Over the past few decades, the average age of American couples that both marry and have children has been climbing. A report from the NationalCenter for Health Statistics in 2006 shows that the number of women having babies between the ages of 40 and 44 has more than doubled since 1981. This trend shows no sign of reversal, and although much of the discussion about this issue focuses on the health of the mother and baby and the implications of raising a child at any older age, what is often neglected are the financial aspects of this decision. In fact, the financial and professional ramifications of having children in later years can be quite complex. In this article, we'll examine some of the factors driving this issue, along with common problems faced by couples who get a late start on family life. (To read more on the decision to have kids, see Kids Or Cash: The Modern Marriage Dilemma.)

Possible Causes
According to the Census Bureau, in 2006 just under 50% of households in America were married couples. The data also indicated that nearly one-third of women and one-quarter of men aged 30 to 34 have never married - a whopping 400% increase since 1970. There are several factors that account for this.

One of the main engines driving this trend is the amount of education that is necessary to make it financially in the world today. High school and college have been fairly standard for the middle and upper class since WWII, but graduate school is increasingly becoming a requirement in many fields. This can take several years, and some students don't finish school until their mid-20s or later. (Keep reading about classes in Losing The Middle Class.)

The Census report also revealed that nearly 60% of the aforementioned unmarried group have at least a bachelor's degree. An increasing number of students in their 30s and 40s are going back to school to get advanced degrees as well. Many couples also want to become established in their careers before having kids, and this can take several years in some cases.

Finally, many men and women just want to take some time to enjoy life on their own while they're young, using their freedom to travel or do other things. The role of medical technology cannot be ignored in this matter either; rising longevity and improved methods of birth control and delivery have also contributed substantially to the current marriage and birth demographics. (Keep reading on this subject in Marriage: For Richer Or Poorer? and Invest In Yourself With A College Education.)

Do Couples Who Wait Really Come Out Ahead?
Although many couples who opt to have kids in their late 20s or 30s do have an easier time financially than those who have them earlier, having kids at a later age can also present some problems that many couples do not anticipate. Kids that come later in life are often unplanned, and even if they are planned, they can be very professionally and financially disruptive for couples who have set lives and career plans.

Women in particular take the brunt of this issue, as having kids requires a reduction of income with a leave of maternity, on top of other emotional, physical and healthcare-related expenses/costs that come with having a baby. However, while men can avoid the physical and some of the emotional aspects of producing a child, they are not exempt from the financial stress. As a couple, costs are shared, and it is often up to the man to provide extra income and support, particularly if the woman chooses to leave the workforce for a long period of time.

The high cost of paying for childcare versus staying home must be carefully considered as well. Adequate daycare facilities can easily run anywhere from $300-$1,000 per month, depending upon various factors such as location and the level of service required. Of course, many employers provide childcare assistance as an employee benefit, but parents will need to run some careful numbers to see which option will land them the farthest ahead. (To read more about benefits, see Fighting The High Costs Of Healthcare.)

The responsibilities of parenthood will cause much more disruption for some than others, particularly those with jobs requiring a great deal of travel. In some cases, job-sharing arrangements are available for working parents, but for those who hold executive or management positions may not have this option. Furthermore, couples who depend on their dual incomes to make ends meet may be forced to make some major immediate changes in their lifestyle, such as selling the house they own and moving into a smaller one (at precisely the time that more space is needed). (If you're cutting an income, read Consider The Outcomes When Cutting An Income.)

Looming above all these issues is the dilemma of saving for a child's college expenses versus continuing to save for retirement. Although most financial planners do not recommend rerouting retirement savings into college funds, the dual cost of funding both must be shouldered one way or another. Compounding the problem is the fact that college and retirement may come at approximately the same time for parent and child, and with a young child in need of care, parents may be left with one income to fund both objectives. (For more on this, read Don't Forget The Kids: Save For Their Education and Retirement.)

Possible Solutions
Parents facing the dual funding dilemma generally have four options to choose from:

  1. Retiring at a later age
  2. Radically downscaling their lifestyles (the least popular, and often least doable, choice)
  3. Saving now for college in a 529 plan (For more on this, see Choosing The Right Type of 529 Plan.)
  4. Placing the entire cost of college on the child via student loans, scholarships or money saved through work
  5. Using some combination of the above choices (most popular)

The following example shows how choice No. 5 plays out for a typical couple in this situation.

Example - Having Kids Late, Making It Work
Ed Nelson, 42, and his wife Marie, 37, have a newborn on the way. Ed and Marie both work full time and are (or were) on track to retire at age 65. The unexpected arrival of their baby has altered this picture, and the Nelsons must now make some decisions about their future. Ed earns $60,000 a year at his job and Marie earns $45,000. They have just finished paying off all of their school debt and own a mid-sized house with a mortgage that can be paid for out of Ed\'s salary alone. They currently have no retirement savings but each has begun contributing the maximum possible amount to their company\'s retirement plans. They estimate that their child\'s college education will cost $50,000.
Marie decides to stay home with the baby for the next five years. After five years, she plans to begin working again on a part-time basis, earning perhaps $15,000 a year until the child is 14, at which time she\'ll return to full-time employment. Marie feels that she should be able to earn as much at that time as she has previously, but for now, the Nelsons will have to make some major adjustments in their current budget. Ed decides that they can afford for him to contribute 5% per year to his retirement plan, while Marie can use her future income to pay for daycare and contribute to a 529 plan. Assuming that their investments grow by an average of 10% per year, the Nelsons will have approximately $260,000 saved for retirement when Ed turns 65. Meanwhile, if Marie starts putting $100 a month into a 529 plan, there will be approximately $32,000 saved for college expenses by the time their child graduates from high school.
Of course, Marie can continue to work and pay for their child\'s college expenses while he or she is in school, but she may want to devote that money to saving for retirement at that point. Also, it will probably be a good experience for their child to earn some of his or her own tuition while in school. In all likelihood, both spouses will need to work full-time for another few years in order to have the kind of retirement that they desire. If Ed and Marie each work at their current salaries for five years past their original target date, then they could accumulate an additional $250,000 for their nest egg. (For more on this read, Managing Income During Retirement and Determining Your Post-Work Income.)

To be sure, the above example is going to put a strain on the Nelsons financially in some respects. As mentioned above, they will have to make some major changes in their spending, especially during the first five years of their new baby's life, when Marie is not working. Working for another five years until Ed is 70 years old may also put a serious dent in their retirement plans, but this type of compromise is unavoidable for those in this situation.

Couples who have kids later in life face can face many challenges, both professionally and financially. Careful planning and investing is usually required in order to help these families achieve their financial goals. Readers who are facing this issue should consult with their financial advisors for more information.

To keep reading on this subject, see Estate-Planning Must-Haves For Unmarried Couples and The Tax Benefits Of Having A Spouse.

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