The Biggest Threat to Your Retirement: Your Kids?

By Markets Fool.com

Times are tough for young adults. Almost 45% of 25-year-olds have student loan burdens, and over half of newly minted college graduates are either unemployed or underemployed.

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The problem isn't just theirs, though. It's increasingly falling on parents, too. One in five people in their twenties and early thirties live at home, and 60% of young adults get financial support from their parents.

And if you're not careful, your willingness to help your children could end up costing you both.

Student loans -- a parental problem
The economy facing young adults these days is complicated, and "success," whatever that means, is often hard-won. Unfortunately, education is also often financed, adding strain to the already volatile post-college period. The average student loan burden is over $20,000 -- and even if you argue that this number is skewed by those few with very high debt burdens, it doesn't change the fact that debt in any form is extremely common for young people, and that this can add financial strain when jobs are hard to come by.

As a parent, then, you've probably looked at all this and thought, "How can I help?"

Maybe you've thought about taking on those loans yourself, or even skimming from your retirement savings to fund college tuition.

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The temptation is obvious and totally understandable: you obviously want to give the most that you can to your children.

Unfortunately, it can also be a terrible idea.

The costs facing generous parents
As debilitating as debt is to young people, the threat is far greater if you're a parent nearing retirement age. Think about it this way: a 25-year-old has about 40 years to go before the typical retirement age. That's 40 years with the ability to work, pay off debts, and save money.

If you're 45, on the other hand, you only have 20 years. If you're 55, you're looking at 10. Maybe you're planning to work in retirement, but even if this is the case -- do you really want several thousand dollars of student loans hanging over you? What if you get sick?

In other words, your child's debt burden might make it harder for him or her to realize a dream, but taking the burden on yourself could make it harder for you to realize a decent standard of living. Those are two very different things.

What to do about it
When it comes to student loans, you will likely be best served by avoiding them at all costs. If there's any way you can fund your child's education in another way, find it. It will take effort, creativity, and perhaps some sacrifice, but the result will be a wide-open set of options for young adulthood that doesn't involve scrambling to come up with payments.

Of course, if you have extra capital that you can afford to spend, that's one thing, but if the choice is between the loans and your retirement account, your focus should likely be the retirement account. It might sound selfish right now, but it isn't: it's no good for you to you finance your child's education now if the result is that your child has to support you in your elderly years -- or scramble to finance costly expenses like long-term care.

Rather, help your child make good choices about debt. Sit down and calculate the tangible monthly cost of debt, and discuss the possible strain this will put on his or her finances. Find ways to reduce or eliminate his or her future debt burden, whether through reducing discretionary costs, coming up with supplemental income sources, or attending a cheaper school.

In other words, teach sacrifice. It's hard, because it's the last thing you want for your child, but it will help lead both of you to a more secure future.

The article The Biggest Threat to Your Retirement: Your Kids? originally appeared on Fool.com.

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