On the Money: How Your Kids Can Ruin Your Retirement

Inverted Yield Curve:

“I always like to ask what does the data actually suggest – let’s go look at time periods when the yield curve inverted. What happened after that block of time – was there actually a market decline in a high percentage of those cases? Dimensional Fund Advisors actually looked at this data – there were 14 different times yield curves had inverted in developed countries – not just the US. In 10 out of the 14 cases of yield curve inversion, the investors had positive returns over the next 36 months.”*

David Ruedi, CFP®, RICP®

How Your Kids Can Ruin Your Retirement:

“Nearly 80% of parents give some form of support to their adult children.”

Paul A. Ruedi

“As far as things that really stress people out, it is often a child going through a very tough time. The divorce example is perfect – we’ve had that pop up a few times where a child is going through a divorce and have children themselves. When couples split up and you have to pay rent at an apartment or two places to live, it can be a big burden on people.”

David Ruedi, CFP®, RICP®

“Tough love doesn’t always apply. It is difficult to be tough love during a divorce or if a child has a drug problem. Sometimes I’ll see it and my opinion is to talk a little tough love, but sometimes that just isn’t appropriate.”

Paul A. Ruedi

“Nearly 70% of people surveyed by T. Rowe price said they would delay retirement to pay for college. And if you look at the data for people 60 years or older and how much college debt they are still responsible for – that has gone up considerably over the years. So there are just more and more people doing more and more for their children and it’s tough”

Paul A. Ruedi

“It’s so hard as a parent – and I’m speaking from the early days of parenthood - there’s such a large grey area around how do you help and how do you be proactive in someone’s life without overstepping boundaries and causing the opposite, for example causing someone to be dependent on you or instilling bad habits at a young age. Maybe you wouldn’t have had to deal with certain things if you had let your child solve their problems on their own.”

Ryan Repko, CFP®

“Parent’s get pressure, not just from their children’s expectations, but also from their friends and family.”

Paul A. Ruedi

Caller Question: What are the tax consequences of an inherited Roth IRA

First of all – there’s not going to be any taxes when you inherit that money. Then when money comes out it is tax-free, just like any Roth IRA, the difference is you are forced to take money out of it. So when you have an inherited Roth IRA, every year you will have a required minimum distribution – a minimum amount you have to take out. You don’t have to spend it, you can move it to a different investment account, but it’s just a way for the government to keep people from growing their wealth tax-free for multiple generations.

David Ruedi, CFP®, RICP®

Caller Question: I hear insurance salespeople tout the benefits of buying a life insurance policy with the goal of leaving money to your heirs tax-free. What are the pros and cons? Are there other options?

If you look at the returns of a whole life policy, they tend to be pretty good fixed-income like returns. But that is still quite a bit lower than the expected return of a 100% stock portfolio. So if I’m earmarking money I’ll never touch for my heirs, I’m putting that in a 100% stock portfolio. For the same amount of money you invest, it is a very high likelihood you will end up leaving a lot more to your heirs.

David Ruedi, CFP®, RICP®

Disclaimer:

* Past performance is not an indicator of future results. You should not make any investment decisions without consulting your own financial advisor and conducting your own due diligence.