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My friend is quickly approaching her retirement. She has worked hard her entire life, has a wonderful husband and two adult sons. She has lived her life in a responsible, middle-class way; she's not a spendthrift. Neither she nor her husband has a pension, beyond the minimum government pensions. They were not very concerned about their golden year: Everything was in place for a comfortable retirement.

One of her sons recently started his own business. My friend and her husband, being loving, supportive parents, agreed to lend a very substantial amount of money to the project. They have faith in their son, and want to give him the support he needs to be successful.

So, what would you do? As the parent, would you risk more capital to sustain the business to give it more time to develop? Or, could you tell your son the business is not worthy of investing more retirement money?

Seldom are there do-overs in life. As we approach our retirements, there are fewer opportunities to make up for mistakes. We need to take fewer risks. As a parent supporting a family member, how can you cut them off, especially when you're the key investor in the business and in their life?

But further capital infusions will certainly cause financial distress for my friend. If the business fails, my friend and her husband will live their retirements in poverty. It will completely change the retirement they planned and prepared for.

Clearly, hindsight says she shouldn't have invested in the business in the first place; the risk was far too great for her age. In her decision tree, it was more important for her to support her son's dream than to secure her retirement.

It has been a hard lesson learned. It's late in life to learn a lesson about risk and priorities. What surprises me more than anything: Why was this decision such a departure from her conservative, responsible lifestyle and financial decision-making? Do emotions blind us to making prudent decisions that much? Is there such a thing as sober, rational, logical, decision-making when it comes to your family?

Obviously, it's difficult or I, myself, would not be struggling with the problem. I've seen people perform crazy, spectacular, life-threatening feats of bravery when it comes to family, like throwing themselves into burning buildings to save loved ones. Perhaps this is no different. Perhaps she would rather go down with her son, than live comfortably while her son struggles.

As humans we are blessed to be the most logical of the earthen species. Unfortunately, we are burdened by emotions that seem to counter our logic, because we still seem to put ourselves into situations that define our failures. It's that gut feeling that we use as our reason for doing things -- where we throw all the logic out the window and take chances with our lives, or in this case, our money.

JOANNA MAKOMASKI is an internationally recognized enterprise risk management executive with experience in energy, health care, and most recently in the sporting event sectors. She can be reached at riskletters@lrp.com.

November 1, 2012

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