As Americans are leading longer and healthier lives, there’s an increasing number of people filling their empty nests as either first-time, late-in-life parents or as parents raising another round of children. With that comes a new set of financial concerns to be aware of.
Government records over the last 10 years have shown small but steady increases in the number of women giving birth in their mid to late 40s—due in large part to the advances in fertility treatments.
Adoption agencies across the country say they see even older parents—those in their 50s and 60s and some already in retirement—opening up their homes and expanding their families through private adoption and foster care. They even find them willing to adopt older children and those with special needs. They point out that some of these older parents may be more stable in their careers or financially strong and can bring a level of wisdom and patience to childrearing.
As well, some late-in-lifers come to parenting via grandparenting, when their older children have found they cannot care for their children.
Regardless of how older parents come into parenting, they all share similar concerns about making a stable life for their children while they negotiate a host of life changes that come with age. These overlapping concerns require careful thought and planning. The goals of saving for retirement and paying for college might be the same as with younger parents, but the strategies put in place to achieve them are different.
Build Your Team
These competing financial and life demands require careful thought and planning, and like most things, it’s helpful to have a team on your side. In this case, you’ll want to involve a financial representative as well as an estate planning attorney. A financial representative can help you identify the best financial options to meet your needs and help you plan for your retirement. An estate planning attorney will put in place a clear system for how your child will be cared for in the event that something happens to you.
Make a Financial Plan
As any parent can tell you, raising a child takes dedication and patience. They’ll also tell you it takes a lot of money. Older parents are likely to see their own retirement and health concerns intersect with the financial realities of raising a child and saving for college. There’s likely to be more strain on your dollars, and you’ll want to be more deliberate in how you allocate your money to meet these needs.
Putting in place a realistic and flexible financial plan is essential. Planning for your child’s care and college education will be a priority, but so is planning for your month-to-month expenses and your long-term financial needs. If you’ve adopted or had a child who has special needs that require additional care, you’ll need to factor in those costs for the long haul, and you’ll need to look into expanding your safety net to provide your child with health insurance.
If you are already retired, you’ll need to sit down and reassess your financial situation and your goals with a financial representative. You may decide to make some changes to how you are drawing from certain accounts, or you may want to consider auxiliary mechanisms, including differing insurance options like whole life insurance and others like income annuities, which might provide stability and flexibility when you need it. Each has its own plusses and minuses that a professional can advise on.
If you haven’t yet retired but foresee doing so while your child is still a minor or while he or she is in college, you need to be doubly focused on your retirement strategy. The instinct may be to put a lot of money into college savings, but some of that might have unforeseen implications for student financial aid, and there are different ways to fund education. Many financial aid programs look at the assets of the family in determining whom to help. Most education savings mechanisms like 529 plans are factored into those calculations, while some retirement accounts may not be.
Laying out all your goals and estimating your expenses will help you determine, along with a financial representative, the best combination of savings, insurance and investment strategies to suit your family’s needs.
Provide the Legal Backbone
There are several legal documents you’ll want to put in place as soon as possible with the help of your estate planning attorney and consultation with a financial representative.
First, you’ll need a will. This document is the road map that lays out the steps you want taken to care for your child and your assets after your death. With your will, you name your beneficiaries. You will also need to designate a guardian for your child. If your child is a minor, the will should state how the assets should be managed for the benefit of your child until you feel that the child is old enough to handle the assets. For example, your will might provide that the assets are held in a trust for the benefit of your child until a specified age. You might name the same person to raise your child and manage the child’s finances, or you may decide that you want more than one person to fulfill different roles. Some people may be more suited to supporting your children’s emotional and familial needs, and another may be better overseeing financial matters.
Whether you have one or many inheritors, it is important that you clearly detail any allocations you want made; and if you have specific desires for how the money will be used and distributed for your child’s care, it should be fully detailed in the will. You may also want to consider establishing a trust for your assets, depending on your financial and tax situation.
You’ll also want to put in place powers of attorney that can be used if you are unable to act as your own agent due to illness or incapacity, including:
- Durable Power of Attorney-This grants a person you choose to act on your behalf in case of an accident or illness, allowing him or her to make decisions about your finances, sign checks, prepare taxes and manage your assets.
- Power of Attorney for Health Care and/or a Living Will-These powers allow you to make known in advance of any incapacity what you want done regarding your own health care. A Power of Attorney for Health Care allows you to designate someone to speak on your behalf about what health care you should receive. A Living Will is a document that will direct a doctor exactly as you wish.
Think Long Term
While older parents may be valued for their wisdom in parenting, the realities of health and aging are a concern that should be planned for. Long-term care planning takes on a greater importance. When an event happens, your kids are going to be younger and may not be in a position financially or emotionally to take care of mom and dad.
Putting in place steps to take care of you during a long-term illness or disability is an essential part of the plan for an older parent. Ask a financial representative for strategies to help your child or his or her guardian arrange for your care.
Filling that empty nest will feel all the better once you have a strong plan in place to help ensure a solid future for your new family.