Near retirement? Three unexpected financial threats to your retirement plan By Rico Dilello
One of the joys of having worked as a financial advisor was putting a solid plan together so that clients, after working for decades, are ready to enjoy retirement life with few worries. But for some, the financial plan we had taken years to craft may be disrupted by unexpected events. If that happens, the client’s expectations of travel abroad and lifestyle choices may need a major overhaul.
Surprise No. 1: Ailing parents
The Canadian Alzheimer society estimates that one out of five Canadians provide some form of care to seniors with long term health problems. Your parents may need nursing or assisted living care and they don’t have the money to pay for it. Unfortunately, elder care is not cheap and costs vary depending upon where you live. For example; estimates for a private room in a nursing home in my area is around $50,000 per year and you need to apply two years in advance just to get in.
Another option that may lessen the financial impact on your retirement nest egg is to determine if it makes more sense for you to become the caregiver. One of my friends, will an ailing mother-in-law, used an agency to hire a full time live in care giver from aboard. Since his children had moved out, he had two spare bedrooms, one for care giver and the other for his mother-in-law. He was lucky that all his wife’s siblings agreed to share the extra costs.
No. 2: The unused vacation dream home.
Spending weekends and summers near the beach or the mountains seems like an ideal way to host adult children and grandchildren for holidays and other big events. Unfortunately, this plan doesn’t always pan out.
Several years ago, one of my retired clients purchased a lake front cottage a couple of hours drive north of the city. It had a private beach for swimming, grassy play areas and a forest nearby with walking trials. Unfortunately, one of his adult children moved his family to another city because of a better job opportunity. My client ended up traveling there to see their grandchildren and rarely used the cottage property.
While this particular scenario was difficult to predict, anyone caught in a similar situation needs to determine if they can afford to keep their property. The cost of maintenance, taxes and utilities can greatly reduce your retirement income. There is an added risk that your vacation home may not appreciate or it could also decline in value. Your dream home could turn into a financial nightmare.
Surprise No. 3: An adult child falls on hard times.
There are a variety of reasons why a child may need some financial aid. Most common are marriage breakdown, job loss, poor saving habits or bad decision making. There is a disturbing trend for adult children to move back in with their parents. The media refers to them as “Boomerang kids.”
Parents always want to help their children out of trouble. It helps to know how much money you can afford to give before it wreaks havoc on your retirement plans. Before making any decisions, determine how long you can provide any financial assistance and make it clear to the child up front that your financial aid can only last for a certain period of time. If they move back in, give them a moving out date.
Remember to take care of yourself
The new reality is your parents are living longer and your children are getting married much later. A growing number of people near retirement age are becoming part of the sandwich generation. Don’t be troubled if you have to put a limited on financial aid to your family. It’s okay to look after yourself first.
by Rico Dilello