Want to finally stop working and retire in peace. It's about more than quitting work and living off your savings in retirement reimagined. You'll discover how to have a fulfilled retirement that lets you enjoy travel, family time and freedom. And now here are your hosts, Ron Bernstein and Nicole Sullivan.
(00:24): Hi and welcome to retirement reimagined. My name is Nicole Sullivan. I'm a financial planner and the co-founder and director of financial planning at prism planning partners. And today I'm joined by my partner and the managing member of our firm, Ron Bernstein. Hi Ron, How are you, Nicole? What's going on? I'm doing great. Doing great. It's Thursday. We had a little bit of audio issues. I need to revisit that These are, these are growing pains and it comes with the territory, but we're actually in double digit number of episodes here right now. So as we continue on this path, we will certainly get all these kinks worked out. I'm very confident of that. Yeah, it's great. I can't believe it. This is episode 11, Episode 11. I know time FL It does. And I hope that we're starting to really gain some momentum here because there's no shortage of topics when it comes to retirement, we're gonna touch on everyone we can find. And you know, hopefully this will go for a good long time, so let's get it on.
(01:27): So today we are going to talk about a question that comes up with so many of our clients. So frequently as a pregnant lady, myself, it's definitely even come up more and more people see me walk into a meeting and I'm pregnant and they're like, oh, you know, Hey, my kid's expecting too. Or one day I'll have a grandchild. And I really want to think about helping my kids and future grandkids in a substantial way. So how do we plan for that? And I think the other question that we wanted to kind of post to everyone is should you be helping your adult children and future grandchildren with life and kind of some of the major milestones that come up,
(02:07): And this is definitely a hot button issue for many households. And it seems like for many, it never, you never stop being a parent and I'm in a different walk of life than you are. Cuz I do have adult children's right now. And I get the whole concept where it is very difficult. You get conditioned to not saying no to your kids in many circumstances, but we need to really talk today about going through how we reckon with this as planners, uh, when clients come to us with these desires or questions. So Ron, you know, I'm going through the expensive newborn phase right now. So, so you're telling me basically it never gets cheaper being a parent and having kids.
(02:43): Absolutely not. If anything about you can get more expensive than any and how you look at it. So yes all right. So let's jump in today's topic at hand. Ron, why do we need to address this question? Well, like anything in financial planning, we need to make sure that we're covering all potential. What ifs out there and expenses for young adult children and in some cases not so young adult children, depending on, uh, what stage of life they're in can come up from time to time. But beyond the unknown element, we very frequently see that many retirees want to help their adult children and eventually their grandchildren. And it has become popular and satisfying retirement to do and a real way to leave an impactful legacy.
(03:26): One thing I wanna mention is that there's not a right or wrong answer to wanting to help your adult children or not. We've had clients tell us that there's, they have no desire to leave a legacy. Maybe they've paid for expensive for your college education or help their children in some other meaningful way. And I don't think that makes anyone a bad parent or bad with money or anything like that. It's planners though. We can never assume anything. And so this question has to be asked at the onset of every relationship where kids are involved.
(03:58): Yes. And I'd say more often than not, when you're retired, uh, with children, you really wanna help 'em you may wanna do so during their lifetimes, as well as leaving a legacy, it gets clear as we age, we see it more and more often, especially with, uh, folks in their sixties and seventies, uh, when you've settled in retirement and feel a bit more comfortable about the lifestyle that you've decided to pursue in your financial situation. And quite often, when a grandchild appears, things start to come into a little bit more focus.
(04:27): And the final point that I'd like to make is the obligation factor. Some adult children or young children could use the financial support, especially if maybe there's a special needs situation or someone else has other challenges. And so as a parent, again, to your point earlier run, you never want to stop helping your child. You wanna do everything you, you can for them that never goes away. So it's important to really get a handle on your own situation, what you can do. And in some cases what you feel obligated to, again, if you're supporting an adult child who has special needs or some other challenges,
(05:03): And it's really interesting too. And if I could just maybe, uh, shed a little more color on this is we were all in that position once, you know, starting young families and it's a different landscape today, a little bit things just generally cost more and it's just harder coming outta college with huge student loans, which my generation, uh, didn't really have as a huge headwind. So there's just a lot of more issues that I think the younger generation, the millennials and generation acts as we like to refer to them, uh, have challenges that we never really had. And, and I think sometimes we recognize that as parents and grandparents, that for them to get ahead, it just requires a little bit more support.
