Half of parents financially helping their adult children say it’s putting retirement savings at risk

Discussion in 'The OT' started by Mark Holtz, May 1, 2019.

  1. May 1, 2019 #1 of 22
    Mark Holtz

    Mark Holtz Day Sleeper

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    From BankRate:

    Half of parents financially helping their adult children say it’s putting retirement savings at risk
    FULL ARTICLE HERE

    You may want to think twice before moving back in with your parents
    FULL ARTICLE HERE
     
  2. May 7, 2019 #2 of 22
    Mark Holtz

    Mark Holtz Day Sleeper

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    Since nobody commented on this, I think I will. Just remember, my perspective is from glowing up and living in the Sacramento, CA area for the past 40+ years.

    First off, while it would be nice for the young adults to move out at age 18 and have their own place, it is now practically impossible in metropolitan California areas to live on your own without roommates, especially if you are just striking out on your own at 18. You are starting out at the bottom, and your paycheck reflects this.

    It also doesn't help that the cost of higher education has jumped. Can you imagine purchasing a Samsung 75" QLED television every six months? Those televisions cost $2,600 at Costco. You know what else almost costs as much? The cost of tuition for a single semester at California State University-Sacramento during the 2018-2019 academic year at $2,449.... no books, no parking permit, no housing, just tuition. And California education is at least subsidized. When I first started at Sac State in Fall, 2003, the cost of a semester was just $828. When I attended my final semester in Fall, 2010, it had jumped to $1,709 a semester.
    Tuition.jpg

    When my father passed away in 2000, I had to remain in my home and support my mother. Otherwise, without my help, my mother would have lost the house. In turn, she was supportive of me when I elected to return to school in order to get my business degree.... something my father would throw roadblocks at because the courses I selected didn't meet his approval (never mind that they were required courses, including the semester of bowling to fulfill a physical education requirement). As my situation finally improved, I actually started to absorb some of the household expenses... sometimes behind my mothers back. For several months, my mother wondered why she kept seeing a zero balance on the electric bill. We had some major home improvement projects, including a bathroom repair and replacement of the roof. Alongside some grumbling, I did pay half of the cost of the repair. My mother also thought I was wasting money like a drunken sailor.... until I showed her one night my account balances and that they were much higher than she thought. She then got on my cases for working so much OT, and filling in for others, instead of traveling. I was simply trying to clear out my debt, which opened up some opportunities, including taking some trips.

    Now, with the recent move to Texas, our roles are reversed, with me being the landlord and my mother being the tenant. Instead of rent, I'm having my mother handle the expenses of gardening for the time being. We are still working out the details.

    As you can imagine, I never married and never had offspring. But, if I were, and my kid turned 18, I would lay down some ground rules if they wanted to stay with me. Number one: You join and attend a weekly Toastmasters club. The speaking, feedback, and leadership skills will give you a competitive advantage in education and your career. Number two: You are working full-time, going to school full-time, or a combination of the two. No, streaming your game play on YouTube or Twitch is considered a hobby unless you can prove a livable monthly income stream. I can certainly understand keeping the kid on the family mobile plan because it's more cost effective. I certainly don't want a Michael Rotondo situation.
     
  3. May 7, 2019 #3 of 22
    dreadlk

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    Good for you man. My nieces and nephews except for one out of six are all still at home. Ages range from 17-36. The older ones have run out of excuses and the younger point to the older ones as a a reason to not even try. Breaks my heart to see them so content at home. When I was growing up my Dad made it clear that at 18 we would be either out the door or getting ready to leave soon.
     
  4. May 7, 2019 #4 of 22
    RAD

    RAD Well-Known Member

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    Shortly after my father passed my sister, who always spent money like no tomorrow, told my mom that she needed money else she would have to declare bankruptcy. And since she worked at a bank, and that bank had her home mortgage, that she would lose her job. So my mom, who had my dad pay for their retirement house with cash so there would be no mortgage, had her home mortgaged for 80% of it's value and gave my sister the money, with my sister making the monthly payments. She told my mom this would allow her to pay off all her debts and get back on track. On top of that she talked my mom into adding her to an airline credit card so she could make charges to get miles to travel to Europe.

    As you might guess things didn't go as planned. My sister continued to spend like she had a printing press. She ran moms credit card up to the limit of $16,000. She also always was paying the mortgage past the due date, no to the point of having to pay a penalty but enough that the band would call my mom asking where the payment was.

    I had no idea that any of this was happening since I lived in another state and only found out when mom asked my to look at some other paperwork and ran into the mortgage paperwork. At this point I took over her finances and bought the hammer down on my sister. I talked to her broker, who talked to my mom about what my sister wanted to do, and asked what he told her. He said my sister was like a drug addict, that you just need to say no and force them to change their habits, which mom didn't do.

