Planning for the unexpected in retirement is critical, even more than when you’re still working. Life can throw curveballs, such as medical events, unforeseen home expenses, or assisting a family member in need. Thoughtful retirement planning accounts for these unanticipated events while giving you flexibility and peace of mind through these changes.
Another common financial surprise for retirees is the cost of providing ongoing financial support for adult children. From tuition and groceries to health insurance, studies show1 many retirees are covering expenses for their adult children well into their 30s. If you plan to fund your adult children’s needs, whether for everyday expenses, an unexpected layoff, or long-term care for a child with special needs, it’s essential to budget accordingly. Without defined parameters, supporting your children could quickly drain your retirement savings, putting your stability and future goals at risk.
Explore our video to learn how to create a budget that meets your adult children’s needs while prioritizing your retirement goals. Continue reading for a fictionalized example that may relate to your situation.
A Case Study on Gifts for Adult Children Based on Retirement Planning
To illustrate how a thoughtful financial planning process can help balance supporting adult children while maintaining long‑term retirement stability, let’s consider the case of Raymond and Lucia. The fictional couple seeks to integrate family support into their broader retirement budget, with each of their two adult children facing distinct circumstances and financial needs. The first step in the process is to develop a retirement budget that also includes support for their adult children:
- Mark, the eldest, is newly married and starting his career. He is focused on building wealth and paying down student loan debt.
- John, their youngest, has recently been diagnosed with epilepsy, which has altered his career plans to enter the military.
In developing their budget, it is important to review key areas, scenarios, and questions, to help inform Raymond’s and Lucia’s decisions and reflect the family’s priorities and values:
- Budgeting for Each Child: Create a line item in their budget for each child, describing their needs and the potential time frame for support.
- The couple wants to help Mark with a one-time gift for a down payment for his new home.
- Develop a long-term funding plan, spanning five years conservatively, to help John get back on his feet, determine a new career path, and secure education or certifications, if necessary, to affect his living situation and future needs.
- For the 2026 tax year, the IRS annual gift tax exclusion is $19,000 for single filers and $38,000 for married couples, which can help provide significant support without triggering a gift tax return or reducing the $15 million lifetime exemption.
- Must-Haves vs. Nice-to-Haves: When calculating the one-time and recurring gifts, ask, “What is essential and what are nice-to-haves?” For example, health and auto insurance may be categorized as must-haves, while travel expenses are not. In Raymond and Lucia’s case, John’s situation is closest to a must-have budget item. Despite available government benefits, his unique circumstances make his parents’ support nearly essential. Mark’s down payment is categorized as a nice-to-have, since Mark could build his savings over time.
- Forecasting: Lastly, a cash flow analysis is performed to model how recurring gifts would affect the couple’s long-term success probability. By stress-testing their plan across various market conditions and inflation scenarios, Raymond and Lucia gain the clarity needed to allocate savings wisely, reduce “nice-to-have” expenses, and explore alternative funding sources without jeopardizing their financial independence.
For more than 50 years, Blankinship & Foster has provided financial planning and investment management services to individuals and families. Our approach is designed to bring together multiple aspects of a client’s financial picture in an organized and coordinated way. We work with clients to help them evaluate their options and make informed decisions in support of their long‑term objectives.
Learn more about the key steps to take now ahead of retirement in our four-part series, The Essential Guide to Retirement Planning. Download it and begin planning today.
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Sources
- “Moving Back In With Your Parents Is So Common Now That It’s Nearly Lost Its Stigma” By Jane Thier ↩︎