Supporting grown-up kids after FIRE

[BigNick]

I've hinted at this in a couple of other posts, but I hope it's worth its own topic.

DW and I can probably afford our FIRE plans (currently: me to ESR mid-2013 at 52½ and do part-time/voluntary stuff, she to continue to 60 in 2017 with me cooking dinner for when she gets home!) and maintain our current spending levels, which will enable us to have a pretty good standard of living (expenses 95K/year, including 20K for house rental).

However, I would feel uneasy about being nicely off if our kids were having to struggle.

DS is 21 and starting his final undergraduate year; he may do two or three more years of higher education, most of which should be finance by grants. DD is 19 and has 3 more years of undergraduate studies to do, but we don't think she will continue in academia.

So by my ESR time, they will both be looking to really start out in real life. We're fairly confident that they will be living away from home, although we have no firm idea even of which country that will be in: we live in France, both are studying in the UK, DS likes the idea of Canada or Germany, DD (who is studying Italian and Russian) will have had a year in Italy and is a globetrotter generally. And of course, between now and 2013, either or both could have acquired a serious S/O and be planning kids faster than we thought.

So, in addition to helping them with the occasional meal out from our regular expenses , it would seem to be "the right thing" to help them with a decent-sized financial contribution. DS is more of a homebody and perhaps we will want to help him with a down payment on an apartment (keeping ownership of that part of the property on our side of the line, especially if it's a joint purchase with a girlfriend). DD talks about starting a business.

It would be great - or at least, it feels from here that it would be great - to have 100-120K each, say, to put into a project for each of them. If I stayed on an extra 2½-3 years, that would be achievable. (I already have to come to terms with the fact that the day I leave, I will be walking away from 80-100K a year in terms of the difference to my end-year net wealth that each extra year at my well-paid, tenured work will make.)

My question, especially for those of you who have stopped working, is: how far do/did you plan to support your kids after they finished college/left home? At what point is "enough" enough? (If I stayed at work until 65, and put the excess above expenditure into a trust fund, I could probably have both children's future retirements provided for!)

 

[REWahoo]

My question, especially for those of you who have stopped working, is: how far do/did you plan to support your kids after they finished college/left home? At what point is "enough" enough?

We saw our two daughters through undergraduate school, helped them with reliable, pre-owned transportation, and assisted in getting them settled in apartments. They were both fortunate to find jobs immediately upon graduation and I suppose our support might have gone beyond that had they not been so fortunate.

No way would we have put "100-120K each...into a project for each of them." Nothing completes an education like having to really work and earn your way in this world.

 

[ERD50]

If it's something you really want to do, and it is worth the cost of working a few more years to you, I guess you should do it. That hold for just about anything. Don't tell my kids though!

Seriously, you raised them to be independent, I'm sure you had something to do with them being motivated enough to get an education, I don't think you should feel you need to do anymore than continue to be a good parent. But it doesn't matter what I think, this is your decision.

I have one out of college, and if he needed some emergency fund money to get over a bump, I'd certainly help out. But more importantly, I've educated him on the power of having an emergency fund, and he's got one in place. I'm not budgeting anything for him or the next two, I'll cross that bridge when I come to it.

I personally don't think I'd give any of my children $100K to start a business. If they had a really good business plan, and I had a lot of confidence in them and that plan, I'd arrange it as a formal loan or investment in the business. When the business succeeds, they will have the satisfaction that they earned it, rather than it being a 'silver-spoon' gift. Priceless!


-ERD50

 

[rescueme]

Your discussion is timely, since my DW/me have been looking at alternatives for our (disabled) son and his current living situation.

He's currently drawing SSD, and will so for the rest of his life. However, with SSD and his minimal income from the sheltered workshop, he does not have enough to live on his own.

Over the last five years (ages 35-40), he has left our home and gone through several housing arrangements, including a group home and currently sharing an apartment with another guy (also disabled).

However, that living arrangement is not the best for him, and we're looking to either get him in his own apartment or possibly buy a condo for his use. He needs very little, both in desires or luxury.

