For most parents, the instinct to take care of their children never really goes away.
When children are young, that instinct is necessary. Parents provide food, housing, education, transportation, guidance, and financial support. For decades, putting the children first becomes part of everyday life.
The challenge is that children eventually become adults—but the parental instinct does not always adjust as quickly.
That can become especially important in retirement.
A recent Morningstar discussion highlighted a problem that receives far less attention than overspending in retirement: some retirees may actually be spending too little. Researchers found that many retirees who have accumulated adequate savings continue to use very conservative withdrawal strategies and, in some cases, see their wealth continue to grow throughout retirement.
There is nothing wrong with investments continuing to grow in retirement. In fact, maintaining or growing assets may be part of a sound financial plan. The concern arises when retirees are unnecessarily sacrificing their own security, comfort, and enjoyment while continuing to financially support adult children.
Sometimes the Problem Isn't Spending. It's Spending on Yourself.
Many people spend 30 or 40 years developing strong financial habits.
They save. They invest. They postpone purchases. They put their children first.
Then retirement arrives, and suddenly the financial objective changes. The money that was accumulated for retirement is now supposed to help fund retirement.
That transition can be surprisingly difficult.
Morningstar's research suggests that retirees often struggle to move away from the saving habits they developed during their working years. Even retirees who know they can afford to spend more may remain cautious because of uncertainty, fear, and the complexity of determining how much is truly safe to spend.
For parents, there may be another factor.
They may have little difficulty spending money on their children or grandchildren but feel uncomfortable spending the same money on themselves.
A $10,000 family emergency may receive an immediate yes.
A $10,000 vacation the parents have dreamed about for years may receive a very different response: "We really shouldn't spend that much."
An interesting question to explore is: Why is one expense automatically viewed as necessary while the other is considered excessive?
Helping and Rescuing Are Not the Same Thing
There is certainly nothing wrong with helping your adult children.
For many parents, helping family is one of the things that gives their money purpose.
A parent may reasonably choose to help with:
- a first home,
- a grandchild's education,
- a temporary job loss,
- an unexpected medical or family expense,
- or another important life event.
If the parents can afford it and the gift reflects their priorities, that can be an entirely appropriate use of their wealth.
But there is a difference between helping and repeatedly rescuing.
Paying an adult child's rent once following a job loss is different from paying it indefinitely.
Helping with an unexpected car repair is different from repeatedly paying off credit-card debt.
Providing assistance during a genuine crisis is different from becoming a permanent part of an adult child's monthly budget.
Repeated financial bailouts can create two problems.
First, they may prevent the adult child from developing the financial independence parents ultimately want for them.
Second, they can gradually become an unplanned retirement expense for the parents.
And unlike many other retirement expenses, there may be no clear dollar amount, time limit, or end date.
Your Retirement Has to Come First
This can be one of the hardest messages for parents to accept: Taking care of yourself financially is not the same as being selfish.
Your children may have decades remaining to work, save, recover from mistakes, and rebuild financially. You may not.
Once retired, replacing money that has been given away can be much more difficult. Before making substantial or ongoing gifts to adult children, parents should first determine what their own financial plan needs to accomplish. That may include:
- providing dependable retirement income,
- maintaining an adequate emergency reserve,
- preparing for healthcare and long-term-care expenses,
- keeping up with their home,
- replacing vehicles when necessary,
- allowing for travel and hobbies,
- and maintaining a comfortable margin for unexpected expenses.
Only after those priorities are addressed can you really know how much financial help you can comfortably provide to others.
Don't Forget Why You Saved the Money
Morningstar's research also points to the importance of having meaningful goals in retirement. After decades of using retirement itself as the motivation to save, retirees may need new goals that give them permission to spend.
Those goals do not need to be extravagant.
Perhaps it is taking the family on vacation.
Maybe it is visiting places you never had time to see while working.
It could be joining a golf club, renovating the kitchen, spending winters somewhere warmer, taking classes, pursuing a hobby, or simply having the freedom to enjoy dinner out without worrying about every dollar.
