Are Your Adult Kids Ruining Your Retirement?

Good advice for anyone Over 50, whether Divorced, happily married, or somewhere in between:  Do not let your adult kids ruin your retirement.  This piece from CNBC points out that any money going toward your kids’ lifestyle (cell phone, gas, etc.) is money that could, and should, be going into your IRA or 401K.

I would quibble with one point, and I am an Investment Advisor Representative.  Generally speaking, I believe you’re better off paying the taxes now and stashing that money into a non-taxable vehicle like a Roth IRA, Roth 401K, permanent life insurance, or tax free bonds.  Many people forget that they’ve got a partner in their Qualified Retirement Plan: the IRS.  When that money comes out, and you must start taking some the year after turning 70 1/2, you’re taxed at full Ordinary Income.  Not the lower capital gains rate.  So it becomes a question of pay the tax now, or pay it later.  If you think tax rates are going up in the future (and most people do), maybe you’re better off paying them now so you have tax-free access to your money later.

But what about that tax break you’d be giving up?  Yes, you get to deduct the amount of your qualified contribution from your income, and pay less tax.  But that money isn’t in your checking account. It’s locked away, and you can’t touch it without penalty until you’re 59 1/2.

To be clear, this is just a general discussion, and not intended as advice.  Just something to think about, or talk over with your advisor.  Let’s discuss in the Comments below…

A DO50 thank you to Scott Harris, who’s both a friend of the site and very happily married!

 

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