Under the current "system", he receives a supplemental housing allowance (few hundred $$$/month). He would receive more if he went Section 8. Unfortunately Section 8 housing isn't the best, and at the current time, there is no government $$$ to cover any new Section 8 applicants in our area.

What my wife/me have done is sat down and did an analysis of our retirement income needs vs. assets to take us to age 100. While we understand that we won't live that long, if we include our son's remaining life (which is not impacted by his disability), we find that we're fortunate (some would say blessed) to have more than we need, at this time. Could something happen to change that forecast? Of course. However, we can only go with our best guess, based upon our age and financial situation.

Using the normal series of withdrawal sequence (e.g. taxable, tax deferred, non-taxable) we forecast that we will never use our Roth holdings.

Our intention is to start drawing on those accounts, either by supplementing him to get an apartment on his own or the possibility of buying a small place (e.g. condo) and we would retain ownership. He would pay us rent and not get ownership of the property. Assuming we pass first, the property would be transferred from our existing revocable trust (where my/DW's existing home is) into the trust, managed for his needs.

From a financial standpoint, it makes more sense to buy a home/condo in the long term. However, due to any remaining estate value after we/he pass going to charity, and the reality is that he would be better off in a rental (just call if something breaks); we're still analyzing the situation.

We have the time to do it, since his current apartment lease is valid to spring of next year; however, we have already looked at apartments (and selected one, if we go that way), along with looking at alternatives (in fact, I'm looking at a small condo today, in an area I know well).

I know that this is a unique situation and there is more of an expectation that we - as his parents have more of a "responsibility" to help him out in our retirement, and when we're gone.

However, we've always pushed him to do his best, regardless of his disability. He's really gone far, from always having a job from high-school on, through college (has a BS/CIS) and whatever job he could get, regardless of his educational background (he could not work within his field due to his "communication challenges").

We're proud of what he's accomplished regardless of his challenges and since it's apparent we can afford (in early retirement) to start "divesting" some of our assets before we pass and be able to make an impact on his life while we're still "above ground", we will do so.

Hey, we will never have grandkids. A lot of money that we probably would have spent over the years for multi-generational "family vacations", such as Disney Cruises will never happen, so we're traveling in a different direction.

So after a long rambling story, in answer to the OP's question of would it be "right" to help out on the financial side; sure, as long as it does not impact you (and your partner's) retirement finances.

The flip side is that you don't want to impact their lives in later years (if you still have contact) to ask for $$$ because you're running short, due to helping them out in the early years of your retirement.

There are also other ways, from a financial POV. For instance, Taylor (on the BH forum) purchased several SPIA's while in his early 80's (I believe he's 85, currently) to take care of his/DW's income needs for the rest of his life. As I understand it, they liquidated their other assets and are making requests to their family in order to see the "results" of their generosity, rather than just make an estate disposition after they pass.

Again, he's provided for his/DW's own needs (via the SPIA's) before he passed on any funds.

IMHO, it comes down to the question of should you do it? Sure. Can you do it? That depends on your financial situation, and the assurances you have made to yourself and your partner to have required income for the rest of your lives.

It's the same guidance you get when you are ready to take off on an airplane and they tell you what to do if the oxygen masks drop; that is ensure you put on your own mask before you help your children, or those around you. Lookout for yourself first, and then you can provide aide to others…

 

[Moemg]

Like Rewahoo I paid for college , first car and down payment on first apartment . I've also paid for shared vacations. Both my children got good jobs but both went through a tough time that required me to reopen the checkbook but now it is closed except for gifts and a shared vacation once a year. I also wanted them to learn how to make it on their own and they have done a great job with that .

 

[Carnage]

I agree with Rewahoo. I would help them with a used car and maybe deposit on an apartment, but not much more than that. (Emergency joblessness notwithstanding) You've done all you can at this point and now it's time for them to make it in the world on their own.

 

[HsiaoChu]

After age 22(we bought both a used car at graduation: one to simply get her out of the house, and the other because we did it for the first), it was no longer my job to support them. That said, we did help my DD with a car and some serious debt issues, but neither of them will get anything more substantial at this point.

