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Introduction: The Balancing Act Every Parent Faces
You’ve spent decades building your retirement savings, but now your adult children need help. Maybe they’re carrying student loans, struggling with a mortgage down payment, or asking you to co-sign for a loan. As a parent, the instinct to help is strong. But here’s the reality: the financial decisions you make now can either strengthen or jeopardize your retirement security.
This isn’t just about numbers—it’s about values, relationships, and long-term stability. The good news? You can provide meaningful support without putting your future at risk. In this article, we’ll explore sound ways to help your adult children financially, tax-efficient strategies, and even conversation scripts for setting healthy boundaries.
Why Helping Kids Financially Can Be Risky
Supporting adult children often feels like the right thing to do. However, the ripple effects on your financial plan can be significant. Here’s why:
• Retirement Has No Loans: You can borrow for college, but you can’t borrow for retirement. Once your savings are depleted, rebuilding is nearly impossible.
• Longer Life Expectancy: If you’re planning to retire at 62, you may need your money to last 25–30 years.
• Inflation and Health Costs: Healthcare and living expenses often increase faster than expected, creating more pressure on your nest egg.
A 2023 survey by Bankrate found that 68% of parents of adult children have made financial sacrifices to help them—often delaying retirement or taking on debt themselves [1].
Before writing a check, let’s look at other ways to approach this.
Start With a Conversation: Setting Expectations and Boundaries
Helping your kids financially works best when expectations are clear. Here’s a framework for having the conversation:
Script for the First Discussion
Parent: “We want to help you, but we also need to make sure our retirement is secure. Let’s talk through what you need and how we can make it work without creating future problems for either of us.”
This sets a tone of collaboration rather than obligation.
Tips for Healthy Financial Boundaries
• Be transparent about your financial limits.
• Use conditional language: “We can help with X amount” rather than “We’ll cover everything.”
• Avoid making open-ended commitments that drain resources over time.
3 Common Ways Parents Help and How to Do It
1. Helping with Student Loans
Risk: Paying off your child’s student loans in full can create a major dent in your retirement plan.
Another Approach:
• Offer a matching program: “We’ll match whatever you pay toward your loans each month up to $200.”
• Refinance vs. Co-signing: Avoid co-signing private loans, as it exposes you to full liability.
• Use annual gift exclusions: In 2025, you can give up to $19,000 per person without triggering gift taxes [2].
2. Down Payment Assistance
Risk: A large cash gift for a house could push you into uncomfortable territory if it comes from retirement funds.
A Different Approach:
• Gift cash from taxable accounts, not retirement accounts, to avoid tax penalties.
• Consider an intrafamily loan: Structure a formal loan with the IRS’s Applicable Federal Rate (AFR) to keep it legal and low-interest [3].
• Document everything: A signed agreement protects both sides and preserves family harmony.
3. Co-signing Loans
Risk: If your child defaults, the lender comes after you. It can also impact your credit and ability to borrow later.
Different Approach:
• Only co-sign if your cash reserves can cover the entire loan without disrupting your plan.
• Require automatic payments from your child’s account to help minimize default risk.
• Consider setting up a “Plan B” fund for emergencies.
Tax-Sensitive Ways to Help
Helping doesn’t have to mean a big tax bill. Here are a few strategies to keep it efficient:
• Annual Gift Tax Exclusion: $19,000 per individual in 2025 means a married couple can give $38,000 to a child without filing a gift tax return [2].
• 529 Plan Contributions: If you want to help with education for grandkids, contributions can grow tax-free for qualified expenses.
• Use RMDs Wisely: If you’re over 73 and must take Required Minimum Distributions, consider gifting some of the after-tax amount.
Hypothetical Cashflow Impact: Help vs. Hurt
Let’s say you’re 58, planning to retire at 62 with $1.2 million saved. You consider gifting $50,000 for a home down payment.
• If invested instead at 6% annual return, that $50,000 could grow to $67,000 in four years.
• Over 25 years of retirement, that lost $50,000 could have generated $200,000+ in withdrawals.
The bottom line: Even “small” gifts today can have a big effect on future retirement security.
The Golden Rule: Your Retirement Comes First
It’s natural to want to help your kids. But remember: if you compromise your retirement, the burden may eventually fall back on them. Helping within your means protects everyone in the long run.
Final Thoughts and Next Steps
Helping adult children financially is a generous act—but it requires planning, clear communication, and boundaries. Focus on these principles:
• Assess affordability before committing
• Use tax-efficient strategies
• Have honest conversations
If you want help creating a personalized plan that balances supporting family with protecting your retirement, schedule a consultation today. A clear strategy can give you confidence and peace of mind.
Sources
1. Bankrate. “Parents Sacrificing Retirement to Help Adult Kids.” 2023.
2. IRS. “Gift Tax Annual Exclusion.” 2025.
3. IRS. “Applicable Federal Rates (AFR).” 2025.
Disclosures:
Provided content is for overview and informational purposes only and is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice. Investing involves risk which includes potential loss of principal.
Neither the companies of OneAmerica Financial, Fuller Financial, nor their representatives provide tax or legal advice. For answers to specific questions and before making any decisions, please consult a qualified attorney or tax advisor.
