Although there is nothing wrong with parents focusing on their kids’ college goals, it has been revealed that a large number are doing this at the expense of their own retirement. While it is perfectly fine to help your kids get through their college years by supporting them, it can be challenging to juggle that along with trying to fund your retirement – which seems to sneak up on you before you even realize it.
The first thing you will need to do is determine how much you are genuinely able to afford to contribute to your retirement as well as your child’s college expenses. These expenses need to be considered simultaneously, as you may find that adjustments will need to be made along the way to one or both goals. Below are a few questions you will need to answer honestly, as they will help you get started with confirming what your financial limits are.
Saving Towards Retirement
- What standard of living would you like to have when retired? Are you keen to travel extensively or would you prefer to live a simple life?
- How many years do you have to work until your desired retirement date?
- Is your employer offering a pension plan where they make matching contributions?
- Are you or your spouse going continue working part-time after officially retiring or not?
- Will you be relying on Social Security to fund your retirement? You may need to go online to check and see how much you will be eligible to receive.
- Do you have a Roth IRA or regular IRA?
- How much are you estimating your balance to be, taking your current results into consideration?
- What level of income do you expect your current balance to provide?
Covering the Cost of College
- How long will it be before your kid(s) start college?
- Do you want to cover all or just a part of their college costs?
- Do you want them to attend private or public college? What will the associated costs be?
- Are you expecting your kid(s) to qualify for any form of financial aid?
- Does your child have any outstanding athletic, academic or artistic abilities that could enable them to qualify for one or more scholarships?
- Will grandparents or other family members be helping with the cost or not?
What to do if you Cannot Fund College and Retirement
If you aren’t able to fund college and retirement simultaneously, you may need to ask yourself:
- Will you be willing to continue working into your retirement years?
- Are you happy to delay your retirement by a few years to try and help boost retirement and college fund savings?
- Will you be willing to reduce your living standards either now or during retirement? It may be possible to reduce spending now so you have sufficient funds at a later stage or you can consider cutting expenses after retirement.
- Will you be fine with asking your kid(s) to contribute towards college expenses?
- Will you be OK with sending your kid(s) to less expensive colleges or universities?
- Are you willing to make more aggressive investments? (This may not always be a wise move).
Don’t wait until your kid(s) have left college to start saving for retirement because you will end up having to save exorbitant amounts of money to try make up for lost time. It’s also possible for your child to attend college by taking out loans or working part-time to help cover costs. If you would like information regarding how to boost your retirement savings, contact our team today.
According to research carried out by Age Wave and Merrill Lynch, more than 65% of parents over the age of 50 have financially supported their kids aged 21 or older in the past five years. Amounts paid out to support these over 21s have averaged at $6,800 per year, which, if saved in a tax-deferred account that provided an average annual return of 6%, would have amounted to almost $100,000 extra that those parents could have saved towards retirement.
Cut the Extras
If there’s a valid reason why your adult kids can’t fully support themselves yet, helping them to cover basic rent and utilities is acceptable – for instance, if they are contributing everything they possibly can or struggling to make ends meet because of not being able to secure employment that pays a livable wage or they are having difficulty repaying student loans. However, funding a fancy apartment or regular dining out at expensive restaurants will not help them learn to support themselves at all in the long run.
Initiate an Appropriate System
A survey conducted by the BMO Wealth Institute revealed that just over 65% of parents give financial assistance to their adult kids as needed, such as at times when there are insufficient funds to cover an emergency or if their kids are short on funds to cover a regular bill.
Instead, it is recommended that you calculate ahead of time how much your child will need to supplement exiting income and then automate biweekly or monthly transfers equaling that amount. From there, you should review the amount being sent after a few months and consider reducing it periodically until you reach a mutually agreed upon deadline for stopping financial support.
Setting up an arrangement like this will help simulate the scenario of receiving a regular paycheck. However, genuine emergencies may still occur at times, such as dealing with a flooded apartment. In cases like these, feel free to step in with whatever you can afford to assist with.
Move your Focus from Provider to Advisor
When the time comes to stop providing physical financial assistance to your child, this doesn’t mean that you should withdraw your advice as well. This advice can come in the form of teaching your child how to budget more effectively, discussing their options regarding healthcare insurance or giving them information regarding how they can select the best possible 401(k) options to prepare for their future.
While it is recommended that you provide your child with financial advice, it is never a good idea to nag or push too hard – this will be the fastest way for them to rebel, which could result in even worse financial decisions being made in the long term.