And helping children can absolutely be one of those goals.
The important word is intentional. Retirement planning shouldn't be about spending as much as possible, nor should it be about accumulating the largest account balance possible. It should be about using your resources intentionally.
A Better Question
Instead of asking, “Can we afford to give our children this money?” we should be asking, “Can we afford to give them this money while still protecting the retirement we worked for?”
That small change can lead to a very different conversation. You might also ask:
- Is this assistance solving a temporary problem or supporting an ongoing lifestyle?
- Have we helped with the same problem before?
- What are we giving up in order to provide this help?
- Will this materially affect our long-term financial security?
- Are we postponing things that are important to us because we feel responsible for an adult child's expenses?
- Is there another way we can help without simply writing a check?
Those are not questions designed to prevent parents from helping their children. They are designed to make sure generosity remains sustainable.
The Goal Isn't to Die With the Least—or the Most—Money
Seeing your investments grow during retirement is not a problem.
You may want to leave money to children, grandchildren, charities, or other people and organizations that matter to you. Preserving assets may be an important part of your plan. But there is an important difference between intentionally leaving a legacy and unintentionally failing to enjoy your retirement.
Morningstar recommends that retirees periodically review their wealth, spending, withdrawal strategy, and goals rather than simply continuing the same spending habits indefinitely. That review should include family support as well.
The goal isn't to spend every dollar before you die. It isn't to stop helping your children, and it certainly isn't to judge someone based on the size of the account they leave behind. The goal is balance. You worked for decades to build financial security. You raised your children and helped prepare them for adulthood. It is entirely reasonable to continue helping them when you can.
But retirement may also require learning something that can be surprisingly difficult for lifelong parents: It is okay to take care of yourself, too.
Source: Morningstar, Investing Insights, interview with behavioral scientist Danielle Labotka on research examining underspending in retirement.
Frequently Asked Questions:
Is it wrong to stop financially helping my adult children once I retire?
No. Retirement changes your financial circumstances. Your children may still have decades to work and recover financially, while your ability to replace money you give away may be limited. Helping can still be appropriate, but your own long-term financial security should come first.
How do I know if I can afford to help my adult children financially?
Instead of asking only, “Can we afford to give them this money?” ask, “Can we afford to give them this money while still protecting the retirement we worked for?” Consider your expected lifetime income, healthcare costs, emergency reserves, housing needs, taxes, desired lifestyle, and other future expenses before deciding what is truly available to give.
When does helping an adult child become enabling?
A good question is whether the assistance is helping solve a temporary problem or repeatedly rescuing the child from the same financial behavior. Ongoing help with recurring debt, rent, overspending, or lifestyle expenses may unintentionally delay financial independence. This distinction between support and enabling is also emphasized in current retirement guidance.
Should I sacrifice travel or other retirement goals to help my children?
That depends on your priorities, but it is worth recognizing what you are giving up. If you can comfortably afford both, there may be no conflict. If helping adult children repeatedly causes you to postpone experiences or purchases that are important to your own retirement, the arrangement deserves another look.
Why do I feel guilty spending money on myself in retirement?
After decades of saving and putting family first, spending on yourself can feel uncomfortable. Morningstar's research suggests that this transition from saving to spending is difficult for many retirees. Developing specific retirement goals can make spending feel purposeful rather than irresponsible.
Is it bad if my investment accounts keep growing during retirement?
Not at all. Growing assets can provide additional security, future healthcare resources, or a larger legacy. The concern is not growth itself. The question is whether your assets are growing because that is part of your plan—or because you are unnecessarily denying yourself a retirement you could comfortably afford.
What should come first: my retirement or helping my adult children?
Your retirement security generally needs to be established first. That does not mean you cannot be generous. It means determining what you need for the rest of your life before committing assets that you may not be able to replace. Current retirement guidance consistently emphasizes evaluating the parents' own finances before deciding how much support to provide.
#RetirementPlanning #HelpingAdultChildren #RetirementIncome #FinancialIndependence #FamilyFinances