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Becoming an Empty Nester

We can help manage priorities whether you’re looking at downsizing, traveling, or funding retirement.

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Now that your children have left for school or set out on their own, you can reconnect with the passions and opportunities you may have put on hold.

But chances are your children are charting a different—and longer—path to adulthood than you did.  If you’re like many parents who unexpectedly become the Bank of Mom and Dad, this may put unforeseen pressure on your finances and put your personal goals on hold.  It’s important to consider how supporting your children (or grandchildren) will affect your lifestyle and finances in retirement.

Here are some tips to help you support the kids while protecting your financial future:

1. Be open about your financial plan.
If you want your adult children to eventually stand on their own two feet, it’s important to be upfront that your bank may be a limited resource. Set expectations for the future and educate them on the fact that you’ll also need to support your own financial goals.

2. Take advantage of saving vehicles.
A Roth IRA can be a great way to make savings more tax efficient and extend your ability to use your resources to meet financial goals, including helping out your kids. Although annual contributions to a Roth IRA are limited by IRS guidelines, income earned in the account is generally not subject to any federal or state tax.

3. Use gift tax rule exceptions.
If you have the financial resources to provide for the whole family’s goals, consider taking advantage of exceptions in gift tax rules to help increase the benefit available to your children. Gifts made for tuition that are paid directly to a qualified educational institution are not subject to gift tax, making more of your resources available.

4. Leave a lasting legacy.
Some parents don’t realize how much their children depend on them financially. To prepare for this, you may want to include provisions in your estate plan documents to support your loved ones over time.

Remember, it’s important to consider your own interests and needs so you can live your adult years the way you always dreamed of. Your advisor can help with communication, expectation setting and forming boundaries with adult children, allowing you to effectively balance your priorities.

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