A Balancing Act (updated)
Helping your adult children while preserving your retirement security…it’s a balancing act.
According to two articles in Barron’s (May 25, 2019) – The Parent Trap (lead article)* and When To Bankroll Your Kids –by Sarah Max… the trend has become for parents to assist their adult kids with financial support – giving help to purchase homes; bankroll education; providing free room and board; vacations; and other big ticket items.
In some cases this help is given at the detriment of parents’ retirement savings. “The biggest implication, no doubt, is when parents jeopardize their own financial security for the sake of their offspring”.
According to the article by Sarah Max – “U.S. Parents now spend $500 billion a year on their 18 to 34 year old children.”
Reshma Kapadia notes: “Parents have long tried to set their children up for success, but today that assistance is costing more, and lasting longer.”
Both articles are a must- read for parents who want to provide financial help, while at the same time managing their retirement goals wisely.
“It’s an old saw in the financial planning industry that you can borrow to pay for college, but not to fund your retirement.”*
*article The Parent Trap by Reshma Kapadia
UPDATE: Sept. 2020:
During the current economy with historically low interest rates, there is an opportunity to develop intra family loans at a very low interest rate. My website has articles about intra family loans (loans made between family members.)
During the COVID crisis, many parents are offering increased support to their adult offspring. An excellent article* offers solid advice as to why parents should keep their retirement savings in tact while at the same time offering their adult children some much needed help.
*How to support your adult children without breaking your nest egg by Michelle Fox, MFOX CNBC, June 8, 2020.
According to the article, “Many young adults are reeling from the economic fallout of the pandemic.”
Working To Preserve Your Wealth and Protect Your Future…in a Constantly Changing World
Please read my full Disclaimer and How I Can Help You
Visit my website: http://www.attorneybarbaradalvano.weebly.com for additional articles; information about free webinars and printable infographics
Millionaire Retirees
In case you missed it, Investopedia had a recent article titled:
“This Is How Retirees Live on $1 Million” By Greg DePersio (Investopedia, May 30, 2017).
You may be able to still access the article quickly via this link:
If not, go to Investopedia.com and search for the article.
At first, when I read the title, I anticipated more of “Lifestyles of the Rich and Famous” – but the reality is far different for ‘millionaires” today.
The article points out for those retirees fortunate enough to have saved wisely, that million in assets SHOULD last for as long as needed – providing it is invested wisely and managed carefully.
Clearly, having a million “ain’t” what it used to be!
Working To Preserve Your Wealth and Protect Your Future…in a Constantly Changing World
Please read my full Disclaimer and How I Can Help You
Visit my website: http://www.attorneybarbaradalvano.weebly.com for more articles and printable infographics
Estate Planning – the Ongoing Process
We all dream of a life well- lived and an idyllic retirement. But there are challenges surrounding the decisions of when to retire, where to retire, and how best to maximize the golden years. If you are one of the lucky ones who have had a plan in place for a decade or more about your approaching retirement, you can congratulate yourself…you are one of the few who do. Let’s hope that over the years you have “tweaked” that plan, to compensate for possible economic downturns and the eventuality of a “forced” retirement or other life event.
According to many statistics, too few Americans are planning or saving enough toward their retirement goals and fewer than half have made a Will or considered developing an Estate Plan. Many believe that estate planning is something that is done near the end of a productive life, but nothing could be further from the truth. Estate Planning is an ongoing process, sometimes difficult to begin, but once the groundwork is developed the reviews/changes/alterations to the Estate Plan become as ‘second nature’.
Adults with children are one of the groups at greatest risk when they do not have an Estate Plan. The court system is a poor alternative to parents’ well-conceived plans for the welfare of their own children. That is not to say that courts do a poor job of trying to create a safe environment for minor children if the parents are no longer able to do so. However the system is not a substitute for having legal documents in place where the wishes of parents are clearly defined.
If you do not decide, the courts will do it for you!
“Working to Preserve Your Future and Protect Your Future…in a Constantly Changing World“
Visit my website http://www.attorneybarbaradalvano.weebly.com for an Infographic pie chart showing my unique four-step approach to the Estate Planning Process
View my full disclaimer and “How I Can Help You”
Save For Retirement or Pay for College – That is the Question!
For those with children preparing for college, the question of just how much to save for retirement and how much to save for college fees might be a looming issue.
TAKE THOSE TAX CREDITS – One way of “saving” on college expenses is to take advantage of every tax credit that is available.
For those with children already in college there is currently in place the American Opportunity Tax Credit which can help when tax season rolls around again, or for those who have filed for an extension this year.
