Well, more and more retirees are being faced with the problem of, do I help support my kids, my adult children, keep them on the payroll, or do I focus more on my own retirement? Well, today we're going to talk about how to transition your kids off of payroll and answer a question that came in for John Stillman. Well, hello and welcome in. This is Mr. Stillman's Opus. I'm Ben George.
He is John Stillman, of course, at Rosewood Wealth Management. John, a good question today to address because it's one that, you know, we'll probably have to figure out at some point in our lives potentially, but there's just more and more kids now that are growing up, maybe having trouble finding work or maybe just being in the gig economy and not having a stable job day to day. But the result is more parents find themselves supporting their kids financially well beyond college. Yeah, I mean, I'm in this boat right now. My kids are still on the payroll.
They're now 11 and 8. So, you know, guys, it's time to move on. It's time to start living your own life at this point, I would say, but it sounds like their mom thinks they're going to still be on the payroll for several more years. I think you also have a similar problem at your house, Ben. Yeah, I'll be happy to at least get daycare off the payroll. We'll start there. I'm taking it one small step at a time, but it is, I mean, it's so true that the children are a wonderful thing, obviously, but it is an expensive job being a parent.
And I know you don't want that to linger longer than you have to, which is why this question today I think is interesting. I'm sure you come across this scenario quite a bit where you have parents that are trying to balance that decision of, well, it's hard for me to kind of push the kids aside or tell them, hey, time for you to pay for this yourself. But if I don't do that, my retirement may be in jeopardy. Well, so there are different levels of kids being on the payroll that we see. Sometimes it's just as simple as, well, you know, they're still on our car insurance or they're still on our cell phone plan because it's actually cheaper overall for them to just be on the family plan. If they went out and got their own plan, it would cost a lot more. And in a lot of cases, when parents do that, they're not actually having the kids refund them for their portion of the cell phone plan or the car insurance. They're just keeping them on there because they know it would be cheaper overall. Well, in those cases, you don't have to kick them off the plan necessarily and make them go get their own thing. But at least you could have them reimburse you for their portion of what it's costing to be on those policies.
So there are different ways to approach that. And then there are people who, you know, they're still supporting their kids well into their 30s with rent or just general living expenses or maybe the kids are still living at home, things like that. So there's a spectrum of where people can be in terms of how much they're supporting their kids later on in life. So you might be saying, well, wait a minute, retirement age and your kids are still on the payroll.
How is that even physically possible? Well, it just depends on the dynamics of your family. So if you're retiring at a younger than conventional retirement age, maybe your kids are a little younger and not that far out of school, or maybe you had kids later in life. And so even though you're at retirement age, they're just now finishing college or just recently finished in the last year or two. Or it could be a situation where maybe the kids didn't go to college right out of high school. They went and did something else for a couple of years and then decided they wanted to go to school. And now they're finishing school and they're at a much later age than normal in finishing college. And so they're just now getting out on their own.
So there are a lot of different ways that it can happen. Sometimes it's just pure enabling by mom and dad. And it's allowing the kids to take entirely too long to get life figured out. And if that's the case, you need to kind of have a conversation with yourself of, okay, how much am I helping them here? And how much am I actually hindering them by not kind of forcing them to go do their own thing? In other cases, it's just purely a matter of communication. Sometimes you just need to sit down and talk about the fact that, hey, we've been paying for this for you all this time.
You need to take it over. Well, in a lot of cases, the kids just don't know necessarily. Like I'll use that cell phone bill example. It could be that they just assume that it's costing you hardly anything to have them on your cell phone plan. And when you say, hey, you know, it's actually costing us $70 a month to keep carrying you on this plan. Now, you could go get your own plan and it would cost you 120 a month. So you can do that if you want, or you can just pay us back every month for the 70. Well, let's at least keep the lines of communication open.
And that way everybody knows what's going on. So when you get a question like this about how do you handle a situation where your kids are on the payroll and you're trying to figure out retirement, what's your role then, John, as an advisor? Is it to work with the client and make them feel as comfortable as possible, or do you have to have some tough conversations with them?
