Retirement or Christmas? Putting Holiday Spending in Perspective
NOVEMBER 20, 2018 – COLORADO SPRINGS, COLORADO – The holidays are right around the corner, and while that involves the excitement and cheer of family get-togethers and festive parties galore, for many it also means the financial stress of buying presents for their children. “The majority of parents spend more than they intend to on their kids during the holiday season, so much so that some say they dipped into their retirement savings or emergency fund to be able to pay for everything,” say Laurent Carrier, a financial planner and owner of Carrier Financial Services LLC in Colorado Springs, Colorado.
Referencing a survey from a couple of years ago, titled “Parents, Kids & Money,” conducted by publicly owned investment firm T. Rowe Price, Carrier focuses on the annual spending that puts on average more than 60% of with 8-to-14 year-olds spending too much.
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Most managed to keep their spending within their current income and credit cards despite going over budget.
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However, 7% of parents tapped their retirement accounts to fund their holiday shopping sprees
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And, 9% relied on their emergency fund to pay for gifts.
Big Costs of Borrowing from 401ks
“It’s unclear what kinds of retirement accounts the 7% of participants were referring to,” says Laurent as the survey didn’t specifically ask. “Still, using the funds for holiday gift giving wouldn’t qualify for a hardship withdrawal under most 401(k) plans, and money removed from an IRA account would be subject to a 10% early withdrawal fee, along with taxes,” he cautions.
Why It Is Difficult but Important to Think Long Term
What becomes clear is that many consumers don’t consider their immediate financial decisions during the holidays in relation to their larger financial future. “People generally look at goals in isolation, so when they’re thinking about how much they’re going to spend on the holidays, they’re not necessarily making the connection between their holiday spending and its effect on things like retirement or college or even a vacation they’ll be able to take next summer,” says Laurent Carrier.
The survey also found that parents were saving for the holidays, even though 30% of those surveyed weren’t actively saving for retirement and 28% weren’t saving for their kids’ college education. Overall, more than one-third of parents said they saved over the course of the year specifically for the holidays.
“Very often, while we say we have one goal that’s more important than another, our money doesn’t always follow that feeling,” Carrier said. “It’s important to keep those other things in mind when people are making decisions.” That isn’t to say that parents can’t, or shouldn’t, spend on their kids during the holiday season. Rather, it’s recognizing the bigger picture and distributing funds accordingly, Carrier said.
Need a Plan? Make it Your Gift.
Make a list and check it twice is the mantra of Santa and almost all holiday shoppers.
The same advice works for retirement planning as well. Make a retirement plan and check it not twice, but quarterly. Give yourself a gift this holiday season — work on your retirement plan.
About Laurent Carrier and Carrier Financial Services LLC
Laurent Carrier is the owner and founder of Carrier Financial Services LLC. For over 40 years, his mission has been to provide honest, simple financial advice to his clients. As a well-respected community leader, Laurent has served on the board of the American Red Cross and is now on the Advisory Board with the Colorado College Summer Music Festival. He is enthusiastic about supporting non-profit educational organizations locally, nationally, and internationally.
For more information, contact Carrier Financial Services LLC, 919 North Weber Street, Colorado Springs, Colorado 80903. 719-249-4774 or visit online at www.carrierfinancial.com
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