9 Ways To Pay for a Child’s Wedding That Don’t Tap Your Retirement
Written by
Jordan Rosenfeld
Edited by
Susan Kim
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A child’s wedding is an exciting life event, but it’s also often an expensive one. Some parents opt to give their children the gift of paying for their wedding so that their children don’t have to start their new life saddled with debt.
Even though parents may be willing to pay for this momentous day, it doesn’t mean finding the funds for it is easy. While you may be tempted to draw from your retirement account to do so, that’s not typically a financially sound thing to do.
Instead, financial experts explain how to pay for a child’s wedding while leaving your retirement safely untouched.
Start Saving Early
As with a college fund, consider saving for your child’s wedding early by setting up a separate savings account specifically for this purpose, said Taylor Kovar, CFP, founder and CEO at 11 Financial.
“Contribute regularly to this account over time, gradually building up the funds needed for the wedding expenses.”
Create a Detailed Budget
Don’t let your child try to wing their wedding costs. Insist on creating a detailed budget outlining the anticipated costs of the wedding, including venue rental, catering, attire and other essentials, Kovar said.
“Prioritize spending based on what matters most to you and your child, allocating funds accordingly to avoid overspending,” he added.
Consider Delaying the Wedding Date
If funding the wedding without tapping into retirement funds proves challenging, Kovar said, you can “consider delaying the wedding date to allow for more time to save.”
“Discuss with your child the possibility of scaling back on certain aspects of the wedding to reduce costs without sacrificing the overall experience,” he added.
Alternative Funding Sources
Other funding sources could include personal loans, gifts from family members and contributions from the couple getting married, Kovar said. “Encourage your child to explore cost-saving measures, like DIY decorations, opting for a smaller guest list or choosing a less expensive venue.”
Look for Assets To Liquidate
Another strategy involves reviewing your investment portfolio for assets that may have appreciated significantly and could be liquidated without impacting your long-term financial goals, according to Philip Wentworth Jr., co-founder and CEO of Rockerbox Tax Solutions.
“For instance, selling off a small portion of stock in a bull market can provide the necessary funds without the need to withdraw from retirement accounts. Each of these strategies is tailored to the individual’s financial situation to ensure their long-term financial health remains the priority while still making it possible to contribute meaningfully to their child’s wedding,” Wentworth said.
Cash-Back Rewards
Another option Wentworth has explored with clients is taking advantage of cash-back rewards from credit cards. “When used wisely,” he said, “[it] can add up to a significant amount specifically earmarked for the event.”
Repurpose a 529 Plan
John F. Pace, CPA, partner with Pace & Associates, CPAs, recommended exploring educational savings accounts, like a 529 plan. “Thanks to recent tax law changes, families can now withdraw funds for other significant life events under certain conditions. While traditionally used for educational purposes, if the plan’s stipulations allow, it could be a creative way to fund a wedding without tapping into your retirement or savings directly.”
You do need to be very careful to confirm whether your plan’s funds can be used this way or whether you will incur penalties to use it for noneducational purposes. But if that money hasn’t been used for college, it could potentially go toward a wedding.
“This requires careful planning and an understanding of the tax implications to ensure it aligns with your financial strategy,” Pace added.
Family Gifts
Pace said it’s also a good idea to see if any other family members want to help share the cost of a wedding.
“[C]oordinating contributions can alleviate the financial burden from any single person, especially the parents,” Pace said. “This strategy not only fosters family unity but also allows for a collective approach to funding the event without endangering anyone’s retirement savings.”
Each family member’s contribution, whether in the form of direct gifts within the annual exclusion limit or through strategic use of family trusts, can significantly reduce the immediate financial impact, he explained.
Repurpose an HSA Account
An often-overlooked option that can be strategically used for significant family expenditures, including a child’s wedding, is a health savings account, or HSA, according to Garrett Smith, a financial advisor and chief commercial officer at Ascend Investment Partners.
“For individuals with high-deductible health plans, HSAs offer a triple tax advantage: contributions are tax-deductible, the account’s growth is tax-free and withdrawals for qualified medical expenses are also tax-free. However, the flexibility of HSAs extends beyond healthcare.”
After the age of 65, funds from the HSA can be withdrawn for any purpose without penalty, he explained, though they are subject to income tax if not used for medical expenses.
“This opens up the possibility of using the HSA as a long-term savings tool. By maximizing contributions and investing them in a diversified portfolio within the HSA, these funds can significantly grow over decades,” Smith said.
However, be warned that this strategy requires thoughtful planning and consideration of healthcare costs and retirement planning to ensure that the HSA can effectively serve a dual purpose.
One or more of these strategies might help you pull off an incredible wedding for your child without putting your own retirement in jeopardy.
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