Planning your finances for retirement is a challenge and it seems to only become more challenging as time moves on. When people look at the roadblocks in the way of their retirement, fingers are often pointed at things like the housing bubble bursting, the economy, the year 2008, the government budget, and so on. But it turns out that one of the biggest enemies to your retirement might be much closer to home, or maybe even in your home.
A recent report from Merrill Lynch revealed that since 2008, almost two thirds of Americans nearing retirement have provided financial assistance to family members. We aren’t talking about spotting your kid a 20 dollar bill for gas; the average amount given is $15,000. The even bigger problem? The study showed that 88% of those soon-to-be retirees have not factored that financial undertaking into their retirement plans.
Since most people find it nearly impossible to not help a family member out, whether it’s a parent, child or sibling, simply looking the other way and keeping your retirement finances intact is probably not an option. Instead, here are a few ways that you can keep this homeland threat from becoming a real danger to your retirement.
Plan For It
Whether you think the expense is in your future or not, it’s smart to have a “family fund” built into your retirement plans. This doesn’t have to mean that money is free for the taking by anyone with your DNA. Think about what situations you would want to use that money for, who specifically you could lend it to, and how much you realistically can allocate. This may include deciding if you want to be able to help your child put a down payment on a house, or if you will need to give your parents support in their long-term care expense. No matter the situation, have a plan in place of the who, what, and why of this money.
Talk About It
Don’t shy away from family discussions about financial support. Having a conversation now can make it a lot more comfortable later when it comes time to the “money talk”. Talk about potential financial risks in the future, possible hardships down the road, or plans that might need a helping financial hand. You don’t have to have a categorized record of each and every conceivable doomsday in the family’s financial future, but think of it as contingency planning for the major “if’s” that could come your way.
Ask For Help
Planning for your future is hard enough, and planning for the future of your entire family can be even more difficult. Make sure you are speaking with your advisor about how to integrate this family support into your retirement plans. As a third party who cares about not only your finances, but also you and your family, an advisor can make sure that you are aren’t letting one weigh down the other in a way that could set you back in your retirement goals.
The stats described in Merrill Lynch’s report are probably not going to change. Future and current retirees will continue to help their loved ones in whatever way they can That’s what family is for, after all! But what can change is how prepared you are to lend your support.
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