RA: Why do you think parents are willing to give to their
kids at the expense of their retirement?
Henderson: It certainly depends on the family. But I
think a lot of parents want to make sure their kids, particularly their daughters, have this dream wedding they’ve
always wanted. Unfortunately, there are examples of parents
pulling money from their retirement accounts or actually
stopping contributions to the accounts in order to pay for
the wedding. I think that’s a terrible idea.
Ultimately, you want to make sure you can take care of
RA: Have you seen someone run into trouble from
yourself and you’re not going to be a burden on your kids.
And people know spending a lot of money on a wedding is
not a good way to make sure your retirement is going to be
spending too much money?
Henderson: We know someone who had an $80,000
wedding — that’s just crazy for one day! We know the
daughter as a friend, but I don’t know exactly where the
money came from. I have to imagine it created some kind of
financial drain. If you take $80,000 out of any pot of money,
the potential of what it could have grown to is much larger
than the $80,000.
RA: Should clients be putting away
money in a savings account, or how should
they be preparing?
Henderson: It depends on the situ-
ation. A credit card is really a bad way
to pay for most any large expenditure.
I think a case can be made to use home
equity. I also think it’s a good idea to
use a cash value life insurance policy
because you can borrow that money
from the insurance company and they
put a lien against your policy. Usually,
it’s at a pretty competitive interest rate.
You can pay it back, and, with most
RA: How does the policy work in this
policies, you’re not going to lose a lot of
Henderson: Let’s say the client has
a $100,000 cash value in their policy,
and they want to borrow $25,000. They
borrow $25,000 from the insurance
company and put a lien against their
policy, depending on whether it’s whole
or universal life. Then, they can actually
pay that money back into the policy,
and they remove that lien or reduce it
as they go along. With a lot of polices,
you end up right back where you were
without losing growth.
Retirement Advisor: So how do you bring up the topic of a
wedding, what does that fall under when helping someone plan out
Dave Henderson: It’s in the general financial planning
realm. You have college costs, retirement costs and wedding
costs. When I first meet with clients, we discuss their income,
assets and when they want to retire. I’ll ask: “Do you have any
future assets that you expect or any inheritance? What about
future expected expenses?”
RA: Do you think parents, who don’t work with an advisor,
don’t think to save for a wedding?
Henderson: A lot of parents who I talk to already have
that thought in their mind. Some will say “I want to pay for
college so my child will come out of school debt free.” Others
say they want to pay for their child’s wedding as a good send
off. Others will say “I find my retirement more important so
I’ll contribute a little bit.” So I think it’s in the back of their
RA: Do you bring it up with all of your clients?
Henderson: It’s something I bring up, and I council my
clients to set the budget. It really removes a ton of stress.
“We gave our
daughter a budget
for her wedding —
she’s 28 and her
fiancé is 29. They
both have good jobs
and make good
money, so when
there were some
special things they
wanted that didn’t
fit in our budget,
they chose to