What’s an increasingly common pitfall of retirement planning? Failing to factor in those cute little grandchildren. Learn more.
Grandchildren may be cute and cuddly, but they can also threaten the retirement security of seniors who fail to factor spending on grandkids into their retirement planning.
“It’s hard when you are still raising your own kids to picture them as ever being parents themselves! But it’s pretty likely they will be, so plan on spoiling these little treasures and having the resources to do so,” Eleanor Blayney, a certified financial planner, wrote in the October Let’s Make a Plan newsletter from the CFP Board.
The current economic environment has complicated many aspects of retirement planning, but investors find it particularly distressing to see their children and grandchildren struggling. A growing share says they are worried about the financial well-being of the next generations, and high net worth investors rank their children’s and grandchildren’s financial situations as their top concern, according to ongoing Millionaire Corner studies. The concern can translate into unplanned spending.
“We’re tracking growing concerns among investors over the college costs of their grandchildren,” said Catherine McBreen, president of Millionaire Corner. “Many retirees are contributing more than they planned as college costs rise and household incomes remain flat or go down.”
More than 20 percent of retirees are helping a grandchild pay for college, according to a monthly Millionaire Corner survey conducted in May, and a small share continues to help a child with college costs. Two-thirds say they have factored these costs into their retirement planning. Even so, roughly 40 percent express “major financial concerns” about these costs, and 16 percent say they’ve had to cut back in other areas of their budget to help their grandchild. About 20 percent say they feel the child’s parents should be paying a larger share of the bill.
Grandparents are taking on more than college costs, according to a study released in March by the advocacy group AARP. Nearly 40 percent of U.S. grandparents are contributing to the basic living expenses of their grandchildren, and roughly one-fourth help to pay medical or dental costs. More than 43 percent act as primary caregivers.
“As we watch our kids struggle to find work, fund the costs of raising their children, afford homes, and try to set aside money for their retirement, we realize more and more the significant value of the gift that we as grandparents can provide in the way of even the most basic financial support,” Blayney said. “If it’s an important part of your core values, plan accordingly.”