(05:44): I feel that and experience that first in of course. Yeah. Which is funny. So Ron really quick, as we've been discussing a lot of the clients that walk through our doors at prison, planning partners have some capacity to help their kids financially retirement, if it ever were needed. And a lot of them as well have the desire to do it. It's not necessarily funding every little thing like, Hey mom and dad, I need you to pay for my, you know, gas in my car. But a lot of our clients want to at various points in their child's lives, do something meaningful. So how do you decide though? What is enough? How do you decide to make sure you can help your kids again, maybe with something meaningful, but make sure you're not enabling them
(06:20): Once again, this is a really tricky question. One that can be hotly debated. It greatly varies from family to family in the situation, not only of the children, but also, uh, yours. And you need to first and foremost have a really good understanding of your own financial situation, as they say on an airplane, come on initially is always put your oxygen mask on first before helping someone next to you. I think that certainly holds true when you should be putting your needs first before considering, you know, making that commitment. And this is where the financial plan comes into play. You know, understanding what you have available to you and stress testing against any what ifs in your world.
(06:59): Of course. And when someone enters retirement, this is typically typically a time when they feel pretty flush, they've got pretty nice retirement savings accounts and they've got some equity built up in their home. So while you may feel like you have access to a lot of money and could certainly share abortion of it with your kids, it really is important to have a financial plan and, and stress test, uh, those level of scenarios just to make sure it's okay to do so. You certainly don't want your kids to be constantly hitting you up for money. And it's even if it's something that you can afford to do, or just being in a position where you get a little too generous, then once again, that that could jeopardize your own retirement.
(07:39): And I would say too, even if you can afford to help the desire to want to help really plays into this too. And again, some families feel like they've done a lot already to support their kids and they wanna focus on themselves first and that's fine. Your kids are adults . As we talked about in the last episode, some people fear running out of money. Even if the numbers do say, you're going to be fine. You have, you know, generous, guaranteed income sources. You don't spend a lot. We've covered the cost of a long term care event. All these things. Some people still really just mentally struggle with the concept of parting with their money. And there's nothing wrong with that, but it does as we've alluded lead to other problems in terms of growing estates and legacy, which obviously we've covered in the past and will continue to cover in future episodes.
(08:25): It's always important to be upfront about your intentions with your kids. Like you said, general theme, they're grownups here, but you have to really settle on what makes sense for the both of you. And if you can afford to do something, communicate that with your kids. And if you can't, you should let them know as well. I would say more often than not. Parents want to parents of means who can want to help their kids in some way. Let's talk about ways to do something that's substantial and meaningful, couple strategies that we see, how can parents give meaningful gifts, gifts to help the younger generations.
(08:58): And this is a great topic. We can talk about the more strategic elements of it here, because you can make a gift, uh, without any strengths attached to any person. I know we're focusing on the kids right now, up to 16,000 per year, uh, without having to trigger any gifting disclosures. So that would be 32,000 from a married couple to another person. So that's some significant money and that can be done on an annual basis. This is referred to the annual exclusion gift. And, and we think taking advantage of, of this gift is a good way to consider starting off a gifting program in general, for folks who may have more elevated as states, and if your kids or grandkids are younger, or perhaps you have some current concerns about whether they're gonna spend these dollars in a responsible way, you can certainly establish trust.
(09:46): Uh, those can be a little bit more conditional in terms of what they can do with those dollars. And when, so there's always a work around these scenarios while the kids are able to grow up and, and mature around money managers, money matters. So that's something to consider and then as well, I mean, distributions can be determined based on several factors, whether it be used for specific purposes like health, education, maintenance, and support. These are, are just really generic estate terms, but working with an attorney, they, they can certainly help you determining what those stipulations would look like.
