Do Parents Have Time To Plan For Retirement?
Once a child come along into a young family, retirement becomes a distant fantasy. Even for people who are well-pocketed and can afford to make the necessary plans for retirement income and health care funding, other priorities push the thoughts of retirement onto a back burner.
Advisors can react when one of their clients becomes a parent. Even though there may be more immediate thoughts that come to mind, an advisor can set into motion those financial maneuvers that can address retirement needs early so that those new parents can concentrate on the needs of the present rather than the needs of the future.
Spectrem’s new study into the finances of parenting points out the need to remember retirement plans when dealing with the day-to-day financial matters that come up due to the arrival of children into a family unit.
Most wealthy investors have retirement accounts, either one created as part of an employer-sponsored program or an individual retirement account outside of work. But such accounts are funded according to the contributions of the investor, and people often change their allocations to retirement accounts when they become parents for the first time, or the second time.
According to the Spectrem study, 55 percent of investors with children began contributing to a retirement plan before they had children, and 34 percent began making contributions to a retirement account after they became parents. However, of those who started a retirement account after their first child came along, a majority say it was not the birth of their child that caused them to open a retirement account.
There are indeed other factors that could prompt an investor to start a retirement account beyond the arrival of Baby Sarah or Ethan. Advisors should consult with all of their clients about their retirement account funding regularly, especially with an eye toward the financial pressures that will exist in the future that could restrict or limit contributions to a retirement account.
Do new parents who have a retirement account back off on their contributions when the first child comes along? In fact, the opposite is true.
Among investors with children, only 13 percent of investors decreased their contributions to a retirement plan when their first child arrived. Instead, 42 percent said they increased their retirement fund allotments upon having children.
That’s obviously quality budgeting. If a fully funded retirement account matters to an investor, then that has to be one of the most stringent payment plans for an investor, before plans can be made for vacations, dance lessons and sports camps.
The finances of parenting are obviously a balancing act, and advisors can assist parents both current and future with prioritizing all of the financial priorities they have. According to the Spectrem study, advisors do a good job of advising their clients on the retirement plans they need to make while also raising children.
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