When we retire next year we will have to live on less than half of the OP's extravagant retirement income which is 40% more than we made when we were both working full time. No more handouts. Time to make on their own, or....... not.

 

[W2R]

We paid for tuition, books, and $500/month while she was in college. She worked part time as well. We gave her a used car so she could get to work and classes. At that time we put up the deposit for her first apartment, which she shared with a longtime girlfriend, and bought her a few things like pots and pans, towels, and so on, to help her get it set up and habitable. This was back in the mid 1990's while we were still working and married. We divorced in 1998.

None of the above was paid for me by my parents when I was that age, and obviously I survived, but then we all want to do things differently from our parents, right? I didn't want Christina to have to struggle as much as I did.

Last year I retired, and my daughter is now 32 years old. Still, last year I paid for her wedding. I probably didn't have to, but wanted to do that. Other than that, I just send her gifts at birthdays and Christmas, and pay for trips to visit her. If they decide to have babies then my expenses will increase (presents, contributions to college funds, etc).

 

[cj]

I don't have kids myself, so I cannot totally relate except for this: I was on my own at age 19, and did not receive any assistance from my parents from that point on. My brothers got more from them (college, loans, extra money for difficult times, etc.) over the years. (Note, I am the only daughter.) I worked my way through college (undergrad and grad school) at night while working full time. I had some lean times, but learned a lot by being on my own. Now, I am more self-reliant and more successful than my brothers are, and proud of it. I am of the opinion (obviously) that the more adult children have to make their own way, the better it is for them in the long run.

 

[Bestwifeever]

BigNick, will you adopt me?

I think your plans to help your children are wonderful. I suggest you don't tell your children about them, however--they probably already know that they would be able to fall back on your help in a true emergency, but they might achieve more and find more satisfaction if their successes are the result of their own efforts. And you can be waiting in the wings just in case.

And rescueme, your post helps put things in perspective. Your son is a lucky man.

 

[My Dream]

Growing up my parents didn't have much and my father got really sick and had to stop working in his late 40's. That made me sort of the man of the house and I knew I wouldn't get much if any financial support, which I believe made, or gave me the opportunity to become very independent.

Fast forward, I believe it gave me the drive to succeed and retire early. As for our 2 kids, one is in high school and my son is in his third year of College. He just got a promotion in his full time job which he also plans on keeping while attending his third year. We told him we would pay 50% of his College bills if he did well which he did. He bought his dream car this year and pays his own insurance. He doesn't pay room or board therefore manages to save money for his own house one day. I now see myself in him and am very proud. We have the money to pay his entire College fund as well as a new car, but decided this was best.

I can't say what's right for you, but I do know that we will still help our two kids along the way but feel they'll do just fine without our financial support.

Rather then putting aside X amount of money, being retired gives me the extra time to go to Florida to pick up his dream car among so many other things. I will never forget a comment my daughter said to me when she was 5 since I couldn't spend any time with her due to working so many hours. "Daddy I have $5.00 in my piggy bank, you can have it so you stay home from work tomorrow and we can spend time together.

If my kids knew that one of us couldn't retire due to the amount of money you suggested putting away, I truly believe they would tell us not to.

 

[seabourne]

You might want to think in terms of a long-term safety net setup - say a trust with $100k that they can't access until they are 55 except for extraordinary medical expenses. That way you can help protect them from bad luck, and with the time lag, provide a huge step forward for their retirement without removing the need for them to carry their own weight during their life. In addition, by taking a lot of the retirement issues, they can spend less time worrying about their uncertain future money and more at living life and taking good risks now, but it's not so much money as to create a lot of problems. I would be careful about giving much more than $100k for that though - the larger the amount of money you give, the more it will distort their lives. A trust like this moves the weight of the distortion back a long ways, but if it's big enough, it will still impact them more than you'd like today.

 

[NW-Bound]

I paid for my two children's college tuition. I gave them nice used cars to drive. Heck, they are newer than my own. They worked for their own spending money. They stayed at home while going to a state U.

