Personal Finance: Talking to Adult Children About Retirement Planning

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Parents frequently fail to teach their children financial skills and planning. Mostly, this is the result of the parents’ own lack of skill and understanding in this area. By the time retirement age arrives, parents should have mastered a remedial understanding of retirement preparation. Unfortunately, their children are adults and may be difficult to convince that retirement planning needs to start as early as possible. If you choose to share what you have learned about retirement with your adult children, a few tips might help you in your efforts.

Recognize that young adults rarely see retirement planning as a concern.

Young people see their own life as endless. The 30- to 50-year span between them and retirement seems like forever. This makes it tough for them to see any need to start planning now for retirement a generation from now. You need to keep pushing forward. Plant the seeds of long-term investing into their thinking.

Outline the mistakes that you made, and what they will cost you during retirement.

One of the best tools that you have is your own experience with retirement preparation. It is easy to look backwards and see where you should have acted differently. Use these mistakes as examples of why starting early is important. It should not be hard to compare where you are and where you could have been with better planning. Sometimes this difference can be substantial and may impress your adult child enough to get him or her to listen.

Explain the different types of investment and insurance options.

Ignorance is the worst obstacle to financial planning. Come armed with your understanding of IRAs, savings accounts, mutual funds, bonds, and any other investment tools that are available. Make the initial discussions more about information than advice and suggestions.

Make up visual aids to help with your discussion.

Run a few of the numbers about investments and offer some graphs if possible that show how long-term investments can grow. You can do this before and after taxes. If you know that your child works for a company that matches some types of retirement contributions, try to include this in your work. If you do not have the skills to do this, consult with your banker or investment advisor. These people should have this type of graphical presentation at their fingertips.

Present a number of different but workable ways to approach retirement planning.

Show that almost all consistent investment in good growth plans will produce stellar results if the time horizon is long enough. Try to convey that small investment amounts over decades of growth produce huge returns. By doing this exercise, you should be able to convince your adult child of the need to start now and not later in order to reach decent retirement goals.

Keep it from becoming a lecture or argument.

Allow the discussion to progress naturally. If your child makes it clear that the conversation is over, honor that decision and stop. Ultimately, as an adult, your son or daughter needs to arrive at the point where investing for retirement seems important for you to succeed. This can take a number of discussions. Look for opportunities to have low-key talks when openings seem to appear. Be ready to answer questions that will surface. These questions demonstrate that he or she is thinking about what you have said. This is a very positive sign.

Offer to help them get started.

People are reluctant to do something that they have never done. By making yourself available, your son or daughter may be more willing to pursue potential investment options. You can introduce them to the right people and advise them about how to make good investment choices. If possible, you might want to offer to help create a household budget that will let them know how much money can be safely used to start building retirement accounts with regular amounts being invested. If you can afford to do it, offer to put the first deposit into an account on their behalf.

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