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How to Not be a Financial Burden on Your Kids

If we’re honest, we all carry a deep fear that we won’t have enough money to sustain us through retirement—becoming a financial burden to our children. The 2010 Retirement Confidence Study shows that only 16% of workers are very confident that they will be able to live comfortably in retirement. That’s an all-time low.

Educate Yourself

The fears we have about retirement are often fears of the unknown. You’ve never been retired, so you feel like you’re guessing instead of planning.

A lot of people are guessing—and doing a really bad job of it. Only 46% of workers have tried to calculate how much they’ll need to save for retirement. As a result, 29% of workers think they can retire comfortably on less than $250,000! The fact is, a couple who retires at age 65 can expect to spend that much just in medical expenses by the time they are 85!

You don’t have to guess. Here’s Dave’s formula for determining how much you’ll need to save for retirement:

For our example, we’ll say you want an annual income of $60,000 when you retire.

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You’ll invest in good, growth stock mutual funds, so we’ll project that your savings will grow at 12%, the S&P 500 annual average growth over 30 years. We’ll estimate inflation at 4%, which means your savings will net 8% growth per year. Plan to live on that 8% growth when you retire.

To achieve an income of $60,000, you’ll need to save $750,000.

$60,000/.08 = Nest egg of $750,000

Now—start saving. A professional investment advisor will help you decide how much to save and invest now so you can meet your goal of a truly comfortable retirement.

Stop Supporting Your Adult Children

Of workers over the age of 55, 37% have saved less than $25,000 for retirement. That is gloomy to say the least. But, when it comes to helping adult children pay the rent or buy a car, these people are forking over an average of $59,000!

This attitude isn’t doing anyone any favors. Adult children must learn to stand on their own. Keep paying the bills for them, and they’ll never learn personal responsibility.

Plus, your income is your biggest wealth building tool. If it keeps going to pay your kids’ bills, you’ll be relying on them to pay your bills one day.

Talk It Out

Money isn’t the easiest subject to talk about—especially for families. But by explaining your financial situation, goals and priorities, you get everyone on the same page. Your kids may not know you’re behind on retirement savings or that you’re supporting your own parents in their retirement.

The Legacy Drawer is a great jumping-off point for discussions about money. The Legacy Drawer is where you put all your important documents in case something happens to you. It should include:

  • Medical and life insurance policies
  • Your will
  • Investment and banking information
  • Funeral instructions
  • Budgets

All the information should be organized so that a child can easily find what they need.

Overcoming your fears about retirement is mostly a matter of taking action. These three steps will get you on your way to a more positive attitude about attaining a comfortable retirement.

Dave also has tools to help you teach your children how to handle money responsibly. Whether they're youngsters or adults, it's never too late (or early) to point them toward financial peace!

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

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