The Retirement Expense People Forget to Plan For: Their Kids

When people think about their expenses in retirement, they usually picture many of the obvious ones: housing, healthcare, travel, taxes and the cost of maintaining the lifestyle they've worked hard to build.

There's another expense I think families sometimes underestimate: their kids.

There's a common assumption that by the time you retire, the expensive years of raising children are behind you. And in some ways, they are. You're probably no longer paying tuition, buying school uniforms or writing checks for sports and activities.

But I've found that for many families, the expenses don't necessarily disappear. They just change.

Many people want to help their adult children with things like a wedding, a down payment on a first home, graduate school, support during a career transition, and unexpected challenges that may arise.

For many of the families we work with, supporting the next generation remains an important part of their financial lives well into retirement.

And I don't think that's necessarily a problem to solve. I just think it's something to plan for.

Generosity Can Be Part of the Goal

When we talk about retirement planning, the conversation often focuses on whether someone has saved "enough."

Enough to maintain their lifestyle. Enough to travel. Enough to cover healthcare. Enough to feel confident they will be able to pay for the rest of their lives.

But what if part of your definition of "enough" is having the ability to help your family?

For some people, financial success means being able to take the entire family on a vacation every year. For others, it's helping their children buy their first homes or contributing toward their grandchildren's education. Maybe you want to pay for a wedding someday, help a child start a business or simply be the person your family can turn to when something unexpected happens.

Those aren't necessarily threats to a successful retirement plan. In many cases, they're part of the reason people worked, saved and planned so diligently in the first place.

If being generous with your family is important to you, I believe it deserves a place in your financial plan.

The Little Things Can Become Big Numbers

Some family expenses are easy to anticipate. You probably know if you'd like to one day contribute toward a wedding or help pay for college.

It's the smaller, ongoing support – or truly unexpected big issues – that can be harder to see.

Maybe you're still paying for a cell phone plan or insurance. Or you’re the one who buys the plane tickets when everyone travels together. Or you cover the beach house for the family vacation. Or you help with childcare or summer camp for the grandchildren. Or you contribute toward a car or step in when one of your children has an unexpected expense.

None of those things may feel particularly significant on its own.

But over a retirement that could last 20 or 30 years—or longer—they can add up to a meaningful amount of money.

That doesn't mean you need to stop doing them. It simply means we should recognize them for what they are: part of your spending.

“Can We Help?” and “How Much Should We Help?” Are Different Questions

This is where financial planning can be particularly useful.

When a client wants to make a significant gift to a child or grandchild, there are really two conversations happening.

The first is financial: How much can we comfortably give without compromising our own long-term plan?

That's something we can model. We can look at different amounts, consider future cash flow needs and evaluate how a gift could affect the plan over time.

But once we know what you can do, there's another question: What do you actually want to do?

Those numbers aren't always the same.

There may be family dynamics to consider, such as:

• Will this be a one-time gift or ongoing support?

• Does helping with a down payment create an expectation that you'll help with something else later?

• Are you and your spouse equally comfortable with the amount?

• If you have multiple children, how do you think about helping one when another may not need the same support?

Equal Doesn't Always Mean Equitable

This is something that can become especially complicated for families with multiple children.

One child may need help buying a first home while another is already financially established. One may have children of their own while another doesn't. One may pursue a career they're passionate about that happens to pay less. Another may experience an unexpected hardship.

Does helping one child mean you need to immediately give the exact same amount to the others

There isn't one right answer.

Every family has its own philosophy about what's fair, and those conversations can be surprisingly emotional. That's another reason I think it's helpful to think through these questions before you're in the middle of making a decision.

Then Come the Grandchildren

Grandchildren have a way of expanding both families and financial plans.

Suddenly there may be another generation you'd like to help. College savings, school tuition, camps, family trips, first cars or simply creating experiences together can all become part of the picture.

And for many grandparents, that's a wonderful position to be in.

The important thing is to incorporate those goals intentionally rather than treating every expense as an unexpected withdrawal from the retirement portfolio.

Put a Number Around Generosity

One of the most useful things we can do is simply acknowledge family support as part of the retirement plan.

That may mean establishing an annual amount you're comfortable giving to children and grandchildren. It could mean earmarking a certain amount for larger future goals such as weddings, education or home purchases. For some families, it may make sense to create a separate pool of assets specifically intended for gifting.

The exact approach will be different for everyone.

But once we've put some parameters around it, generosity can become something you've intentionally planned for rather than a decision you have to reconsider from scratch every time someone needs help.

In a way, you're giving yourself permission to say yes—because you already understand what your plan can support.

Taking Care of Yourself Is Part of Taking Care of Them

I understand the instinct to want to help your children whenever you can. I don't think that instinct suddenly disappears when they become adults.

But there's an important balance.

Protecting your own long-term financial independence is also a way of taking care of your family. If you give so much today that you compromise your own financial situation later on, you may eventually create the exact situation you were hoping to avoid: your children needing to financially support you.

A thoughtful retirement plan can help you find the space between those two things—taking care of yourself while also using your resources in ways that are meaningful to the people you love.

One of the great privileges of financial success is having the ability to make life a little easier—or a lot more meaningful—for your family.

If that's part of what you want your money to accomplish, it shouldn't sit outside your retirement plan. It should be built right into it.

If you're approaching retirement and wondering how much room your plan gives you to help your children or grandchildren, we'd be happy to help you think through it. Schedule a conversation with our team by clicking here.