My 24-yr old daughter graduated and found a decent job. Her employer will pay for her graduate studies. I helped her to settle into an apartment near her work. When the time comes for her to buy a house, we will most likely help out with a down payment, but she needs to come up with some savings of her own first.

My 21-yr old son still has a year or two to go, and we will provide similar support. I would not commit to a lump sum amount that they can spend as they wish. They are simply not mature enough to handle that. Well, perhaps my frugal son, but not my spendthrift daughter.

 

[Rustic23]

Like Wahoo and others we paid for the kids college. Well most of it, when DS passed his 5th year without a degree, we said the rest was on him. We also gave both kids money early in their marriage, total about $30,000 between them. It did not effect our retirement and do not regret it.

 

[Sue J]

We did for our sons as our parents did for us. We supported them through undergraduate education. In addition, my parents offered to supplement our purchase of our first house by matching whatever we had saved. But my dad underestimated our savings capacity and had to put a limit on his contribution, keeping it to approximately what he had contributed to my sister for her first house. We were hugely grateful for his help and never expected anything more.

My FIL set up a grandchildren's college trust which helped my 2 sons and another 5 nieces and nephews. He intended it to pay the full tuition (4 year state university) for all 7 grandkids. There was not enough for full tuition but it was a nice helping hand. For those of us with kids this was meaningful but to 2 of DH's siblings who didn't have kids it didn't help them at all.

I don't know if we will be able to help our sons with any large cash gifts. DH has ERed and our older son earns more than DH's pension. I would LOVE to help out with new home expenses (kitchen startup or a piece of furniture, etc.) or expenses for a grandbaby (cross your fingers for that one).

 

[Nords]

My question, especially for those of you who have stopped working, is: how far do/did you plan to support your kids after they finished college/left home? At what point is "enough" enough?

We just sent our kid to college a couple days ago, but we've thought about this a lot. All of these discussions boil down to one common denominator: you gotta know your kid and what they're likely to decide to do as a result of your decisions.

I'm definitely not going back to work to subsidize my kid's lifestyle, even if parents paying for grad school helps her eventually fix every civil engineering problem on Oahu.

Beyond that limit, we worry about affluenza. REW's right; people appreciate their opportunities more (and work harder for them) when their own assets are at risk.

However our kid did decide to fund a large percentage of her education from NROTC, whatever her internal motivations, and we did save a separate college fund whose status won't affect our ER. So there's a little leftover savings looking for a place to be used.

Our kid may decide in four months that she never wants to have anything to do with NROTC or college ever again, but for now the plan is to help her maximize her tax-deferred savings during the first few years out of college. (In the military that's the TSP as well as her Roth IRA.) Most college graduates don't aggressively fund their retirement accounts for the first few years, and a few dollars there will compound for at least 20-30 years to have the biggest impact.

This seems to be a fairly tax-efficient scheme (political risk notwithstanding) and a good way to put assets in her name at less risk of the typical personal legal catastrophes. We've also emphasized that we'd rather hand her an inheritance now to invest more tax-efficiently than we can, and that this is all there is.

This money-management experiment is relatively cost-effective (at least we can afford it) and the way she handles it will hammer home a few life lessons. In our opinion the payoff is worth far more than the risk.

Another reason to get the money into her tax-deferred accounts is to keep us from changing our minds. I've been on the other side of this intergenerational wealth transfer with a family member who gifted largish sums of money over a period of many years. They later made some well-intentioned but ultimately foolish life decisions and then reversed course a few years afterward. Unfortunately the course reversal was financed by them essentially saying "We want you to give it back. Thanks!" Not gonna let that happen again.

 

[BigNick]

Thanks for all of the great replies so far. Keep 'em coming...

We don't think that we've ever spoiled our kids, but when they come home from college for vacations, DW takes them out and buys extra clothes and other nice stuff (some of which I think they should be paying for out of their allowance) - I can see this continuing when they get their first, not-too-well-paid jobs. We have some margin for that in our current budget; that's another reason why our FIRE plans involve spending as much per month as we currently do, because although we don't spend extravagantly, we also don't worry too much about whether or not to get an $80 item. And when I see how people have to stretch themselves to pay rent or mortgage on an apartment anywhere you would actually want your kids to spend time, I wonder if they will be able to live as well as we were able to.