(10:20): And something I wanna point out as well, trust sound like they're fancy and complicated, but they don't have to be a trust in its most basic forms allows the grantor or the person making a gift to attach some of these strings. Like you alluded to the gift kind of on how money is spent. And then you can also appoint a trustee to be in charge of managing the dollars and the trust and making distributions to a beneficiary when appropriate. Um, that could be a family member. That could be the, maybe child's, if you're gifting to a grandchild, it could be that child's parents and you can also invest dollars in a trust. So gift of the trust can grow, which is really wonderful. If this is maybe a long term strategy you're contemplating for a younger beneficiary. Yeah.
(11:03): It certainly sets the stage up for maybe helping provide for bigger ticket items well into the future. So you, you can time your gift to, uh, a later purpose as well. Who knows, you know what our children's adult children's retirement's gonna look like or their ability to save properly for retirement at this age, when they've got a myriad of other expenses. So there's a lot, a lot of versatility in, in the use of trust, but I will say too, you, you could always write a check outright to an adult child, and those can be certainly helpful for more immediate expenses like the purchase of a home, or just direct expenses in, in child raising. But just be aware if, if a child is married, that money that you are gifting, uh, is a marital asset and one that gets commingled in the household. So there's really no protections around divorce when that money does get distributed. And that's where that's where trust actually can be very helpful.
(11:57): So let's talk a little bit beyond trust as well. Many grandparents like to do something meaningful for their grandchild, but maybe they don't wanna establish formal trust. So a thing that we often see is that grandparents help fund college, and there are specific accounts that can provide some tax advantages for that. So let's touch on that real briefly. Yeah. So these are 5 29 education focus plans, and they're administered by the various states and funds can be saved for specific college needs and invested in these tax advantage investment vehicles, which are really cool. And the tax benefits are possible at the time, not only the contribution, but also if it's used for qualified higher education expenses at the time of distribution. So fabulous ways to effectively save for the cost of college.
(12:47): There's a lot more nuance in detail to how these 5 29 plans work. There's some other higher ed savings vehicles as well that exist out there. It is something of great personal interest to me most, especially since I'm expecting a baby in a few months. So this will absolutely be a future episode where we dive into some of the details a little bit more. Yeah. And just to add one more little nuance to this direct payments to colleges or for medical expenses as well, if your adult child needs, that level of support does not fall under the gifting guidelines. So as long as they're made the checks are made, made directly to those institutions, uh, you're cool to do that. So I just wanted to throw that out because there are circumstances yeah. Where certain emergencies occur, where you can have a more pronounced impact on helping them.
(13:34): Absolutely. That's a great tip. Thank you for sharing that, Ron. Yeah, no problem. All right. So that really wraps up today's episode. As I mentioned, we have, we're gonna have a number of future episodes that dive into some of these topics in greater detail, but Ronna just really wanted to thank you so much for your insights on this topic. Again, it is definitely a hot button issue that we hear quite frequently with a lot of people who walk through our doors.
(13:59): Yeah. And I guess one last comment here there isn't a one size fits all case study around this. I think everybody has to dig deep and think very personally about, you know, what they're trying to accomplish, especially when it comes to a wealth transfer, which is a very complicated subject. And I know we just try to address it in a very short period of time, but it would be wonderful to have, you know, deeper conversations for those who are really struggling this situation.
(14:24): Thank you all so much for taking the time to listen to today's episode. If you are interested in more retirement related content, I'd love to direct you to our website, which is prism planning, partners.com. We have a whole host of different podcast episodes on there in addition to things like blog articles, videos, just other things that you're able to download and explore. We are also constantly looking for feedback on this podcast. So please reach out to Ron or me if you have any questions or just comments around, uh, different future podcast episodes that we could include, uh, let us know how we're doing as well. Feel free to subscribe and, you know, write and review our podcast on your favorite platform. We'd love to hear from you. Thank you all so much. Thank you very much and be in touch. Take care. Bye.
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