    Because of my sisters actions my mom basically got no money when we sold her house when I moved her into a care facility. My sister had promised to continue to make the same payments to my mom that she had been paying for the mortgage, which of course she has pair zero back.

    Luckily my dad had purchased long term care insurance which has been paying the bulk of her monty rent at the adult facility, but that will run out in a few months. She'll then have a few more months of being able to stay there using her IRA and after that she'll have to move to a facility that takes state assistance.

    So bottom line is from my experience, don't lend money to family members, it won't end well.
     
  5. May 7, 2019 #5 of 22
    MysteryMan

    MysteryMan Well-Known Member DBSTalk Club

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    A lot of parents should study nature and observe the parenting of wildlife. In nature the parents feed, shelter and protect their offspring while they are growing but they also teach their offspring how to "survive" in the world they're going to be living in. Upon reaching adulthood the offspring are weaned off their parents and can survive on their own. My wife and I raised three sons. We gave them a lot of love and affection but we also taught them. One of the first things we taught them is that we are your parents, not your friend. We taught them in life you're going to hear the word no a lot more than the word yes. We taught them they will be held accountable for wrongful behavior. As they matured they were given responsibilities (making their bed, cleaning their room, helping with chores). But most importantly we taught them that mom and dad aren't always going to "powder your hiney and wipe your nose" when things go wrong, as adults you'll be responsible for making your way in the world. I'm proud to say our sons are successful adults and self sustaining.
     
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  6. May 7, 2019 #6 of 22
    jimmie57

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    In my lifetime it has caused me to think that lending to a relative is just giving to them because most of them never intend to pay any of it back. I have experienced this first hand.
    I do not know what we did wrong raising them that caused this dependency.
    I borrowed the money for a car from my mother in 1970 ?? because I was in Georgia and living in Texas at the time and the banks were not willing to lend me the money.
    I paid it back as soon as I got home.

    I have several bad experiences with money with one of my sons. The other son and my daughter do not have these tendencies.

    Next door and 2 neighbors ( homes ) across the street from me both have kids that have gone thru schools and jobs and are now back home freeloading on their parents.
    One house, the kid that came home is saving his money so he can move out. The other house has a kid that is doing absolutely nothing for his mother. He does not even cut the grass. Wait until she dies and he finds out that she has a large Reverse Mortgage on the house that he will have to pay or lose the house.

    For young people reading these please take heed and see if you can do something different than we have done. You should not have to take care of your kids forever.
     
    Rich likes this.
  7. May 7, 2019 #7 of 22
    TheRatPatrol

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    There you are. :)

    I think some of these kids need to take after your sons. ;)
     
  8. May 7, 2019 #8 of 22
    SamC

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    Any parent who "helps" a child financially, after college, is not doing the child a favor. The sole exception to that is, if you really have more money than you will need and plan on leaving it to a child anyway, you can loan it to the child and forgive it in your will, thus saving them interest.
     
  9. May 7, 2019 #9 of 22
    James Long

    James Long Ready for Uplink! Staff Member Super Moderator DBSTalk Club

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    My parents did ok, had a comfortable retirement with a few toys (RVs, boats, etc) to use in retirement before age and health issues rendered them moot. They also helped their children. And we helped each other ... with some loans but no loan greater than we would give as a gift. It worked for us ... it may not work for you. There is no blanket "NEVER" and "ALWAYS" absolutes since every family has their own dynamics.
     
  10. Mark Holtz

    Mark Holtz Day Sleeper

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    To be fair, my mother did gift me the money which I used for the down payment of the house (and help avoid the PMI that you pay if you put down less than 20%). This helped me out tremendously, as money that I was going to use by cashing out investments is currently on hold until I am fairly certain that I can prove to the state of Taxifornia that I'm now a resident of Texas and avoid CA's capital gains tax.
     
  11. billsharpe

    billsharpe Hall Of Fame

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    My parents gave me $1000 to help with the down payment for our first house. That was a lot of money in 1957, although the house itself only cost $14,000.

    California has high taxes for high earners. Thanks to Proposition 13 our property tax is a bit over $2k. Our 2018 California income tax was about $400. I can easily put up with high gas prices with taxes that low.
     
  12. Rich

    Rich DBSTalk Club DBSTalk Club

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    My inflation calculator tells me $1,000 in 1957 would be worth about $9,000 today. Nice gift.