(We both started with nothing; the only contribution either of us has ever had was when my parents lent me $2000 when I bought my first apartment, to help furnish it. I lost money on the place in the end, and that was my last dream of getting wealthy from real estate.)

Still, if DS (who's a drummer studying biology) records a hit album or discovers a cure for cancer, or DD makes it big in the world of "stuff for girls" (she's got an eye for the business angle of everything from night clubs to nail varnish, and she knows she's expensive to run!), maybe they'll be subsidising us...

 

[Keim]

I suggest the OP read Thomas Stanleys "Millionaire Next Door," paying special attention to the section entitled economic outpatient care. It discusses the negative impact of helping your kids too much.

My parents bought me a car in high school, and paid for my undergraduate degree (requiring me to live at home for the 1st two years in order to save on room and board). Nothing else. My wifes parents did similarly. We expect to do this for our kids in the years to come.

 

[FinanceDude]

For my two boys, aged 10, and 8, DW and I are doing the following:

Enough money for 4 years at a public instate college
Enough money for incidentals and books and stuff (about $15-$20K each)
Reliable pre-owned transportation (car)

If that isn't enough, tough..get a job and Pell grants like your mom and I did.........

 

[Carnage]

Just a quick story. My DW and I came from somewhat different households. I graduated from school with $30k in loans, while my DW came out of school debt-free. It was a bear to deal with early on in our marriage, but by the end of it, we were better off for the experience. My DW had never really had large amounts of debt and she had to create her own coping mechanism for that, and I had to learn how to control spending and overcome debt. The lessons that that $30k taught us were invaluable and now we're using what we learned to have a mortgage paid off by the time we're around 34.

Initially I had somewhat begrudged my parents for not planning better, but later on I just figured they did the best they could with all of their kids, and I still had my degree and the burden was on me and I wanted it that way.

 

[FIREd]

My parents helped with my very, very low college expenses but never helped me buy a car (I bought my first car at age 23) or a home. They gave me a token amount to help with the wedding costs. They had the money to do more, they just didn't feel the need to.

DW's parents helped her buy her first car at age 16 (though she had to pay back some of it) but didn't help with college expenses or buying a home (again, they had the money to help her, but didn't feel the need to). They gave her about $10K for the wedding but the strings attached to that money ended up costing us more than what they gave DW, so the $10K didn't really help at all.

Our financial struggle in college and graduate school forged our characters. For us, living under the poverty level for a few years and making mistakes early on like using credit cards as an easy way out of money problems really gave us the best financial education we could have hoped for. It also gave us a lot of drive to succeed. Counting your pennies to see if you can afford to eat is no fun.

We don't have kids, but I am setting aside a little bit of money for my only niece. I will give her the money (probably no more than $10-$20K) to help pay for college or buy her first home. I refuse to subsidize a car purchase or a wedding.

 

[haha]

My sons were on their own at 16. I would have preferred that it had been later, but 16 was when they were tired of Dad rules and wanted to make their own.

They are both very very successful as men and as earners, so though I don't know that their early independence created this, it clearly did not prevent it. It also doesn't seem to have pissed them off at me, perhaps because we didn't really go through any period of conflict or unwelcome advice about their life choices.

Ha

 

[flyfishnevada]

We are prepaying our two sons college tuition and we have a deal with them that we will buy them their first car, $2500 limit. They can get a junker at 14 and fix it up or get a junker and 16 and not. Up to them, but they have to do most of the work to fix the car up. This is mainly because we live in a very rural area and cars are a necessity to get a job. No busses, no taxis, way to far to bike or walk and I sure as heck am not going loan them my truck!

That's all they get. Other than some pizza money now and then or helping them make up a couple hundred bucks to pay for books or something, they need to get a job, a loan, a grant, a scholarship or marry a rich older woman, to pay for any other school expenses. They both know that once the turn 18 and graduate high school they will be expected to either go to school, join the military or get a job and move out. Funny thing is, they have heard this message since they were old enough to understand it, and at our 12 y.o. is accepting, our 14 y.o. is eager.