The IRS provides information on their website about the American Opportunity Tax Credit. Check with your tax adviser to find out if your student qualifies.
A helpful IRS website with more information can be found at http://www.irs.gov/uac/American-Opportunity-Tax-Credit:-Questions-and-Answers. Make sure you are using the most recent information for your taxable year.
Some interesting information from that IRS Question and Answer website:
“Unlike the other education tax credits, the American opportunity tax credit includes expenses for course-related books, supplies and equipment that are not necessarily paid to the educational institution.”
“ It also differs from the Hope scholarship credit because it allows the credit to be claimed for four years of post-secondary education instead of two.”
“ For the American opportunity tax credit, qualified expenses have been expanded to include expenditures for course materials, as well as tuition and required fees. For this purpose, the term “course materials” means books, supplies and equipment needed for a course of study whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance.”
Again, remember that each situation is different. Consult with your tax professional about the American Opportunity Tax Credit.
KNOW THE COSTS – To calculate the costs of tuitions and fees for a four year college you might go to www.collegesavings.org to understand what your options are. There are other numerous websites to help you calculate the costs of a college degree.
GO AFTER THE MONEY! Check websites for other sources of funding, like little- known scholarship funds. Browse the website www.scholarships.com to find some of the scholarships on offer. In addition to more traditional scholarships, which might require strong essay skills combined with high grades – there are career specific scholarships on offer: study abroad scholarships, scholarships for women and minorities; and tech scholarships. And then there are the just plain “wacky” scholarships like the one involving asparagus. Yes, asparagus. Snagging scholarship funding is often a matter of research, dedication, time and perseverance. The funding is out there and encourage your high school student to go out and find it! College loans are not the only answer.
GRANDPARENTS – If you are fortunate enough to have a loving grandparent who wants to help with college expenses, make sure you discuss with them the various methods, for example a trust fund. The decision of HOW they will help financially can have an impact on the financial aid your child qualifies for.
What does all the above have to do with retirement, you might ask? Well, the more you can save on those tuition fees, the more you can continue to save for your retirement. It’s that simple. The best strategy is to balance your future retirement needs with potential college fees.
I would like to hear from those who have other ideas about balancing retirement savings and college fees.
Please read my full disclaimer and also “How I Can Help You”
Working to Preserve Your Wealth and Protect Your Future…in a Constantly Changing World
More Money Ideas for Retirement
In a previous post titled “Money Making Ideas for Retirement” I provided a partial list of income ideas for those people who are retired (or dreaming of retirement). The ideas not only had the potential to provided added income, but also to give a new “slant on life”. Here are more ideas that retired people have offered as potentially fulfilling “second career” choices.
When I was in South Dakota for a conference I met two delightful couples who seem to have the absolute right attitude toward their retirement lifestyle. One couple ran a gallery in the state lodge. Their crafts were truly exceptional and they not only had great pride in their work, but also they were able to travel in the areas that they loved, offering their artwork to tourists. Another couple were “professional” volunteers. I met them in the small museum within the state park. They travel by RV each year (and have been returning to the same location for three years) to the park when it opens for the season. They keep their RV at the park and do volunteer work during the tourist season. She volunteers in the museum and he is a handyman. Then they pack up and head south again when the park closes for the winter. They love meeting new people, are never ever bored and are able to maintain an active and exhilarating lifestyle.
Another idea came via the internet…one retired teacher has developed her second career as an on-line tutor. She adores interacting with her young students, helping them to excel in their learning activities.
I remember a retired CPA who created a steady income stream by helping the adult children of aging parents. Each month he visited his older clients and reconciled their bank statements and filed the appropriate paperwork for insurance, physician and prescription reimbursements. He loved his work, was constantly learning new processes for insurance reimbursements and was a blessing to the adult children. He was also able to head off any possible situations of financial mismanagement. His was indeed a WIN WIN WIN new career.
Keep those ideas coming in to me about post retirement careers and I will post on my blog.
Working To Preserve Your Wealth and Protect Your Future…In A Constantly Changing World.
Please see my full disclaimer at the bottom of this page and also my column “How I Can Help You”
visit my website http://www.attorneybarbaradalvano.weebly.com for other information about my law practice in Colorado
You can contact me via telephone or text at 719-963-2933
More For Millennials
I recently posted a blog about millennials and their concerns titled “Millennials, Wills & Retirement”. Here is a great newsletter article for millennials, from the Women’s Institute for a Secure Retirement – http://www.wiserwomen.org that talks about retirement savings. (Don’t let the name wiserwomen fool you. Their information is for everyone!)
