GOLDEN VALLEY, Minn. — A new study from Merrill Lynch and Age Wave, reveals that many parents are going overboard on financially supporting their adult children. Nicole Middendorf from Prosperwell Financial joined us on KARE News@4 to discuss the study and the impact it is having on many families bottom line.
- Each year, parents spend twice as much on their adult children as they contribute to their retirement accounts.
- Specifically, U.S. parents spend $500 billion annually on adult children aged 18 to 34 yet contribute a collective $250 billion to their nest eggs.
If you can afford to help your kids out financially that is great. However, most Americans are behind on retirement savings and can't afford to be spending more on their grown children than they contribute to their IRAs or 401(k)s. Imagine you spend your entire 50s giving your adult children $300 a month. If you were to put that money into an IRA or 401(k) for a decade instead and invest it an average annual 7% return, you'd boost your nest egg by about $50,000. And that's money that's bound to come in handy during retirement. But the biggest issue is what are you teaching your children and grandchildren and you don’t want to enable them. So what to do:
Get a retirement projection done. See if you are on track or not towards your own retirement.
Contribute to a 529 plan for your grand kids or help your kids set up a Roth IRA.
Do not contribute any money to your kids until you know you are on track for your financial plan and are maxing out all the accounts that are available to you.
Make sure you have 6-12 months of income set aside in liquid money for your own emergencies first.