I have three kids who are in chinuch and kollel and I could not be prouder of their accomplishments. I’ve been helping them with monthly bills, general expenses, and their home purchases. To finance it all I’ve maxed out my credit cards and have taken out the equity in my home. I’m now 70 years old, am still working, and have no meaningful retirement accounts. I want to ultimately retire comfortably and also want them to continue pursuing their dreams. What do you recommend I do? – Anonymous
Let’s start by recognizing the importance of your kids’ chosen career paths. Education, particularly Torah education, is foundational to every Jewish boy or girl’s life. It is an admirable vocation and essential to the viability of the Jewish community at large.
The problem here is that your ongoing financial support has allowed your kids to live a life that they cannot afford and has positioned you to be destitute or financially dependent on others when you retire. This reality didn’t happen overnight. It is the culmination of years of irresponsible financial decisions. You may be able to get out of this mess with perseverance, commitment, and more than a little bit of luck. Below is what I would recommend.
Cut your children off financially: I know that sounds harsh. However, refraining from financially supporting your kids’ lifestyle is an important first step. Your children decided to pursue careers in chinuch and learning in kollel, which are not high-income professions. There is nothing wrong with that decision as long as your kids can live within their means. Since you have been supporting them, they never had to do that. They need to start living with the consequences of their decision or pivot to higher earning careers since you simply can’t afford to keep them afloat any longer.
Continue working: This may seem obvious, but your ability to continue working is key to addressing your situation. The longer you can work, the easier it will be to pay down your debt, build a nest egg, and ultimately retire at some point in the future.
Pay off your debt: High-interest debt is a cancer to personal finance. It can quickly grow out of control and become insurmountable. To dig yourself out of your financial hole and begin building wealth, you need to get rid of your loans. Start with the highest interest loans, like credit card debt, and work your way down. Some lenders may be willing to negotiate a settlement if you can’t make the full payment. It’s worth calling to determine if that’s an option. As a last resort, if your debt burden is too large, consider filing for bankruptcy. While bankruptcy has become stigmatized in our society, it is actually a sensible financial strategy that may be appropriate in certain situations.
Save most of your earnings: You will need to tighten your belt and only spend what is necessary. All other cash flow should be saved. The average lifespan in the U.S. is nearly 80. If you are in decent health at 70, it is not farfetched to assume that you will live to your 90s or later. You need to plan accordingly. This means building an emergency fund for unplanned expenses. Someone who is gainfully employed in the middle of their career typically should aim for about six months’ worth of expense money. In addition, you’ll need to figure out how much you spend on an annual basis. Multiply that amount by your estimate, based on family history, of how many years you may live after you retire. That total is roughly how much you will need in savings to comfortably live out the rest of your life. This is a crude calculation, but without more detailed information about your finances, lifestyle, and other retirement income sources, I can’t get more specific. After decades in the workforce, you should theoretically have been at a point in your life where you could spend more freely. Alas, you don’t have the luxury to do that now since you made the decision to spend excessively on your children up until this point. If you manage to accumulate a sufficient nest egg over the next few years, hopefully you will have more financial flexibility in the future.
Purchase appropriate insurance: Given your age, there is a likelihood that you pass away or that health conditions may prevent you from continuing to work. That may leave a spouse who is financially dependent on you and unable to support themself. Having life and disability insurance policies can be helpful. Consider any group plans available to you through your employer to minimize your costs and potentially avoid a more rigorous underwriting process. Alternatively, you can purchase a standalone policy, though it will likely be far more expensive.
Reevaluate your housing costs: For most families, housing costs are typically their biggest expense. Downsizing and moving to a lower cost of living location may help you save more money. It will also help you more easily make ends meet when you ultimately stop working.
It’s wonderful when a parent can financially assist their children at the start of their career. However, eventually, every parent should cut the lifeline to allow their kids to become financially independent. Failure to do so may leave both the child and parent in a precarious situation. The silver lining for your family is that you are still working, and your kids are young enough to make proper adjustments. In other words, there is still hope that in time your family can dig themselves out of this financial quagmire. B’hatzlacha!
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