How Much You Lose in Retirement Dollars by Helping Your Kids Buy a House
Written by
Daria Uhlig
Edited by
Angela Corry
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Homeownership is a significant rite of passage and wealth builder for younger adults. So much so that 74% of parents with kids at home say they’d consider or have already started planning to help their kids buy a home, according to Northwest Mutual’s Planning & Progress Study 2026.
That gesture can have a significant impact on your retirement dollars because you’re not just out the amount you give your kids — you also lose out on compounded returns and you might owe tax on your gift as well.
Lost Growth Can Cost More Than the Gift Itself
Compounding has an exponential effect on growth. The longer the gift money would’ve been invested, the higher the opportunity costs of helping your kids buy a home.
Say you want to give your child $25,000 you’d otherwise invest in one lump sum. Assuming a modest 6% return, here’s how much you’d stand to lose.
| Number of Years Invested | Lost Growth | Total Cost |
| 10 | $19,771 | $44,771 |
| 15 | $34,914 | $59,914 |
| 20 | $55,178 | $80,178 |
Withdrawing Gift Money From Investment Accounts Could Have Tax Consequences
You might have to pay taxes on gift funds you withdraw from investment accounts.
If you tap into a taxable brokerage account to sell assets you held for more than a year, you’ll pay capital gains tax if your taxable income is more than $48,350 ($64,750 for joint filers), according to the IRS. The capital gains tax rate is 15% for most people, but those whose incomes exceed certain thresholds pay more.
Assets held for one year or less are considered short-term investments. Gains on their sale are taxed at your ordinary tax rate.
You’ll also pay income tax on withdrawals from regular individual retirement accounts and 401(k)s — plus a 10% penalty if you’re younger than 59.5, per the IRS.
Large gifts might need to be reported to the IRS under gift tax rules. The exclusion for 2026 is $19,000, and the lifetime exclusion is $15 million, per the IRS.
The Surprising Cost of Gifting Spare Cash
A study by Veterans United, released on April 9, revealed that of the parents helping or planning to help their kids buy a home, 65% were using funds from checking and cash accounts. Costs associated with these gifts are less tangible but still important to consider.
Those funds can keep you out of debt if you have an emergency expense, for example, and protect you from having to sell investments at a loss during down markets.
Questions To Consider Before You Help Your Kids Buy a House
Before you offer assistance, ask yourself:
- Are they ready for homeownership?
- What strategies can I use to minimize taxes?
- What are the best accounts to draw from to minimize the impact on retirement savings?
- How else might I help besides making a direct cash gift?
A financial advisor can work through these questions with you and help you determine the long-term impact on your retirement income.
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