One of the interesting factoids in the article is that individuals will change jobs on average ten times during their careers! With all those potential job changes, What happens to the 401(k) money that you may have invested? The newsletter article gives some “wise” tips about what to do and what not to do with that nest egg you are trying to build for retirement. The article is titled: Where’s Your Retirement Savings Nest Egg? Rolled Over? Cashed Out? Consider the Benefits of Keeping 401(k) Accounts Together! And can be accessed via the wiserwomen.org website. It is also free and easy to subscribe to the wiserwomen newsletter.
Here are some other interesting factoids from the article to whet your appetite to visit the website:
“There are 9.5 million job changers per year with 401(k) accounts…”
39% of 401(k) participants are lost are missing…” (I think that you can interpret that at 39% of people who have had 401(k) accounts cannot be located!)
“There’s nothing free about cashing out your 401(k) balance…”” ( You could owe income tax on the proceeds.)
And here is something truly amazing…”If an individual cashes out $5,000 at age 30 (from their 401(k) account) the lost compounded value is nearly $55,000 by age 65…”
OK. Now have I convinced you to visit the wiserwomen.org website to learn more options for your 401(k) accounts? I hope so.
Go to bottom of this page to see my disclaimer and also the column “How I Can Help You.”
Millennials, Wills & Retirement
I have often written that it is never too early to start the Estate Planning process. Once you begin to acquire assets; get married; have a family; or start a business – these are all signals that you might want a plan to help direct your future. Apparently a number of ‘millennials’ agree with me. In a recent Time.com – (October 16, 2014) there is an article by Lily Rothman titled: ‘The Last Will and Testament of a Millennial’. Not only is Ms. Rothman an excellent author, one who writes with great wit, charm and humor – her article is insightful and thought-provoking about the concerns of the “millennial generation”. You can also access via Time.com (the internet magazine) another article titled: ‘5 Things Every Millennial Should Know About Retirement’ by Jack Dickey. “Millennial” has been defined as those individuals born between 1981- 1996 (although there are various other dates offered for the millennial generation e.g. 1977-1992) However, there seems to be a consensus that Millennials follow the Baby Boomers and GenX. If you are a ‘millennial’ then the Rothman and Dickey articles will be of particular interest. My opinion is that these millennials are on the right track in planning for the future and towards a comfortable retirement. On my website there is an infographic titled: “A Life Plan You Can Live With”. You can access the infographic by going to http://www.attorneybarbaradalvano.weebly.com and clicking on the ‘Infographics’ section under the drop down menu of ‘Professional Activities.’ Feel free to make copies of any helpful infographic you find there! I am currently researching an article about guardianship for minor children, which should be of interest to millennials (and others) who have a young family. Stay tuned.
Go to the bottom of this page for my disclaimer and also the column “How I Can Help You.”
Living For Today – Planning For Tomorrow
Much has been written about the use of reverse mortgages for retirees seeking a “boost” in their retirement income. The Squared Away Blog of the Center for Retirement Research at Boston College (CRC) offers a perspective on the reverse mortgage strategy and utilizes a comparison chart between two alternatives: Alternative #1 – using a reverse mortgage strategy and Alternative #2 – downsizing to a smaller home. You can access the report, entitled “Primer: Home Equity” via the Center for Retirement Research website.
An interesting response to the blog article came from one reader who noted that one of the realities of downsizing is that there is often a difficulty to find appropriate (“smaller”) housing in certain areas of the country and also that increases in property taxes are “eating into (retirement) income.”
The CRC article also notes that when applying for a reverse mortgage – “regulators require that homeowners meet with a government-approved housing counselor to apply for a loan.”
Finally, according to CRC, few retirees are taking advantage of reverse mortgages. One suggested reason is “reverse mortgages are an unfamiliar and complex financial product, and their costs, benefits, and risks are poorly understood.”
Any loan/mortgage is a legal document and as such should not be entered into unless the borrower understands both the short-term and the longer term financial impact.
In addition, I would add, that before you sign any contract/document, particularly one that is unfamiliar and complex, seek competent, professional advice to review the details. At the bottom of this page is my column “How I Can Help You”.
Working to Preserve Your Wealth and Protect Your Future in a Constantly Changing World.
This post has been brought to you through the Law Office of Barbara Ann Dalvano. This information is provided for educational purposes only and to generate ideas, provoke thought and facilitate conversation. It is not intended to create an attorney-client relationship. Each person’s situation is different and this information should not and cannot be relied upon as legal, tax, accounting or investment advice. Please read the entire disclaimer for more important information.
Barbara Ann Dalvano, Esq.
