By Craig Erwin, Ph.D. 1-8-20
Retirement planning for parents can be very challenging. The book “Cheaper By The Dozen” was written by Frank Bunker Gilbreth Jr. and Ernestine Gilbreth Carey about growing up early in the 20th century, when it was not terribly uncommon for parents to have a dozen children. When their father, Frank Gilbreth Sr., was asked why he had so many children, he would quip, “Because they are cheaper by the dozen.” The book has twice been made into a movie, most recently in 2003 with Steve Martin starring.
It made far more sense to have large families a century ago than it does today. The mortality rate was high, many families lived on farms (where children were invaluable laborers) and the older children were expected to practically raise the younger ones themselves. Children were also a key part of retirement planning for parents; children were expected to help support and care for their elderly parents.
Times have changed, though. A lot. Today raising a dozen children costs a fortune. Sharply rising child-rearing costs have likely contributed to the sharp decline in both birthrates and family size for much of the world in the past century. A 2017 U.S. Department of Agriculture study concluded that a middle-income couple with two children spends $233,610 to raise just one of their children from birth to the age of 17. Obviously, that doesn’t even include the cost of college. For more details on the USDA study, visit USDA: https://www.usda.gov/. Clearly children don’t come cheap, even if you only have one or two.
One of the biggest ways in which children affect their families is the impact they have on retirement planning for parents. If you have children later in life, it is very unlikely that you will retire early and much more likely that you will retire later than your friends. And planning to cover the cost of college for one or more children may really throw a wrench into your retirement plans. If your friends are beginning to retire, but you are still borrowing money to pay for your childrens’ tuition, room and board, it’s not likely that you are going to retire anytime soon.
Even though it may sound crazy and premature, retirement planning for parents must begin before they start a family. Why? Because having children may change everything about how, when, and where they will be able to (or must) retire.
Although it is more obvious how children will affect your retirement if you have them later in life, even if you have children when you are in your twenties, they may still have a profound impact on your retirement. Why? Because the most important factor affecting the amount of money you accumulate for retirement is how much you save. In your twenties, instead of aggressively saving money for retirement (when it can do the most good because it has decades to grow), you will likely need to spend much of the money you earn raising your children. And if you pay their college expenses, you will have even less money left to save for retirement. So, retirement planning for parents must begin early; waiting until your children are grown to start planning for retirement may mean that you will end up working forever.
If you are considering starting a family, think long and hard about your priorities. If you love to spoil yourself, perhaps travelling or buying the latest cars, gadgets, or clothes, consider whether you will need to give up most of those things up if you have children. You need to work out your retirement priorities and goals before you have children; retirement planning for parents cannot be left to chance. Once you have children, you will have far less flexibility. And definitely far less money.
For more on the impact of children on their parents’ retirement, please visit The Risky Business Of Having Children: Children Change Everything: https://womenretire.com/the-risky-business-of-having-children-children-change-everything/