    Rich
     
  13. Mark Holtz

    Mark Holtz Day Sleeper

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    And, thus, my entire reason for keeping our home, and the only reason why I was staying in California. I made the decision a few years ago that if anything happened to my job, my two options would have been to either find a new position in the Sacramento area or move out of state. There was no BLEEPING way I was going to move to Los Angeles, never mind super-commuting to the Bay Area. You can probably guess the result of my decision.
     
  14. phrelin

    phrelin Hall Of Fame DBSTalk Club

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    As an old guy who was born and lived almost his whole life in California, Prop 13 is one of my least favorite ideas.

    Your base taxable home value is set when you buy it, unless that was before 1978 in which case it is the 1978 value. If you do improvements, the value of the improvements is added to the base. Normally the base is increased 2% per year (that's an increase ceiling) to set the taxed value. The tax rate is 1% of the taxed value. The right to that base value can be inherited.

    While it is good for us (we bought our current home in 1988), Prop 13 creates significant inequities between homeowners and much of that can be owner age associated.

    Further, a lot, and I mean a whole lot, of property is owned by corporations which owned it in 1978.

    I'm not sure it is any worse than the combined federal and state income tax systems - personal and corporate. But watching younger folks buy homes makes me feel like it probably is far more inequitable, particularly with California's willingness to tax income in higher brackets at a higher rate.

    Of course, the voters could change it. But since the percentage of home ownership rises with age, and there is a correlation between that and benefit from Prop 13, and a correlation between age and voter turnout, I'm not sure any change will ever be possible.
     
  15. billsharpe

    billsharpe Hall Of Fame

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    My property tax was over $2k in 1977. It went way down with Prop 13 but has finally returned to just over $2k in 2018. There's no way I could have stayed in this house after retirement if property taxes were still based on market value of a home.
     
  16. Mark Holtz

    Mark Holtz Day Sleeper

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    There is an initiative that has qualified for the California November, 2020 ballot that will "Requires Certain Commercial and Industrial Real Property to be Taxed Based on Fair-Market Value. Dedicates Portion of Any Increased Revenue to Education and Local Services." Under the current political climate in California, I expect it to pass. This will be the first step towards dismantling Proposition 13. Although, as I like to say, actions have consequences. Sometimes, those consequences are unplanned, unintended, and unexpected.

    I also found this article from HumbleDollar called Farewell Money, and while I am guilty of a item or three, the one thing I never got (perhaps they were not fashionable at the time I was 18) was a tattoo. I'm utterly convinced that I should be investing in tattoo removal services, as some of these kids who get tattoos in their early 20s realize that it isn't that great of an idea, and spend a few thousand to get them removed.
     
  17. steve053

    steve053 Godfather

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    I'd kill for $2K annual property tax. We're around $4k (SE Wisconsin), and that's significantly lower than if we were living a few zip codes over.
     
  18. Mark Holtz

    Mark Holtz Day Sleeper

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    I received my assessment for my home last month for the 2020 tax year. It's $7,760, but then again, Texas has no income tax, so they have to take it from elsewhere.
     
  19. jimmie57

    jimmie57 Hall Of Fame

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    Make sure you contact them for a Homestead exemption and possibly a senior discount.
    Some portions of my taxes are frozen when you reach 65 Y/O.

    Does that include the school taxes. Some do it in separate bills. Mine is separate but it used to be all in 1 bill.
     
  20. Mark Holtz

    Mark Holtz Day Sleeper

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    Yes, it does include the Homestead exemption, and in checking against this table, I'm being hit for Richardson City tax, Collin County tax, Collin County Community College tax, and Plano ISD, all of which is reflected in my tax bill, and it's one bill which I have in a escrow account with my mortgage along with my homeowners insurance. If I lived just a half-mile further south, my property taxes would be .5% higher.

    So, I'm cutting down on my expenses elsewhere. One of the first things I did was make sure all of my lights were LED. (one lamp outside still needs to be replaced). My commute to work is now just a quarter-mile away, and when the weather turns decent, I can walk there, and thus no toll-road charges and hardly any gas cost (I last filled up on Tuesday, April 30th). For two days of the week, I work from home and have a virtual connection to the office. I do have the toll tag on both my mothers and my own car, thus avoiding the bill-by-plate surchages. While shopping isn't within walking distance, most of the stuff we need is within 10 minutes driving. I have Energy Ogre handling my electric so that I get the best rate, plus I have a Nest Smart Thermostat and a Rachio Sprinkler Controller to more smartly control the utilities. In a few months, I hope to significantly reduce the principal on my home and then refinance it to a 10 or 15 year mortgage at a lower interest rate.

    Am I adulting now? Or adulting at a higher-than-average level?
     
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