Dear Quentin,
Despite the ups and downs of life, as brilliantly described by Jonathan Clements, I was able to retire at 58 in 2018. My wife, who is 10 years younger, will follow me in 2024. Throughout our working years and my retirement, we have financially helped our children, who are in their mid- to late 30s. I have two daughters from my previous marriage, while my wife has a son. We try to instill fiscal responsibility but find that difficult to attain, particularly with my daughters.
Unfortunately, a recent schism occurred with my youngest daughter, who is mired in a nasty divorce. She is a stay-at-home mom raising my 2-year-old grandson. She and her husband have no savings, however; they have about $200,000 equity in their home. Initially, she asked for $5,000 to retain a New Jersey divorce attorney; her mom, my ex-wife, and I agreed to split the cost.
The schism occurred when she asked for more money to pay her attorney. I refused because the divorce has dragged out too long, and I feel like her attorney is running up the tab. She lashed with several humiliating and disrespectful texts, insinuating that I am not a loving and caring father. Moreover, her mother took her side in this quarrel. Her mother spent $36,000 renovating her home in New Jersey so my daughter and her son could move in with her after the divorce.
“‘Her mother spent $36,000 renovating her home in New Jersey so my daughter and her son could move in with her after the divorce.’”
As kind of financial therapy, I decided to run the numbers with my Quicken and found that excluding child support, I have provided over $166,000 in financial assistance to my daughters since they graduated from high school, with my youngest daughter receiving the most money ($94,000) because she decided to attend a private university in Manhattan.
Beyond college assistance, I gave money for moves, healthcare, auto breakdowns, etc. In other words, I was their emergency fund. Moreover, I decided to fund my daughters’ annual IRA with their understanding that I will need to stop if there is a significant market downturn, which I did last year and this year due to the recent bear market.
“‘I lost half my net worth due to my divorce. I dusted myself off, worked hard, saved and recovered nicely.’”
I retired as a healthcare administrator. Despite a former financial adviser who placed a good percentage of my investments in tech stocks in 2000, I lost half my net worth due to my divorce. I dusted myself off, worked hard, saved and recovered nicely. I do not have a pension; thus, I live off my investments. My wife’s public-school salary is not enough to pay for the lifestyle we have become accustomed to since my working days.
I am mindful of “sequence-of-return risk,” where the timing of my withdrawals could adversely affect my retirement income. So I use the “bucket strategy” — dividing my retirement strategy into short-, medium- and long-term needs — to help minimize that risk, although the bond portfolio bucket has taken a beating.
We presently have $2.8 million in financial assets with $2.5 million in retirement accounts. We draw $75,000 to $90,000 annually to support our lifestyle. We have no debt. Our condo is valued at $700,000. Am I right to refuse to continue to financially support my daughter’s divorce? I truly believe she should have learned to stand on her own feet by now.
Sad Dad
Dear Sad Dad,
You paid for her wedding, I presume, and now you are expected to pay for her divorce. There is a fine line between facilitator and enabler, and your instincts are telling you that you have reached that line. The logical response to an endless supply of funds is that more funds will be forthcoming. You have played a part in creating this expectation.
When you cut off the supply, your daughter will react — positively, neutrally or negatively. She could have responded in one of three ways: 1) ask you why, and thank you for all of your help in the past; 2) ask you to help her one last time, even though it may not be the last time; or 3) let loose about how the money is a representation of how much you care for her.
Ordinarily, I would say being cajoled into giving a child money — or anyone money — is a no-no, especially if they resort to name-calling or reducing the relationship to a transaction. While I disagree with her response, this is what your daughter has learned: She needs money, and you will give it to her because a) you are her father and b) your love is expressed in financial support, among other ways.
“Divorce takes a toll on a person’s mental health as well as their bank balance, so give your daughter a pass this time. But make sure it’s the last time.”
Divorce is a financially and emotionally devastating experience, and your daughter — for better or worse — is at her most vulnerable emotionally and financially. She needs to see it through, pay her attorney and, hopefully, get the best deal she can with the help of this divorce attorney. Pay for the divorce, and ask her to never send you texts like that again.
Be clear that this is the last time. Tell the truth. It gives you pleasure to help your children in life, but there comes a point where that help is becoming an emergency fund. Instead, she needs to learn how to budget and plan for unforeseen events. She may or may not be grateful, but this needs to be a milestone conversation that you can refer to for future requests.
The average cost of divorce in the U.S. hovers at $7,500, but the median is closer to $12,500. Attorney fees can range from $100 an hour to $400-plus an hour. It’s an exhausting and nasty business. While I feel your daughter has become too reliant on your financial support, given your healthy net worth, this is probably not the time to pull the plug.
“When you have all your own ducks in a row, you may consider taking out tax-advantaged 529 college-savings plans for your grandchildren. ”
Divorce takes a toll on a person’s mental health as well as their bank balance, so give her a pass this time. Assuming you are now in your early to mid-60s, you will have enough to see you through retirement, although you should talk to a financial adviser about ways you could cut down on expenses, and whether withdrawals of $90,000 a year are feasible over the long term.
You should have your own emergency fund, long-term-care insurance (taken out long before now, I hope, as the premiums increase over time), a durable power of attorney, a will and a healthcare advance directive. When you have all your own ducks in a row, you may consider taking out tax-advantaged 529 college-savings plans for your grandchildren.
There are many ways you can help your daughter without being an ATM every time she runs into trouble. Living with your ex-wife will help. As a post-divorce gift, you could pay for her to meet with a financial planner. Could she find a part-time job, if she is not working? It’s time for her to build her own emergency fund. Ultimately, she needs to embrace her newfound independence.
If she gets wind of your retirement fund, there will be no end to her requests.
The Moneyist: “Divorce takes a toll on a person’s mental health as well as their bank balance, so give her a pass this time.”
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