It pays to negotiate, even with your own kids
Playing the Tooth Fairy and leaving kids a few bucks under their pillow is a fun family tradition. Fast-forward a few decades and a less joyous ritual can take hold: Those once-cute children now repeatedly ask you for money.
He warns parents under age 59 ½ to consider the source of funding before agreeing to a cash giveaway. As a former tax attorney, Bergman places a high value on maintaining tax-deferred savings into your golden years. Bergman recalls a neighbor in his 50s who sought advice when his son wanted $10,000 for his wife’s in vitro fertilization treatment. The neighbor intended to draw down an IRA from a former employer, but Bergman cautioned against that. Instead, the neighbor wound up taking out a loan on his 401 plan and arranged for his son to pay back the money over a five-year period.“Interest rates were really low and the son has been paying back the loan for three years now,” Bergman said.
Even if the costs outweigh the benefits—and clients will dig themselves into a deep hole that endangers their future lifestyle—many parents refuse to say no to their child. Advisers must tread lightly. “You have to be impartial, follow the facts and help the client visualize what could happen,” he said. “Rather than say, ‘Doing this will destroy your plan’ I’ll show them a chart of how it’ll affect their assets and ask, ‘What do you think?’”
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