Phone and Text Message: (719) 963-2933
Email Address: barbaradalvano@yahoo.com
The Waning of Social Security
Recently arrived is Social Security’s Financial Outlook: The 2014 Social Outlook in Perspective by Alicia H. Munnell, researcher of the Boston’s Center for Retirement Research (August, 2014.)
The six page brief gives a clear analysis of data and succinctly outlines what we have been hearing for a long time, that the Social Security fund is running out of money…but thankfully not immediately. Social Security, for many retirees, is only one of the elements of financial planning. As we obtain increasing information/data about the future of our current Social Security System, (which is described as a pay-as-you-go system) it might very well become one of the lesser elements.
One conclusion taken from Munnell’s brief is that “the long-run deficit can be eliminated only by putting more money into the system or by cutting benefits. There is no silver bullet.” Whether you agree or disagree with the conclusion of the brief, for those approaching retirement, there is an increasing incentive to reserve/allocate funds in order to maintain a comfortable lifestyle into the future.
One of the infographics on my website…(www.attorneybarbaradalvano.weebly.com) A Life Plan…outlines steps (by decades) ..the Plan starts at age 20! Yes, it is never too early to begin your life plan for financial security.
It is also worth noting that the Center for Retirement Research at Boston College (Hovey Hall) was (according to their website) established in 1998 through a grant from the Social Security Administration. I encourage you to access the entire brief at http://crr.bc.edu.
One Size Does Not Fit All
Would you walk into a clothing store, go to any rack, grab a suit, take it home and expect it to fit perfectly…forever? When you ‘grab’ a ‘legal’ document from a shelf, from a website, out of a book, or via the internet–that is exactly what you are doing – expecting that document to ‘fit’ your unique circumstances perfectly and to fit now and in the future.
Estate planning documents, like Wills and Trusts, are NOT one size fits all arrangements. They are ‘tangible’ – you ‘own them.’ Good estate planning documents are the product of significant thought, crafted to suit your particular situation and prepared by an experienced lawyer with a strong knowledge base in the legal subject. And, your estate planning documents have a shelf-life and should be ‘refreshed’ or updated — changes in the law and in your personal family situation can affect how the documents operate in the future.
Whether the document is a Will, a Trust, a beneficiary designation for a life insurance policy or a beneficiary designation form for a retirement account, the document should not (and in the case of ‘irrevocable’ Trusts, need not) remain static; the next change in law or life event demands a review to determine if a modification or update is appropriate. One significant life change that definitely has an impact on the way previously signed documents will operate in the future is marriage or entering into a civil union or other partnership – the couple undoubtedly will want, and need, to prepare new estate planning documents and review all beneficiary designations for life insurance policies and retirement accounts. Moreover, a pre-marital agreement, post-marital agreement, co-habitation agreement or other similar beneficiary or property agreement may be warranted or appropriate. Completely unintended financial consequences can result if the legal issues surrounding the new relationship are not addressed early.
There are many life events that ‘trigger’ a need to review your estate planning documents and in some cases, modify or completely revise your documents. Changes in the tax and probate laws occur frequently and suggest that estate planning documents be reviewed periodically so that their utility or “potency” is not compromised. Some of the more common personal, family and financial developments that may make estate planning documents outdated and dictate that a review is in order include:
- divorce or separation of family members
- marriage
- death in the family
- birth or adoption of a child or grandchild
- acquisition of real estate
- sale of real estate
- bankruptcy
- material change in health of a family member
- new business ventures
- marked increase or decrease in the value of assets
- sale of a business
- addition or deletion of a business partner
- retirement
- family conflicts
- relocation, both domestic and international – temporary or permanent
- incapacity or special needs of a family member
- inheritance or receipt of a gift
- windfall of substantial value, e.g. lottery winnings, lawsuit award or settlement
This is not by any means an exhaustive list. But if any of the above life events have taken place recently, or some other life or financial event has occurred, it is time to review your estate planning documents.
Working to Preserve Your Wealth and Protect Your Future . . . in a Constantly Changing World.
This post has been brought to you by The Law Office of Barbara Ann Dalvano. This information is provided for educational purposes only and to generate ideas, provoke thought and facilitate conversation. It is not intended to create an attorney-client relationship. Each person’s situation is different and this information should not be relied upon and cannot be relied upon as legal, tax, accounting or investment advice. Please refer to the entire Disclaimer on this site.
Barbara Ann Dalvano, Esq.
Phone and Text Message: (719) 963-2933
Email Address: barbaradalvano@yahoo.com
Feel free to visit our website at http://www.attorneybarbaradalvano.weebly.com.
Sticks and Mortar Blog 