It’s a metaphor that seems to resonate the best with her clients nearing retirement.

“Before you take off, the flight crew will advise you to put your oxygen mask on first in an emergency, before you help your kids,” says Arwen Martin, a Financial Consultant for Vancouver Island-based Coastal Community Credit Union. “That’s how we need to approach retirement planning—by making sure our needs, including those unanticipated ones, are taken care of first through thoughtful planning. And we should be doing this before helping our loved ones financially.”

She’s speaking from her experience of seeing more and more new retirees transferring their wealth to kids or grandkids outside of a will.  The would-be gifters often come into excess cash after downsizing their homes but are hesitant to put that money into low-paying guaranteed investments. “They paid high interest rates in the eighties to borrow this money, and now they don’t get to enjoy the other side of that,” says Martin. Putting their house proceeds into market-based investments also gives them pause, with today’s volatile stock market.

People in this scenario sometimes choose to gift their loved ones financially instead. While their heart might be in the right place, there are risks involved if they haven’t first thoroughly planned for their retirement. This includes taking a good look at things like inflation, living longer than anticipated or facing unexpected, and expensive, costs. Assisted care homes, private nurses and medical equipment can run into the tens of thousands.

Without a plan and supporting savings strategy, these expenditures easily transform into financial burdens. What can make it worse is if the loved ones you were hoping to help financially in the first place are the ones now shouldering the costs.

So what does Martin suggest you do? “Plan for a variety of retirement situations, and consider engaging the help of an expert when you do so. They’re skilled in applying a critical and objective eye to various situations and helping you plan accordingly.”  These conversations can lead to deep dives into other important topics like living wills, Powers of Attorney, and estate planning.

“When you can breathe easy knowing you’ll able to live sufficiently through retirement and its many scenarios, that’s when the joy of gifting your surplus can begin.”

Arwen Martyn, CFP
Financial Consultant, Coastal Community Credit Union
Investment Advisor, Credential Securities