I won't necessarily say put your foot down, but say, hey, you have to decide this or this, because if not, then your financial future could be in jeopardy. Yeah. I mean, there have been a lot of times where I've had to help people get to the point of being comfortable having that tough conversation. And it's rarely going to be, hey, you know, John said, you're done.
So good luck. You're on your own. No, it's usually like, all right, let's think about it from mom and dad's end.
Let's think about your complicity in this whole situation. Why is your kid 31 and still relying on you for financial help? Let's do a little self-inspection of how did we get here from mom and dad's perspective. And then let's set some parameters of like, okay, by the end of this year, we need to have you weaned off of, let's say, the monthly help that we're giving you toward your rent, or the fact that we're picking up this particular bill for you.
Let's set a deadline and say, by the end of this time, the end of this month, the end of this year, you need to be at a certain point of financial stability yourself. And, you know, make it reasonable, make it long enough, far enough out in the future that they can reasonably get there. And if they don't get there, they don't get there, but that's on them.
That's not on you. At some point, they're gonna have to experience a little bit of pain in life. That's been one of the big problems, is that mom and dad often are trying to keep the kids from experiencing any pain, financially speaking. But the reality is like the pain is where you learn. That's where a lot of life lessons are learned, are in the pain.
And so sometimes, even though it's hard, you just have to sit back and let it happen. PAUL What about if you get some pushback and someone says, Well, I understand, John, you know, of picking up a cell phone and picking up maybe car insurance. That's really not gonna make that much of a difference towards my retirement. But how significant can it be? And how can that actually help you maybe catch up a little bit more when you want to get to retirement?
JOHN Yeah, well, again, there's a spectrum. For some people, we discovered that once they actually sat down and added up the expenses, they were paying close to $4,000 a month to help their kids out. And their kids were in their 30s.
They were like 31 and 36 at the time. And they were just continuing to enable, continuing to help their kids. And if they were just sitting around thinking about it, they would have said maybe $1,500 a month. But when we sat down and we looked at actual checks that are written to the kids, money transferred to them, bills that they cover for the kids, it was like $3,700 a month that they were into for their kids.
And then, you know, if there was a big event, like somebody needed new tires, they were helping out with that too. But that $3,600, $3,700 a month was just regular monthly support. And in a situation like that, yeah, it was greatly affecting how much they themselves were able to save for retirement.
It was also affecting how much income it appeared they needed to live their life, right? So, if we're trying to figure out how much income do you need in retirement, and we think you need $9,000 a month. Well, if 3,000 of that 900 or 3,000 of that 9,000 is simply just going to the kids, well, if we can eliminate that $3,000 expense, suddenly the income planning becomes a whole lot different.
Now, you only need $6,000 a month, much easier to achieve. So, a lot of it is, one, yes, getting them off the payroll so that you can save more for retirement. But a lot of it is just, we just need them off the payroll by the time you retire. We just need the expense to go away by the time you're no longer earning a paycheck. So, you have a nice built-in deadline there.
Right. Well, I know this is not always easy to do on your own, which is, again, where someone like John come in, he's a chartered retirement planning counselor, can help you out with this. Look at the numbers, help you get a better understanding and a clearer picture of where you're going and where maybe you want to get to and taking off some of these expenses, clearing off the payroll, so to speak, can help get you there. I know it's tough with children. You want to do what's best for them. But to your point, John, there is a lot of life lessons learned through the pain and we're always better off as kids as we grow up, mature, to learn these lessons as early as possible. So, some things to think about, but a great question. I know a situation a lot of people are in, so kind of good to break it down. Any final thoughts to wrap it up? No, I think that covers it. Just keep in mind, there is a range of how much help you might be giving the kids and some of it might be appropriate, some of it might be enabling, and it's worth a conversation to see where you fall on that spectrum and then decide what you need to do from there. Yeah, good point.
You might not necessarily be doing anything wrong, so to speak, but some adjustments you can make to put yourself in a better position financially. Any questions, go to rosewoodwealthmanagement.com. You can always also book a meeting with John at meetwithjohn.com. Very simple. John, thanks for your time. Always a pleasure. Carolina Wealth Stores doing business as Rosewood Wealth Management is a registered investment advisor in the state of North Carolina. The material presented is intended to be general information and should not be construed by any consumer as the rendering of personalized investment advice.
