there’s a good chance your children are still in college and you’re helping fund that education. You’re going to have to make some tough decisions here and it’s not always easy, but consider the time you have to recoup that money for your retirement versus how long they have to pay off that debt,

Speaking of education, grandparents like to help out when it comes to college and ask us how best to do that. There are two choices that make a lot of sense in this situation. The first is to write a check and pay for tuition directly because that’s not consider a gift as far as the IRS is concerned. The other great option is to open a 529 plan and start contributing to that. As long as the beneficiary uses it to pay for education, the growth in that account is tax-free.

Now let’s reverse this a little bit for our next scenario. We work with clients that are part of what’s called the ‘sandwich generation’ because they’re having to support not only their children but also their parents. When you have the responsibility of providing support to your aging parents, there are emotional decisions to go with the financial ones. Financially, the best advice again is to make sure you’re prioritizing your own needs to make sure you don’t go bankrupt in retirement. Of course everyone’s situation is different so we treat these on an individual basis.

The final family scenario we talk about on the show is the one where people want to have an intentional plan about leaving a legacy. This is so important to many people and you want to execute correctly so that the money is spent with your values and intentions protected. That’s why it’s advantageous to have a trust. It can give you flexibility, protection, and confidence.

Ultimately, you want to make sure you have a plan in place so that you can tackle these as they arise. Take advantage of our Money Map review and get that process started if you haven’t.

[1:52] – About to retire but still helping children financially

[4:17] – Putting off retirement to continue paying for a child’s college  

[5:52] – Grandparents that want to help grandchildren financially

[9:20] – Aging parents that are counting on their children

[11:58] – People that want to be intentional about leaving a legacy

[13:54] – Do you have a plan yet for these?

Thanks for listening to this episode. We’ll be back again next week for another show.


Final Thoughts:

“If you’re somebody that’s sacrificing you own retirement to support your 20 and 30-year-old kids, my job is to point out the cost of that. And the cost of that is you might be living with your kids in retirement if you run out of money.”

– Joel Johnson

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