Our Thoughts

Put Your Own Mask on First: Balancing Retirement & Education

We all know how the airplane safety speech goes: 

“In the event of a drop in cabin pressure, an oxygen mask will drop down in front of you…If you are traveling with a child or someone who requires assistance, secure your own mask first, and then assist the other person.” 

One of the biggest decisions that overwhelm many families is how to prioritize goals for themselves vs. goals for their kids. I am not talking about self-care and ME time, I am talking about the ripple effect of our decisions as parents, like who gets more of the discretionary dollars.  

When you mix money matters and emotions, things get complicated. Kids represent a piece of ourselves as parents. You want what is best for them. And sometimes this means giving them more than you had growing up or setting them up for success in a life you recognize as so hard. We want to put their mask on first. 

But… that nagging airplane safety speech has significant meaning.  

Should we take care of ourselves first by saving for our own future BEFORE we fund our kids’ futures? Jill Schlesinger, a financial planner, CBS News Analyst and Author echoes this sentiment: “I know you want to do right by your kids, but remember: If you screw up your own retirement, the burden is going to fall on them”. Something else she noted is “that the fastest growing segment of the population with student loans is people who are in their 60s and older.” Too many parents are taking out loans for their children!  

Let’s contrast that against what people who have saved for themselves. At Vanguard, the average 401(k) account value for an investor age 65 and older is $192,877 in 2018, but that number is inflated by a small group of long-term super-savers. The median balance among the age group, where half have more and half have less, is just $58,035 Let’s swim upstream to see where the decision point starts.  

Take Sally and Sam – they need to choose how to earmark their dollars. With finite resources, do they prioritize savings for the college education of their adopted daughter, Maddie, OR for their own retirement? We discuss the emotional attachment to providing for Maddie’s college and giving her an opportunity neither one of them had – coming out of college without debt! This is compounded by the heart tug that most kids in Maddie’s native country do not have an option for university. These emotional motivators will dwarf saving for their own retirement because …it… seems… so far away!  

Sally and Sam wrestle with the outcome of the either/or approach and are unsure which scenario would be worse. Like many of us, they want both, but most of the time you need to prioritize one over the other or risk having neither on track. Ultimately, it is unearthing the essence of why saving for their own financial independence is really saving for Maddie after all.  

By securing their own future, Sally and Sam are providing for Maddie’s future. They are giving her the chance to build her own financial security and independence without having “caring for parents” be on her list. They are lifting this burden from her shoulders.  

Family members are often the ones who provide care: 

“This unpaid care also worsens an already large gender wealth gap as women as more likely to be caregivers and as caregivers tend to save less due to greater labor market risks. Caregivers who take the drastic step of leaving their job experience a volley of financial shocks: They lose their primary source of income, miss out on participation in a 401(k), and they lose access to their employer’s health insurance plan.”  

If a child needs to care for a parent, the adverse effects bleed into their financial well-being. “These individuals are also incurring out-of-pocket costs. The study found that caregivers spend a median of $150 per month to cover expenses for their loved one….and this amount goes largely unreimbursed: 75 percent of caregivers don’t receive any payment or financial assistance for their duties.” 

Once retirement is on track, you will have plenty of chances to support your children. Nearly 80% of parents give some financial support to their adult children— to the tune of $500 billion a year, according to estimates by consulting firm Age Wave. That’s twice what parents put into a retirement account, according to a 2018 survey from Bank of America Merrill Lynch and Age Wave.