Helping Younger Generations Plan for Retirement

Helping the Next Generation Plan for Retirement

Every generation hopes for a better future for their children and grandchildren. Yet, today’s young adults face financial headwinds that were unimaginable to their predecessors. Graduating with staggering student loan debt, facing a competitive job market with stagnant wages, and with no guarantee of pensions or robust Social Security, their ability to save for retirement is in jeopardy. This creates a new and vital role for parents and grandparents: the opportunity to provide a foundational gift that can secure the next generation’s financial future.

The New Retirement Reality for Young Adults

For many young people, their financial life begins not at zero, but from a significant deficit. Student loan balances can be the equivalent of a mortgage, making it incredibly difficult to save for a down payment on a home, let alone for retirement. This is a stark contrast to previous generations who were often able to build wealth from the start of their careers. The result is a generation that may never be able to afford to retire without a significant change in strategy.

How You Can Make a Generational Impact

While many families consider helping with educational costs, a more powerful and lasting gift may be to help a child or grandchild start saving for retirement. The earlier they start, the more profound the impact of compound growth. However, many parents find themselves in the “sandwich generation,” financially squeezed between raising their own children and supporting their aging parents. This often places grandparents in a unique position to provide this forward-thinking support.

Here are two powerful strategies to consider:

Strategy 1: Supercharge Their Roth IRA

The best time for a young person to contribute to a Roth IRA is at the beginning of their career when their income—and tax bracket—is low. Unfortunately, this is also when they can least afford it. You can bridge this gap. Once a child or grandchild has earned income, you can offer to gift them money specifically so they can make their annual contribution (up to $7,000 for 2025). This allows them to build a tax-free nest egg that can grow for decades, a gift that is exponentially more powerful than if they waited until they were more financially stable.

Strategy 2: A Foundation for a Lifetime

For a very young grandchild, another strategy is to purchase a whole life insurance policy that is specifically designed for cash-value accumulation, not just a death benefit. When structured properly, most of the premium goes toward the investment, creating a tax-sheltered asset that grows over time. This can become a source of funds they can borrow against tax-free in retirement, while still providing a death benefit for the next generation.

This forward-thinking generosity is a key part of creating a multi-generational legacy. Call our office at (919) 256-7000 to schedule a consultation.