Along the same lines, the goal of helping the kids out financially may end up costing the grandparents more. Depending on one’s age and health status, the amount a part-time grandma who is not eligible for Medicare pays in insurance premiums can easily be more than she is saving the kids. This won’t be the case for everyone, particularly married grandmothers with a working spouse, but it is an important point to consider. 

For example, a 61-year-old grandma will typically have a very different healthcare cost structure than one who is 64. Limiting out of pocket payments to one or two extra years may be much more tolerable than carrying those costs for three or four years (in combination with lower pay). 

A similar situation arises with Social Security. Claiming benefits at 62 so grandma can devote time to child care and, at the same time, bridge the loss of her income may work well in the early years, but comparing that 30 percent discount to full benefits at a later date can be a disconcerting number … unless that grandchild becomes a celebrity, fortune 500 CEO or professional athlete who can in return support you. 

At the risk of harping on the financial impact, keep in mind that grandmas with only a few years left to work are also at their peak earning years and likely saving more than ever before. For some, what they save in these final years may be just extra padding but, to others, it’s the crucial time to take less risk with their investments, maybe help finish paying off the house and at least keep pace with rising inflation. Again, it’s a tradeoff that needs to be considered.

Two more considerations stand out. First, the mobility of young people and careers today. It would not be uncommon for a new parent to finally get that dream job, requiring relocation. Initially, grandma may simply agree to follow, but experience teaches that mobile kids stay mobile and another transfer may follow. 

Obviously this may never happen … or be less of a problem if it’s a one-time transfer only an hour or two away … but it suggests the need to ask and clarify whether the soon-to-be new parents are seeking career advancements or a physical move. It could play a big part in a grandma’s decision.    

Secondly, for grandmas still married, the impact of these decisions can spill over into her own home. Will her desire to retire early mean her spouse will have to work longer than he planned? Will babysitting one or two days a week change plans they previously made as a couple … or worse yet, turn into a full-time job? If grandpa is already retired, will a newborn in the home, even a couple of days per week, challenge his plans and routine? Once again, it’s important to simply ask these questions and set clear expectations so that everyone is in agreement.

Overall, advisors need to arm themselves with tools, resources and strategies for clients facing this situation. It’s important to express to new grandmothers that like the stock market, making such a decision won’t guarantee things just go straight up. There will be bumps in the road, and just as advisors encourage clients to have family meetings and discussions to talk about wealth and long-term care, so too needs to be the case for those caring for a newborn grandchild. That makes it crucial for advisors to start such a decision with an open and honest conversation about these factors to ensure the best possible outcome is made. Happy Grandparent Planning!

Robert Laura is the president of SYNERGOS Financial Group, the founder of RetirementProject.org and the creator of the Retirement Wellness Report and DividendPaycheck.org. He can be reached at [email protected]

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