The question people planning their retirement keep asking: How much of my savings can I afford to give my kids?

There is literally no end to the financial cost of parenting.
It starts with gear for newborns and daycare bills and goes on. And on.
In a recent report from Fidelity Investments, 59 per cent of retirees surveyed said they were helping adult children financially. One-quarter helped with day-to-day finances, and one in five helped with big purchases like a car or weddings. Sixteen per cent helped with money to buy a home.
Welcome to retirement in the 2020s, where one of the biggest planning questions is whether you can carve out some of your retirement savings for your kids.
Lance Howard, a certified financial planner in London, Ont., said conversations with parents prior to 2019 used to be about helping out their adult kids with a gift of $10,000 or $15,000. Today, his clients are looking at much larger amounts, particularly to help with a home down payment.
“Parents are now saying, we’ve done okay and we want to give our child $50,000 or $100,000 – what does that look like?” Mr. Howard said.
Sometimes, the numbers don’t look ideal. Mr. Howard recounted a conversation with a single parent who wanted to give a child money for a home down payment. This client was living off retirement income. Removing a chunk of capital from her savings would mean less income each year.
“The decision she needs to make as a mother is, am I prepared to sacrifice some of my income so that my child can get into a house?” Mr. Howard said.
Statistics Canada has estimated that the cost of parenting a child from birth to age 17 is more than $350,000, with an additional 29 per cent tacked on for parents who support their kids to through postsecondary studies to age 22.
High living costs are influencing more young people to not have kids – we looked at this phenomenon in a Season Seven episode of the Globe and Mail’s Stress Test personal finance podcast for Gen Z and millennials. In Season Nine, launching June 5, we dig into exactly what the costs of starting a family are these days, and how they conflict with financial priorities like home ownership.
What makes early parenting costs somewhat bearable is that you dole out the money every month, and you get used to it. The parenting costs of later in life often come in block amounts – as much as tens or even hundreds of thousands of dollars. No longer are many parents fine with letting their kids inherit what’s left of their estate after death.
Mr. Howard said his affluent clients tap their tax-free savings accounts or non-registered investments to help their adult kids. Withdrawing money from a registered retirement income fund is less preferable because of the comparatively high tax hit. With a non-registered account, there’s a preferential tax treatment of dividends and capital gains.
Like all planners, Mr. Howard has software that allows him to project the maximum lump-sum, after-tax withdrawal from retirement savings that could be made in a future year. The software then shows the optimum account from which to withdraw the money, and the impact on the client’s finances.
I asked planners and advisers on LinkedIn how often their retired clients ask how much money they can afford to give their adult kids for a home down payment or other purposes. Sample responses: “More common than ever before,” “This is a very common discussion,” “It certainly comes up in our meetings” and “Common enough that the discussion has expanded to grandchildren.”
It’s long been standard operating procedure for parents to financially help kids as they transition into adulthood, but the continuation of this trend into retirement may not be fully understood by boomers and Gen Xers who are still in the work force.
In the Fidelity report, 42 per cent of those planning their retirement who have non-student adult children expected to provide financial help to these kids in retirement. Should it now be standard practice for planners and advisers to look at how clients in retirement can financially help adult kids?
Mr. Howard said a retirement plan doesn’t necessarily have to carve out money for adult kids. “But I think a planner needs to discuss the possibility.”
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