You’re cruising along towards your retirement goals and feeling good about the direction you’re headed. Or you’re into your retirement years and all the boxes are checked; health, debt under control, and retirement funding. Then, like a ghost from the past, you get a call (or a text these days): “Mom, I got laid-off, and I need some help.” Or perhaps the call is positive. “I’m getting married!” “Wonderful news!” you reply, knowing what’s next. “Oh, and your part is $10,000.” It could even be funding education or asking for a downpayment for a car or a house. So when your adult child asks you to reach into your nest egg to help fund the ups and downs in their life, do you have a strategy? Here are some things financial planners shared about assisting your family at the risk of jeopardizing your financial future.

Clint Herndon, CPA says, “‘Helping’ children does not always mean giving them money. Some lessons in life are best learned by hard work and perseverance. Parents naturally want to soften the blow of life to their children, but choosing to put themselves in a risky financial position can have long term, sometimes irreversible, consequences. It comes down to simple math; If parents at age 55, who do not have a significant nest egg, pay $50,000 for a wedding, they might only have 10-15 years of earnings ahead of them. However, their 28-year-old child still has 40 years of earnings ahead of them. Which of these can recover from a $50,000 hit more reasonably?”

Shelley Giordano of The Academy for Home Equity in Financial Planning offered a strategy that many may not have considered. “Most Boomers are not aware of a retirement asset that they already have—a house. Although it is well documented that retirees are extremely generous to the next generations, it can be dangerous to spend from a finite savings nest to help children/grandchildren. But a reverse mortgage can meet the needs of both helping the children but not putting the retiree under the stress of a traditional mortgage. No monthly payments are ever expected, and since no payments are due, the retiree is not at risk for possible missed payments. Increasingly, retirement experts are acknowledging that putting this ‘lost asset, the house’ to work can not only help the retiree but the extended family as well.”

Giordano and Herndon echoed the sentiments of Chris Wilczewski of Edward Jones. “Plan ahead! The old adage holds true ‘The best time to plant a tree is twenty years ago, the second-best time is now.’ Working with a financial advisor to develop a strategy that provides a cushion can help you prevent making regrettable decisions. With many advisors, there is no charge for an initial consult, so why not take advantage of it? Our goal is to get that tree planted so that as these life experiences happen, and they’re going to happen, you’re better prepared.”

By Lorn Randall

Special thanks to our experts: Clint Herndon, CPA, 916-850-0245, nextpeakcpa.com; Shelley Giordano, The Academy for Home Equity in Financial Planning, ahe.illinois.edu; Chris Wilczewski, AAMS, CRPS, Financial Advisor, Edward Jones, 916-260-5996, edwardjones.com/chris-wilczewski