Sunday, October 24, 2021

Lifting the Barbell

Ask The CFP® Practitioner

“He plants trees to benefit another generation.”
~ Caecilius Statius, Roman Poet

Question: How do couples approaching retirement plan for the future if parents, in-laws, and adult children are likely to need financial assistance? We’re not sure how to balance everyone’s potential needs. Help!

Answer: You’re not alone, and unfortunately your concerns are common. Many pre-retirees must evaluate the financial, physical and emotional needs of three generations. They may need to help aging parents, by paying for groceries, medical and utility bills, or even provide housing, while also helping adult children. Depending on the children’s ages, this could mean tuition, food, cellphone bills, insurance, college debt and any number of other expenses. At a time when life usually becomes more carefree, pre-retirees and retirees may find themselves conflicted and concerned that their needs could drop to the bottom of the list. Welcome to the sandwich or barbell generation.

Extended lifespans are one reason for this new reality; the other is that many people haven’t saved enough to cover a longer life that may equate to thirty years without an official paycheck. Years of low interest rates haven’t helped either. Adult children, often referred to as “Millennials” and “Gen-Xers” are at the under end of the spectrum. Some in this age group find it difficult to secure jobs with wages to cover expenses and outstanding school loans.

Then there’s you in the middle worried about holding up a barbell with kids on one end and parents on the other. Even with proper planning, our children and parents can face very real economic dilemmas. Whether it is external circumstances or personal choices that bring a family to these crossroads, the question remains, how do you allocate limited resources for the various financial needs? The answer is, “it depends.” With a little planning and a lot of communication, we can face this new reality.

Triage and Survival Mode

With a few exceptions, there are no loans for retirement. Although the immediate inclination may be to help family members, it is important to strike a balance between caring for ourselves and helping others. It’s not selfish to prioritize your needs. There’s a reason that in case of emergency, flight attendants remind us to place the oxygen mask on our face before helping others, including our children and parents.

If you do gift or loan funds to children, it may increase their ability to contribute to the family in the future. Consider setting clear expectations as to whether the financial assistance is a loan or a gift. Remind them that you’re providing the loan to help them out of a temporary situation. If the loan is of a sizeable amount, handle it in a business-like manner. Document the transaction and terms. You may want to read up on the “applicable federal rate,” which states that if you lend money to family members you must charge a minimum rate of interest set each month by the Treasury, or risk having to pay a gift tax and other income tax consequences. In addition, check with your tax advisor to see if you’re entitled to any tax benefits resulting from the support you give to family members.

Draining your savings could place your entire family in a precarious situation. Saving too little and then spending part of these limited resources on children and parents is a recipe for disappointment. If striving for balance is the goal, here are a few suggestions:

  • Establish and stick to a family budget.
  • Maximize contributions to your retirement plans. Don’t raid these accounts for your children’s or parent’s needs, this is for your retirement.
  • Control debt by keeping consumer debt under 20% of your take-home pay or cumulative income sources.
  • Before abandoning your career to take care of aging family members ask your employer about telecommuting, flex hours, reduced hours or taking unpaid leave. Leaving a job could reduce earnings and future Social Security benefits.
  • Talk to children about exploring financial aid and the possibility of working part-time during school.
  • Ask parents if they’ve set aside funds or have insured themselves for the possibility of needing assistance in the future.

Do your best to plan and anticipate the family’s financial needs. Identify income sources and determine how much you’ll need in the best and worst case scenarios. Setting and agreeing to realistic goals helps everyone adhere to the parameters.

Easy Does It

With children and parents, it may be best to ease into any changes. If appropriate, discuss the positive and negative consequences of allocating family financial resources. Living situations may need to change. Having these talks early is better than waiting for an urgent need or crisis situation.

Running a multigenerational balance sheet requires a special skill set to promote and maintain harmony. On a positive note, these financial conversations do provide an opportunity to reinforce the importance of saving, budgeting and spending wisely.

This is your chance to be the role model for fiscal responsibility while focusing on common goals and treating everyone with respect. This may help reduce emotional responses. It is possible to balance the needs of children and older relatives without depleting yourself emotionally, physically or financially. Stay focused and invest accordingly.

Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. This information is general in nature, it is not a complete statement of all information necessary for making an investment decision. Opinions expressed herein are those of the author as of November 16, 2019 and subject to change at any time. For family lending arrangements, all parties are urged to consult their attorneys, accountants or tax advisors with respect to questions on interest rates and terms.

“Certified Financial Planner Board of Standards Inc. owns the certification marks CFP(R), CERTIFIED FINANCIAL PLANNER(tm) and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.”

This article provided by Darcie Guerin, CFP®, First Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at 239-389-1041, email Website:

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