Many retirees find themselves helping other family members, including parents, children and grandchildren, according to a report recently published by the Society of Actuaries (SOA).
In some cases, children or grandchildren often need money for higher education, and a few need special help to deal with physical or mental handicaps, according to the report.
And in other cases, adult children may look for help in case of unemployment, divorce or financial setback, according to Cindy Levering, a co-author of the report and a member of the SOA’s Committee on Post-Retirement Needs and Risks.
“Many retirees find themselves helping other family members and prudent retirement planning should recognize that that's a possibility that they might have to provide that future assistance,” she said. “It's very common for adult children to seek greater personal or financial support from their retiree.”
So, how best to manage these risks?
Plan for support of other family members. “It's very important to plan for support of other family members,” said Levering. “I also think it's very important to have these discussions in advance with the family. Just so everybody's kind of on the same wavelength. Obviously, you can't anticipate everything that might happen.”
But it’s important for family members to know what the situation might be or what the steps might be.
What’s more, she said, it is prudent to consider whether—should unforeseen needs arise—you are able to provide support and to do this before you make the commitment to fund whatever the need is to the family.
Give gifts to family, charity or other causes. In some cases, retirees might want to provide significant gifts to family, a favorite charity or other causes. “You want to do that carefully to ensure that the retiree isn't subjecting themselves to a potential financial crisis themselves, or to prevent poverty later in life. So if you know that it's very important to, to really think that through.”
Consider public benefits: Social Security may pay benefits to children and surviving spouses after the death of a parent or a spouse. It's very important when claiming Social Security to consider the situation if one of the spouses should pass away, said Levering.
Communicate well: Good, open communication among family members about financial resources and expectations can help minimize conflicts in the future and open the road to better management when help is needed, said Levering.