Could your boomerang kid sink your retirement?
“…the monetary gains are real for the adult children [who move back in with their parents], but the monetary hits to the parents involved are also real—especially when it comes to retirement savings. Since new data from Pew Research Center reveals that 15% of adults ages 25 to 35 now live at home (compared to 12% in 2010), the toll this takes on parents is increasingly worthy of discussion.”
—The biggest threat to your retirement might be your kids, Apartment Therapy
There’s been a lot of talk about rising numbers of young Americans living with their parents well into adulthood. Getting a financial lift by moving back home with Mom and Dad makes sense—a fact I’ve written about in the past. It can be hard to get a foothold in today’s economy, so saving on rent while getting established in the job market can provide a powerful leg up for millennials and Gen Zers.
There’s been less talk about the impact of this lifestyle shift on the other party involved—the parents.
For every recent grad getting a financial boost by crashing with the ’rents, it’s important to remember that there are (often) two parents who may be suffering a blow to their retirement savings plan.
What makes this financial hit harder to take, as Elizabeth Seward’s article in Apartment Therapy points out, is the fact that many Americans are already staggeringly far behind on saving for retirement. Studies show that about a third of Baby Boomers and a third of Gen Xers have no retirement savings at all. It turns out, parents are actually giving twice as much money to their grown children as they’re putting in their own retirement accounts. The burden of taking care of an adult kid’s room and board—and in some cases health insurance, student debt, car payments, or expenses for grandchildren—makes the journey toward a secure retirement that much harder.
So, should parents who’ve taken in adult kids just resign themselves to working until they’ve got one foot in the grave? Or, should they kick their kids to the curb?
I say there’s a middle ground. The first step is communication—a thoughtful and empathetic parent-child conversation. Parents should outline for their returned-to-the-nesters what their own financial goals and limitations are. And their children in turn should explain their short-term and long-term career and financial plans. (And if they don’t have any yet, parents can help them to set some.)
Then, both parties can come up with the all-important parameters of the move back home: How long will the kid stay there? What’s their savings plan? Are they going to contribute to rent and groceries? How about chores? What about replenishing household supplies? Get these decisions in writing, so there are no misunderstandings down the road.
You don’t have to be a fan of tough love to see the benefit of setting guardrails and limits. They can help a young adult develop a sense of motivation and responsibility, and they can help parents, too, by reminding them that as much as they love their kids, they must also keep in mind their own financial needs and retirement goals. It’s okay for families to look out for one another, but that includes understanding and respecting parents’ needs and financial goals, not just children’s.
