Have you been in a situation where a parent, adult child, or sibling needs financial help? If so, you are not alone. Research shows many seniors are financially supporting their adult children and vice versa, adult children are helping aging parents meet financial needs. This tug-of-war is taxing emotionally and financially. So what, if anything, can be done to ease these burdens?
According to the Pew Research Center, 83% of individuals over age 60 have provided financial support to an adult child in the last year. On the other end of the spectrum, 32% of adults with parents over age 65 have provided financial support to a parent in the last year.
Assessing the Need
Support for Aging Parents. Baby boomers have an average of $200,000 in retirement savings. While that amount isn’t insignificant, it can quickly be depleted by unexpected expenses or healthcare needs. Before you reach into your own pocket to help your parents, you need to have a candid conversation with them about their financial situation. It is important to understand how your parents’ funds are invested and whether any taxes/penalties would be incurred by using those funds.
If you are choosing to provide financial support to your parents, you should also discuss expectations on future reimbursement. For example, if you covered necessary home repairs and their house is later sold, this would be an opportunity to be reimbursed for those expenses. In this case, it may also be advisable to have your parents include a reimbursement provision in their estate planning documents.
If you find yourself paying more than half of your parent’s living expenses, you may be able to claim them as a dependent on your tax return. Consult with a tax advisor to see what makes sense in your situation.
Support for Adult Children. At the other end of the spectrum are your children. Education is undeniably an investment in their future, but the affordability of higher education is often overlooked. Talk with your children about the average salary and loan payments they can expect in the programs they are considering. Helping them understand this financial commitment and its impact on their lives is an important life lesson.
Many college graduates end up receiving some type of support from their parents. Before you open your checkbook, review your financial situation as well as your child’s. Maybe you could keep them on your health insurance plan for a few years (they are eligible until age 26) or co-sign a loan in order to get them a lower interest rate. Avoid covering expenses that don’t have a natural end date, such as helping with a car payment instead of paying car insurance.
Keep in mind that you can gift $19,000 per person per year without any required reporting on your tax return for 2026. Payments made directly to medical providers or educational institutions do not count toward the annual $19,000 limit.
Living Together Again?
Beyond the financial aspect, it is not uncommon for aging parents to move in with their children or children to move back home and thereby create a multigenerational household. Moving mom or dad into your house may sound like the easiest solution, but think about the true costs and associated logistics with this type of help. Consider that doorways need to be wide enough to accommodate walkers or wheelchairs and ideally bedrooms and bathrooms need to be located on the first floor. The cost of renovations can add up quickly.
Adult children moving home typically doesn't require home updates, but they bring their own set of considerations. Will you be charging rent or require that they pay a portion of household expenses? To get them started on the right foot, perhaps in exchange for allowing a child to move home, you require that they save a reasonable amount of monthly income to establish good savings habits.
Regardless of who the new tenant is, it is important to set expectations with the entire family as a new normal is established.
Intangible Impact
Though it may be difficult, don’t put the needs of your children or your parents ahead of your own. Your highest earning years could easily overlap with the need to support a family member so make sure you are maximizing retirement contributions and are on track to meet your goals.
Depleting your savings may appear to solve a problem in the short term, but doesn’t help anyone in the long term. Kids can get loans for college and parents may have to spend down their assets to pay for their care, but no one is going to give you a loan to help you retire.
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The material has been gathered from sources believed to be reliable, however Bedel Financial Consulting, Inc. cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source. To determine which investments or planning strategies may be appropriate for you, consult your financial advisor or other industry professional prior to investing or implementing a planning strategy. This article is not intended to provide investment, tax or legal advice, and nothing contained in these materials should be taken as such. Investment Advisory services are offered through Bedel Financial Consulting, Inc. Advisory services are only offered where Bedel Financial Consulting, Inc. and its representatives are properly licensed or exempt from licensure. No advice may be rendered unless a client agreement is in place.
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