Darryl and his wife, Jane, are financially very fortunate. They are successful by many measures — they excel in their careers, raised three kids who are now adults and have enough saved to plan for an early retirement with plans to travel around the world. Darryl is even beginning to realize some of his lifelong dreams: The custom motorcycle he has coveted for decades is on order, and his business plan for a Cheers-style establishment — which he and Jane plan to run well into their retirement — is well underway.
One day, a call from Child Protective Services made it necessary for Darryl and Jane to adjust course. They found themselves taking in their four grandchildren, assuming the roles that their son and daughter-in-law could no longer fulfill. Darryl and Jane didn’t anticipate raising grandkids, nor did they know how to navigate this unexpected situation.
While the names above are pseudonyms, this scenario is real — and becoming more common among grandparents. To complicate matters further, almost half of them are still working to support their grandchildren, and over 400,000 custodial grandparents in the labor force are 60 years old and over.
If you’re one of them, or considering taking on the responsibility of raising your grandkids, your financial roadmap may need an overhaul — especially if you want to keep your retirement plans on track. Here are a few financial considerations to help prepare for this new phase of late-life parenthood.
1. Figure out a long-term financial plan
The annual cost of raising a child is about $17,000 each year, according to the Brookings Institution. In Darryl’s case, that’s about $68,000 per year that can no longer go toward savings, businesses or vacations abroad.
It’s important to make sure you can shoulder those costs and still fund your retirement. Start by using financial planning tools to analyze your progress toward reaching your retirement goals. Imagine the hypotheticals you might bring up with financial professional: For example, “If I were to take a luxurious trip around the world, could I still retire by 65?” But this time, ask yourself that same question, replacing the concept of taking a trip with supporting your grandkids.
Make sure to leave breathing room in your budget for additional, unforeseen expenses. For example, you might pay more than the average grandparent if your grandchildren are involved in several extracurricular activities. Expenses like doctors’ visits, increased food costs, new clothes and enrollment in athletic teams can add up — and they often aren’t something you can cut from your budget indiscriminately.
If you can’t make it happen, you may have to defer your retirement date. Find out how far you’ll have to push back retirement and adjust your plans accordingly. Consider working with a financial adviser who takes a holistic approach to financial planning. They should take the time to understand your needs beyond your finances, asking questions about your life and what matters most to you and your family.
2. Decide whether to pursue guardianship or adoption
After taking responsibility for your grandkids, consult an attorney to determine whether becoming their legal guardian or adopting them is the best approach for you, your grandchildren and their parents.
If their parents are permanently unavailable, adoption may be a better fit. It will grant you the authority to make critical decisions on your grandkids’ behalf at schools, hospitals and extracurricular organizations. Adoption isn’t inexpensive, however. The cost of an independent adoption (i.e., without agency involvement) varies widely between states and can run between $25,000 and $45,000 — but with parental consent, that figure could be significantly lower. Grandparents should be prepared to cover legal fees and take advantage of federal tax credits for qualified adoption expenses.
On the other hand, if the parents are temporarily incapacitated (e.g., incarceration or drug rehabilitation), guardianship may be a better — and less expensive — approach. Leaving the door open for the parents’ return may be psychologically and emotionally beneficial for all parties involved. And the cost of securing guardianship of a minor is much lower than adoption. Various attorneys have cited a range of $1,500 to $3,500 for legal fees and up to $10,00 for court fees. If you decide to file for guardianship, check with an attorney to see if child support payments are available from the parents.
3. Shift to a parental mindset
Darryl and Jane, like many grandparents, love to spoil their grandchildren, whether it’s buying them their favorite shirt in every color or the latest must-have toys. When they took on the role of raising their grandchildren, this aspect of their relationship quickly changed. They now find themselves saying “no” more than yes.
Though they have the financial resources to buy what their grandkids want, Darryl and Jane now acknowledge that the price of always purchasing their grandkids what they want can add up quickly. As a result, they have slowed their spending to accommodate their new priorities.
For other grandparents raising their grandchildren, the takeaway here is simple: A shift in mindset is crucial to maintaining your retirement savings and realizing your other financial goals.
4. Explore financial resources
Be sure to evaluate the estate of your grandchildren’s parents. If they had catastrophic coverage, life insurance or another form of insurance that pertains to their current situation, that could go a long way toward covering child-rearing expenses.
Another resource to consider is the lifetime gift exemption. You can use this exemption to grant your grandkids money or assets without paying the federal gift tax, instead of leaving those gifts to your estate plan.
5. When in doubt, ask for help
Ultimately, you shouldn’t be afraid to seek financial assistance and guidance from relatives, organizations and government institutions. There is more support available than you may think, and people will go above and beyond your expectations.
You can begin by reaching out to the state organization responsible for child welfare in your community. Try checking your local church or community gathering place for support groups with people just like you. States’ workforce commissions offer job or skill development opportunities that you can use to pursue a career with a higher income.
In addition, check your employer’s benefits for resources that can help ease the cost of raising your grandchildren. There may be benefits covering adoption and childcare support, as well as other family resources.
Finally, if your grandkids are close to graduating from high school, there are specific grants and scholarships aimed at funding their college education that you should also consider looking into.
This isn’t a setback — it’s life
There is no shame in taking on the role of parent in your golden years. Keeping these financial considerations in mind and shifting your spending can help keep your retirement savings and your dreams on track, while providing a nourishing atmosphere for your grandkids. Take it from Darryl and Jane’s experience — their grandchildren are flourishing.
This article has been obtained and is provided as a courtesy by Stephen B. Dunbar III, JD, CLU, Executive Vice President of the Georgia Alabama Gulf Coast Branch of Equitable Advisors, LLC. Equitable Advisors and its associates and affiliates do not provide legal or tax advice and make no representation as to the accuracy or completeness of this information, nor do they endorse, approve or make any representations as to the accuracy, completeness or appropriateness of any part of any content linked to from this article. You should consult your own legal and tax advisors regarding your particular circumstance.
Stephen Dunbar offers securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC (Equitable Financial Advisors in MI & TN), offers investment advisory products and services through Equitable Advisors, LLC, an SEC-registered investment advisor, and offers annuity and insurance products through Equitable Network, LLC. GE-5884319.1(08/23)(exp.08/25)
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Stephen Dunbar, Executive VP of Equitable, has built a thriving financial services practice where he empowers others to make informed decisions and take charge of their future. He and his team advise on over $3B in AUM and $1.5B in protection coverage. As a National Director of DEI for Equitable, Stephen acts as a change agent for the organization, creating a culture of diversity and inclusion. He earned a bachelor's in Finance from Rutgers and a J.D. from Stanford.
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