It’s no secret that raising children is expensive. While children are understandably a family’s priority, too many of today’s 50-somethings are seeing their children off to college, only to turn to their own financial situation and realize there’s a significant shortfall in their retirement readiness.
It’s natural to expect that you can wait until the kids are gone catch up on building your retirement nest egg. For many pre-retirees, there just isn’t enough time or room in the budget to catch up on making financial decisions they’ve been deferring for many years. Then they may be left with disappointing prospects for the next phase in life.
The limbs of your financial plan
The foundation of any financial plan is saving. To have financial success, you need to save enough- and allow it to grow into enough- to fund your financial goals. The most significant of those goals, for most couples, is to pay for the later-in life expenses of retirement and aging.
Raising children is an amazing life experience, rewarding beyond description. I wouldn’t miss it for the world. However, when looked at purely from the perspective of saving, those little cherubs are well, an impediment. Given that it costs somewhere around $250,000 to raise a child, the biggest issue for many young families is that it’s harder to save once kids are in the picture. Where a young couple might be saving 10% or 20% of their income, their savings may plummet to near zero once they have the additional expenses that kids add. If this lack of savings occurs for too many years, the missed opportunity for growth is just too much to recover from, even with aggressive savings in your 50’s.
Adding to the savings pressure, a primary goal of many families is to help pay for their children’s’ college expenses. Funding college goals in addition to funding retirement goals may require saving much more than 10 or 20% of income. And that, for many families, is a lot to ask.
GUIDES
The Essential Guide to Retirement Planning
A 4-part series that answers key questions about building your plan, positioning your investments, and more.
Understanding all your options
To combat the financial ravages of child rearing expenses, some re-organizing of the family budget may be needed. In the earlier years, some belt tightening may be just what’s needed to allow for the kind of savings needed for multiple goal funding.
In the later years, more aggressive changes may be needed: downsizing the house, or other empty nest changes to make up for the lack of saving earlier. Belt-tightening, sacrificing and making tough decisions are not much fun, but they can pay big dividends in financial stability, and ultimately, financial freedom.
Looking ahead to retirement
Having an adequate and well positioned nest egg is how to assure financial security, and being financially secure is how to live happy in retirement. Making up for lost time can be daunting, but it’s much more do-able with a sound plan and a disciplined strategy. If you find yourself with an empty nest and an uncertain retirement picture, we can help. At Blankinship & Foster, we have a proven process for helping families plan for a successful retirement. Contact us to learn more about how we can help you.
