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Signs that you can't afford to spoil your grandkids include: going through your retirement savings too quickly, having a negative cashflow, or even struggling to pay the bills.
For many retirees, it can be tough - emotionally and financially - to balance your own retirement income with the desire to give to and support your grandchildren financially. But jeopardizing your own retirement to give to your grandchildren isn't worth it.
There are a few things retirees will notice if they're spending too liberally on their grandkids. From having a negative cashflow to not being able to pay the bills, a financial planner says that there are several signs that you're spending too much on your grandkids in retirement.
You're burning through your retirement faster than anticipated
One major sign that you're spending too much on your grandkids is that you're draining your retirement account.
Financial planner John Pak of Otium Advisory Group in Los Angeles says that this is a sure sign that you can't afford your current gift budget.
"The number one concern that retirees have is, 'Am I going to outlive my money, or is my money going to outlive me?' Most prefer the latter," he says.
And you're dipping into other accounts to stay afloat
Even if you have a few different accounts, remember that they won't be replenishing on a regular basis. "I'm always looking for signs of drainage a little too fast," says Pak.
Retirement spending is about making your savings last for as long as possible, and spending too much will put that goal out of reach.
You'll need to keep enough cash on hand to be able to keep up with surprise expenses in retirement, and keep enough to cover your monthly expenses and more for years to come.
You're living above your means to spoil them
Living above your means can happen in many different ways, but you might notice yourself spending more than you used to, or even taking on debt. If you're spending or giving too much to your grandkids, this could start happening.
If you're spending more than your retirement income allows, you might want to reconsider your gifting habits, and even your personal spending.
You've got a negative cashflow
If you're spending more than is coming in each month, there's going to be a problem. And when working with retirees, Pak says this is particularly alarming. "Anytime that the income level starts to drop because you're giving away too much money, that's when the red light goes on," says Pak.
You're taking on debt
Debt, especially credit card debt, can be hard on retirees. If you start taking on debt in retirement as a grandparent, it might be a sign that you're spending too much on your grandkids.
Keeping your expenses down in retirement is an important part of making your money last. "If you're living on a fixed income, we want to make sure that you maintain that," says Pak.
You're having a tough time paying the bills
While it might sound obvious, consider the fact that living paycheck to paycheck will be even more difficult in retirement. "You have to satisfy your fixed obligations," says Pak.
There are also some expenses that you probably didn't think much about when you were working, including Medicare and supplemental insurance. While you're planning for retirement, it can be helpful to factor these things in.
You're seeing gift-giving quantitatively instead of qualitatively
If you're simply trying to give them as much now as you can, it probably won't be as helpful in the long run. Instead, it's probably better to think qualitatively, and give what will improve their lives.
"Instead of giving gifts, you might want to just hold onto your assets," says Pak.
"It's not always black and white," he says, since everyone's financial situation is different. While there's no magic number for the amount you should give, the fact that you'll still need funds to live on is the same for everyone.
