Support Your Adult Children Financially Without Risking Retirement

Supporting adult children financially and the impact on your retirement

At 58, you likely face decades of retirement to fund. That makes prioritizing your own financial security essential before making large gifts to adult children. Planning for a long, healthy retirement should be your baseline: ensure your retirement income needs are covered, and that you have an up‑to‑date will and estate plan that reflects your wishes.

In the next five to seven years you may encounter changes—positive or negative—such as job changes, market shifts, or health events. Because circumstances can change quickly, consider helping your children gradually rather than making a single large transfer. Gifting in tranches over time reduces the risk that you’ll deplete resources you need later.

That said, if your children are in their 20s or 30s and facing high housing costs or early-career challenges, smaller, purposeful support now can have outsized benefits for their long-term stability. The key is to strike a balance between meeting their needs and maintaining your retirement security.

The commuted value of a pension

If your defined benefit (DB) pension is with your current employer, you may not be able to take the commuted value—a lump-sum payout—until you leave employment. If the DB is from a former employer, some plans allow a commuted value to be paid earlier, subject to plan rules.

A commuted value can often be moved into a locked-in retirement account (LIRA). LIRAs, like pensions, restrict annual withdrawals to help ensure the funds last. Plan administrators will calculate how much of the commuted value can be transferred to a LIRA; any excess may be taxable. You may be able to move excess amounts into an RRSP to defer tax, but that requires available RRSP contribution room. Members of DB plans often have little or no RRSP room, and many already hold TFSA savings, so that can limit options.

Taking a commuted value while you are still working can produce a large taxable event. The lump sum is added to your income for the year and could push you into a much higher marginal tax bracket. Timing and tax planning matter.

Commuted values also vary with interest rates: generally, higher interest rates reduce the lump-sum value compared with lower-rate environments. That makes the decision partly a function of current market conditions, but the choice is ultimately personal and depends on your health, life expectancy, risk tolerance and goals.

For example, if you have a shorter life expectancy or wish to leave a larger estate, a lump sum invested and spent strategically may produce a higher combined retirement and estate value than monthly pension payments. Conversely, lifelong annuity payments remove longevity risk and provide stable income you cannot outlive.

Who should parents ask for advice when helping their kids with money?

Fee-only Certified Financial Planners (CFPs) are one option, but they are not the only competent professionals who can help. Investment advisors, planners employed by banks or wealth managers, and fee-based planners can all provide good advice. The important point is to choose an advisor whose compensation model and expertise align with your needs and whose interests do not conflict with yours.

Fee-only CFPs often focus more on comprehensive retirement and estate planning rather than on selling financial products, so they may provide thorough guidance on pension options, tax consequences and long-term retirement planning. That said, there is a cost to that advice, and it’s reasonable to weigh the expense against the potential benefit of a clearer plan.

If you consult the person who manages your investments about taking a lump-sum pension payout, be conscious of potential conflicts of interest—particularly if that advisor stands to gain from managing a larger pool of investable assets. It’s common for advisors to refer clients to fee-only planners for an independent opinion on major pension decisions.

My practical advice is to prioritize your own financial independence before committing significant assets to your children. Update your will, powers of attorney and beneficiary designations. Consider modest, structured gifts over time rather than one large transfer. Reassess your plans periodically as your health, markets and family circumstances evolve. A qualified planner—fee-only or otherwise—can help you model scenarios, estimate tax impacts and create a gifting strategy that preserves your retirement security.

Read more about financial gift giving:

• Financial gifts: what you need to know before giving money or investments
• Gifting real estate to your adult children
• Alternatives to RESPs for gifting to grandchildren
• Can you gift cash or property to your children tax-free?