How to Retire If You’re Married With Children

Being married, raising children, having a good job to provide for loved ones, and then living a carefree life in retirement enjoying your grandchildren…

That’s the American Dream, right?

Unfortunately, being married with children and then having a comfortable retirement are becoming incongruous ideas in America.

Boomeranging Millennials

First, there’s the reality of boomeranging Millennials.

Adult children, from age 21 to 35, move out of the house. But then, according to a study from Pew Research Center, something happens. Nearly a quarter have a “launch failure” and are forced to move back in with their parents.

While that may bring joy to some parents, there’s also a financial cost.

Supporting an adult child, which well over half of parents do, lowers the chances of successfully putting enough money aside for retirement.

Remember that a minimum of seven times your annual salary is required to have a sufficient nest egg – and lots of financial advisors say to set a goal of 10 times your salary.

Empty Nesters Blowing It

But what about the three-quarters of parents whose kids don’t boomerang, the empty nesters? Let me put it bluntly… they’re blowing it!

Many empty nesters are saying, “Whew! The kids are gone. Now let’s party!”

But a new study from the Boston College Center for Retirement Research is sobering.  Empty nesters are simply using the money they would’ve spent on their children to splurge on themselves. Vacations, cars, a new kitchen, you name it. Everything except increasing their retirement savings.

The study shows that even eight years after the nest is empty, savings in retirement accounts rise by less than 1% of income. Meanwhile, a whopping 52% of working-age couples are at risk of not being able to maintain their standard of living after retirement.

A recent Fidelity study found that couples entering retirement today will need $240,000 in their golden years just for healthcare expenses! And that number is sure to continue climbing.

Maybe the parents plan to boomerang back on their successful children…

Plan for Retirement NOW

But that’s not a viable strategy.

And while I no longer give financial advice professionally, here are some of my thoughts.

  1. Growing old is not an option. It happens to everyone. So face up to that very real fact of life and do something positive that will affect the quality of the rest of your life.

  1. That positive start is to set up a specific plan for retirement. Figure out how much money you’ll need to set aside for your golden years, and decide where you’ll keep it. Also consider how much you will likely spend annually… you’ll probably need about 80% of your pre-retirement income.

  1. Since many would rather splurge than save, I suggest automatic savings plans. This can be a 401(k) at work or an IRA you set up yourself. Your checking account may be near zero, like when your kids were around, but at least now the money is working for you and your retirement. And if you’re over 50, take advantage of the additional contributions you can make toward IRA and 401(k) accounts.

  1. Finally, while you can do this on your own, I suggest seeing a professional. Most independent financial advisors do a great job. Based on your risk tolerance, they’ll help you allocate your money properly. A very general rule of thumb is that the percentage stocks in a portfolio should be 110 minus your age.

Bottom line: Everyone should be saving for retirement. Let the power of compounding work for you. Even if you only invest $100 a week for 20 years, you’ll have about $250,000 at the end of that 20 year period. That could pay for your healthcare expenses.

Good investing,

Tim Maverick

P.S. – I’d love to hear from any empty nesters out there. Please leave a comment or reply on Facebook or Twitter.

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Being married, raising children, having a good job to provide for loved ones, and then living a carefree life in retirement enjoying your grandchildren… That’s the American Dream, right? Unfortunately, being married with children and then having a comfortable retirement are becoming incongruous ideas in America. Boomeranging Millennials First, there’s the reality of boomeranging Millennials....

Tim Maverick

, Senior Correspondent

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