As a parent, you likely want to do everything possible to provide for your kids and help them get a good start to their lives. Unfortunately, this can sometimes lead to decisions that end up jeopardizing your own retirement security.
Before you decide to prioritize an older child's financial needs above your own future, there are a few key things that you need to consider.
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Why prioritizing financial assistance to older children could be a big mistake
The reality that parents need to consider when deciding where to put their limited funds is that they likely don't have many other options to fund their retirement besides savings.
While it's true they'll receive Social Security income in their later years, Social Security only replaces about 40% of preretirement earnings. That's nowhere near enough for most people to live on, and the average benefit of $1,657 in 2022 would offer just $19,884 total for the year -- barely above the federal poverty level.
Retirees usually don't get pensions from employers anymore. So, with a pressing need for income to supplement Social Security, retirement savings must be a top priority. Unfortunately, if parents focus on college savings or providing financial support for adult children, they could end up shortchanging themselves.
And while their kids likely have other options, such as borrowing for school or living at home or in a cheaper area in early adulthood, parents don't necessarily have the same range of solutions for dealing with a retirement savings shortfall.
Options they do plan to exercise, such as working longer to catch up on retirement savings, may not always come to fruition either if they end up forced out of the workforce sooner than planned due to unemployment or health issues.
What you should do instead
Ultimately, parents cannot and should not sacrifice retirement savings to provide for their adult children, no matter how much they may feel an emotional obligation to do so.
It helps no one -- including their kids -- if parents leave themselves unable to cover the basic necessities in their later years. In these situations, those grown adult children who parents wanted to leave unburdened could end up needing to provide more help to struggling parents than anyone is comfortable with.
Ideally, parents will be able to budget enough to save a sufficient amount for retirement and cover educational costs, as well as offer the other assistance they desire to their older children. If parents start saving for college and retirement early and live on a careful budget, they may be able to do that.
But if a choice must be made, it's best for parents to treat investing for their later years as a must-pay bill. This means they should fulfill that obligation to their future selves first and can then choose to use any funds left over for their children. By setting a detailed retirement savings goal and taking advantage of tax breaks for retirement, parents can make certain their needs are met and will have a better idea of how much they have to spare to help out their offspring.