Another way in which you can help guide your child financially is to introduce them to budgeting apps such as Digit or Mint. Encouraging them to spend time on sites like Bankrate.com will also provide them with a wealth of information on how they can become more financially secure and not have to rely on the Bank of Mom and Dad for constant handouts.Continue reading
Servant leadership is a phrase that was made known by Robert K. Greenleaf in his essay entitled, “The Servant as Leader,” which was first published in 1970. Listed below is each of the principles of servant leadership discussed in a little detail.
In most cases, leaders are valued and appreciated for their superb decision-making and communication skills. It’s essential for servant-leaders to reinforce these crucial skills by committing to really listening to those around them. They should strive to determine and clarify the will of a group of people, while also listening receptively to everything being said. Listening receptively enables you to her your inner voice, and learning to understand what the body, mind and spirit are communicating.
A true servant-leader will be able to not only understand, but also genuinely empathize with those around them. It is not only crucial to acknowledge and accept people as they are; you need to understand their point of view completely as well.
This refers to healing on a more holistic level instead of physically, which can be achieved by means of coaching, discussion, mentoring and encompassing a relationship-oriented style of leadership.
Being more self-aware as well as being more aware of those around you is a common characteristic of genuine and effective servant-leaders. Understanding your weaknesses, strengths and areas where development is possible is an essential component required to maximize performance.
An inherent difference between servant leadership and other types of leadership is that servant-leaders tend to work with cooperation and persuasion instead of delegation and harsh authority. Servant-leaders have been gifted with the ability to convince those around them instead of forcing them to comply with requests.
A true servant-leader will be able to look at and consider a problem or challenge from a conceptualizing perspective, which means that they have the ability to think further than just the daily realities of the work they do. Although conceptualization is extremely important, servant-leaders possess an ability to carefully balance this with their day to day focus.
This is a characteristic that allows genuine servant-leaders to understand and learn lessons from past experiences, while also understanding the realities of ‘right now’ and the potential outcomes of any decisions that are made in the future.
All leaders such as managers, CEOs, directors etc. should ensure that they play a crucial role when it comes to establishing their organization in trust for the greater good of all of society.
Committing to Helping People Grow
Servant-leaders firmly believe that people have far more value than simply being recognized for the work they do. They are therefore able to lead and commit to the professional and personal growth of each person in their organization.
Establishing and Developing Community
This is a crucial aspect of servant leadership. Servant-leaders are constantly looking for ways to build and develop task-oriented communities for everyone working within their company or organization.
Adopting and using the above mentioned principles will ensure that you are able to provide the best level of servant leadership possible, regardless of the position you hold within your organization.Continue reading
As a result of declining fertility and mortality rates, it has been estimated that more than 80 million Americans will be over the age of 65 by 2050 – almost twice the amount of older people that are around today. This has serious implications on virtually everything from the availability of a skilled labor force to the amount of funds that will need to be allocated to healthcare spending.
A Potential Marketing Goldmine
Numerous policymakers have voiced concerns regarding the fact that having more and more senior citizens collecting public benefits would damage the economy. However, director and founder of MIT’s AgeLab, Joseph F. Coughlin, has suggested in his new book entitled, “The Longevity Economy,” that the rapidly accumulating golden years may in fact represent somewhat of a goldmine. This is owing to the fact that the consumer goods market that has been tailored to seniors is worth as much as $8 trillion per year.
A new form of innovation will be needed to tap into the resources of the quickest-growing demographic of the country’s population, and this will have to start with a fresh way of thinking about old age.
A Social Shift
During the 19th Century, doctors firmly believed that when people got old, they needed to slow down in order to conserve the last bit of energy they had. However, people started living longer after 1900, meaning that there were more senior citizens than before.
This resulted in industry, business and government agencies wanting to justify removing them from the workforce to accommodate younger employees. As a result, a ‘retirement age’ was created. Despite the fact that people are healthier and living longer than ever before, the myth of ‘old age’ and retirement has been kept alive. This has resulted in society in general trying to literally write off up to 25% of the lifespan of people over 65.
Ensure that you Plan Accordingly
Although you may already have a plan in mind for how you would like to spend your retirement years, it’s crucial to keep in mind that you will need funds to live on – and with inflation being what it is, relying exclusively on Social Security to provide for your retirement funding is a bad idea.
If you are in your 30s or 40s, you may be thinking that you still have ‘a good few years’ to set aside or invest money to keep you afloat during your golden years. However, the earlier you start investing, the less you will have to set aside each month, thanks to compounding interest.
Here at Dream Bridge Planning, we are able to provide you with a host of information pertaining to financial planning services, enabling you to enjoy the retirement plans you have been dreaming about. If you would like to get on the right track and start securing your financial future, get in contact with one of our qualified and experienced financial planners today. We will always be willing to provide you with the right advice.Continue reading