By: Paul Morrone
Family matters are the most common conversation in our office. Without exception, those with loved once place the wellbeing of family and close friends above virtually everything else, and in many cases, even above their own. And many are willing to make personal sacrifices in terms of time, money and stress to make sure the people closest to them are well taken care of. There are plenty of examples: giving money to a child to afford a home, caring for an aging parent, building an addition on the home to create an in-law apartment or helping subsidize the cost of quality long-term care. But what about the grandparents that spend time babysitting their grandkids so their children don’t have to pay for daycare, the child who manages the finances and healthcare matters of a parent who is incapacitated or the aunt who serves as conservator for a disabled nephew? The impact others have on your financial plans – both in terms of monetary costs and time investment – can be staggering.
When we first ask someone “how do you plan to spend the 168 hours per week in retirement?” It is uncommon that anything listed above is top of mind. Spending time with family and friends, travel, and something to do with a hobby are usually in the top 3 answers we get. But the reality is that life is not always all about the fun things. How often do you hear of someone retiring and then complaining that all they do is go to doctors appointments? Whether it is for them, a spouse or loved one, reality sets in quickly.
The point is not to avoid these conversations, but to embrace them as part of the plan. How will your unique circumstances, family and relationships impact your financial plans? If your goals include monetarily supporting someone other than your spouse, how is that goal going to be funded, and is it going to be at the expense of your financial stability? Most importantly, how can we get ahead of these items to ensure the best possible outcome for you and your loved ones. This could me and setting up dedicated funding sources for things like college savings – 529 plans could be a great solution for parents with young children. A child may work with a parent to help them protect assets from Medicaid spend down requirements.
The follow-on question to this is: how will you draw on these experiences to plan for your future as you plan for and transition into retirement? Do you want your children and family to have the same experience as you? Can your financial plans withstand the impact of a sustained long-term care event, premature death or long-term disability? There are endless possibilities because of how unpredictable life is. With intentional thought and proactive planning, however, it is possible to get ahead of these matters. Being open, honest and realistic about the impact of others can help your planning team develop a strategy so you can make future decisions on your terms as opposed to simply accepting life’s many curveballs.
Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
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