We believe that while they don't stop being our children at 18, they do stop being children. They are adults. We never understood the people that have put off their hard earned retirement to continue to work to pay their kids way through school or continue to cloth and feed them and let them live at home until they are "ready" to move out. We all have responsibilities to take care of our children, but isn't allowing, encouraging, even forcing them to become adults and take responsibility for themselves part of that? Should we deny them the satisfaction of working hard, struggling and finally succeeding like we have by enabling their continued dependency?

Human nature is such that we take for granted those things that are given to us and cherish the things we earn. I would bet most kids would strive a little harder if failing a class meant paying for it again out of their own pocket. They will appreciate the accomplishment all the more and take pride in it. Paying their own way through school (or a substantial part of it) will prepare them better to handle the day when mom and dad aren't willing or able to help.

Besides, what makes their needs as adults more important than yours? Why does their success, happiness and security take priority over yours? Why do they get to lounge around in college (and let's be honest, college isn't anything like having a job and the responsibilities that come with one) while you work hard to support them? Heck, statistics show that not only are you shortening your retirement on the front end, but shortening your life on the back end by working longer.

I say don't do it. Let them take care off themselves. Sure, it will be hard, but that struggle is important. It helps them appreciate their success and value their earnings. Besides, if FIRE is important to you, set an example for them and do it. Show them what a little struggle, hard work and perseverance can do for them.

 

[FUEGO]

BigNick, you'll have to answer your questions on your own. I can provide you with my tentative plan for what I'm going to spend on my two daughters (currently age 3 and 5!).

We hope to be able to save enough for college tuition in a dedicated college savings account (529 plan here in the US). Room and board, books, transportation, etc will be funded from some combination of loans, work study, scholarships, grants, summer jobs, and if need be, money from us.

There may be something like a $5000 used car in there somewhere for the kids to use, maybe keep after college. There's a good chance it would be whatever car(s) we buy in the next 5 years or so.

After college, we will play it by ear. The plan is to set aside something roughly equal to $10000 or so in today's dollars for each kid to cover things like new house, apartment deposit, wedding expenses, etc. Let them figure out what they want to do with it and spend it however they would get the most value out of it.

During their adulthood, we may pay for some family vacations with them and (if they arrive) grandkids if the portfolio travels on one of those upward trend lines in FIREcalc and we can afford it.

That's the plan anyway. No lavish spending planned for our daughters, although the scope of what we are paying for has greatly increased over the 5 years since our first daughter was born. My thinking is that we are lucky/smart enough to have acquired all this wealth. We might as well spend some of it now when we can see the fruits of our labor instead of leaving it all to our heirs in a bequest and never see the happiness that it will bring to those we care about.

If I were in the OP's shoes, I don't think I would work an extra 2-3 years solely to fund a $100,000 per kid honeypot (above what is already being provided to them).

I like Nords' idea about helping fund tax-deferred savings in the initial years out of college. I have always been able to max the IRA's and 401ks straight out of college, but I understand that is not always feasible given the different trajectories people end up on. If we could afford it we would probably help in this way as well.

We don't want to end up in the position of expanding the lifestyle and expenses of our kids such that they rely on us to fund their spending. But I think helping fund tax deferred savings plans during the initial years of a career when salaries are lower wouldn't necessarily be artificially enlarging their lifestyle as long as the help is clearly marked "temporary". This kind of help would really depend on whether our portfolio is growing more than we think we will need. It would essentially be an inter vivos gift that is more tax efficient instead of leaving it as an inheritance.

 

[BigNick]

I didn't specify this in the OP - I hadn't thought too hard about it - but if we put 100K into a home down payment or a business startup, it wouldn't be a gift. We would keep the equity.

One thing which I know is affecting my thinking on that is what happened to slightly older of ours. Their DS got married and our friends put quite a bit of money towards their home. The marriage went bad and when the house was sold, their daughter-in-law ended up with half of what the parents had put in. So, married or not, if son and partner get a 300K home and we put in 100K, it will be our 1/3 of the property, duly notarised, not a handout.