We all know it’s expensive to raise kids. How expensive? The average cost of raising a child to age 18 is in the range of $233,000, according to the U.S. Department of Agriculture.
New research shows, however, that the costs don’t end there for parents — even at the expense of their own retirement savings.
In a recent Bankrate.com survey, half of the respondents said they have sacrificed some of their own retirement savings in order to assist grown children with their financial situation.
- About half of parents with children over 18 say that they’ve put their own retirement savings on the backburner to help their kids.
- More than half the parents said they cover at least part of their kids’ cell phone bill
- Car payments, food and housing expenses also add to the overall financial picture for parents — even higher earners
“We found that higher earners are more likely to sacrifice retirement savings,” said Kelly Anne Smith, a Bankrate.com analyst. “It’s a trend spanning across all different households.”
One big suggestion? Parents need to find some middle ground with their kids. It’s one thing to save responsibly to help pay for college. It’s an entirely different issue if you’re putting money away for your child at the expense of your own retirement.
“You can borrow your way through school, but you can’t borrow through retirement,” said Doug Oosterhart, a certified financial planner from East Lansing, Michigan.
Income crunch hitting retired baby boomers
A new report in the Boston Globe puts the income crunch into perspective for seniors — more than half of middle-income seniors will lack resources for housing and care in the long term.
As the ranks of retired baby boomers swell and many live longer than their parents, the study projects that by 2029 about 14.4 million middle-income seniors — nearly double today’s number — will lack the financial resources for housing that offers personal care assistance.
“We’re talking about retired teachers, trade union members, first responders, government workers,” said Beth Burnham Mace, chief economist at the National Investment Center for Seniors Housing & Care, who coauthored the report. “This is a cohort that hasn’t been paid much attention to. These are people who provided amazing services to society, and it’s important that there’s housing and care they can afford.”
In the study, researchers broke middle-income seniors into two groups. The “young old,” between 75 and 84, were able to draw on $25,000 to $74,000 a year per person from savings and investments. The “old old,” those 85 and older, were able to draw on $24,000 to $95,000. The income range was wider in the older group partly because more are widowed.
Only about 54 percent of the people in this middle-income group will be able to meet the estimated annual costs of $60,000 for assisted-living rent and other expenses, researchers found. Middle-income individuals under 75 weren’t included in the study because many are working and most live independently.
FactRight: Insights on RIAs and Alternative Investments
From our friends at FactRight: As they continue to review offerings aimed at registered investment advisor distribution, and add more RIAs to their stable of customized consulting clients, here are some recent blog posts on RIAs and their use of alternative investments:
» The Alternative Investment Imperative for RIAs makes the compelling case that it is critical RIAs be able to access alternatives for their clients in an era of declining value creation through public markets.
» How RIAs Warming to Annuities Could Be a Positive Sign for Distribution of Alts examines the history of annuities within the RIA distribution channel for what it can tell us about opportunities and challenges to wider adoption of alts within that community.
» What FactRight is learning about RIAs and Alternative Investments. RIAs already doing business with alternative investments have done just enough to address the issues, but they need ongoing support. Many are looking for a curated platform of options, but have little idea where to start or how to get in touch with the right sponsors/managers. RIAs not using alts today are becoming aware that sooner or later, these investments may be indispensable for their practice.
Take “Airplane Mode” to a whole new level — daily
When it comes to maximizing peace and tranquility in your daily life, here’s a suggestion via The Wealth Advisor:
Start your day with your digital devices in airplane mode. It’s a simple switch, but one that can have significant, long-lasting impacts.
This one move will give you a bit of quiet and calm to start your day, along with some creative space — which helps you approach your day in a more deliberative, contemplative and collaborative way. Everyone’s looking for a way to minimize distractions … why not start the day with a break from your technology?
Put email where it belongs
Along the same lines, email can very quickly engulf our day. Forbes delivers 10 tips to reduce the stress of daily email. It’s a lot of basic thoughts, but these steps can put you back in control of your email (rather than vice versa).