Parents Are Risking Their Retirements to Support Adult Children

(Bloomberg) — One day your child will grow up and leave you. Or will they?

With younger generations facing tough economic circumstances, many parents are supporting their children long past the college years. Nearly half of young adults in the US live at home, and millions more are receiving help with rent, bills and everyday costs. For parents, it’s a major expense, sometimes requiring greater debt loads, depleted savings and delayed retirement plans.

Kori Shafer — a 49-year-old commercial insurance producer with two twentysomethings living with her in Craig, Colorado — said she and her husband want to support their children as they transition into adulthood. But at the same time, she wonders how long their living situation will last — and what she’s enabling if her stepson is spending $900 a month on a sports car and insurance, when he says the reason he’s living with them is to save for a house.

“I’ve gotten to the point where I’ve been ready to move out myself,” she said. “We want to still help and protect them. But also push them to grow.”

With greater student debt levels and a lack of affordable housing, the percentage of young adults living with their parents is roughly on par with the 1940s. To be sure, there have always been kids who stay home after high school or return following college, including many who do it to save money as they start their careers. But the uptick now is being driven, in part, by how the pandemic normalized living with parents. It’s also gotten harder to find good entry-level jobs and afford a higher cost of living. 

Financial Strain

The pandemic put “the whole business of growing up on a different timetable than in the past,” said clinical psychologist Mark McConville, author of Failure to Launch: Why Your Twentysomething Hasn’t Grown Up and What to Do About It. As a result, children have become dependent for longer, and during high-cost times, that’s putting a strain on parents’ finances. 

US parents spend about $500 billion every year on their 18- to 34-year-old children, which is double what they put towards retirement, according estimates in a Merrill Lynch and Age Wave study.  

“I thought at this point my kids would be working good jobs, but I’m constantly using up my savings to help them progress,” said Angela Trice-Bari, a 52-year-old schoolteacher in Oak Park, Michigan.

Trice-Bari thought that by allowing her kids, ages 21, 22 and 33, to live at home during college and grad school they’d have enough to buy a home at age 28, like she did. But she realizes that goal is largely out of reach. Now, she’s drained her savings and dipped into retirement funds to help pay for their education, food, travel expenses and more — especially for her son who lost his job.

Like a lot of parents, she hopes her children will repay her someday. Her youngest is going to school to become a lawyer and says she’ll help financially after graduation next year.

“Sometimes helping your kids now is an investment in your future so they can help you later on,” said financial advisor Mitchell Kraus, of Capital Intelligence Associates in Santa Monica, California. It’s seen as a kind of retirement plan, for some — albeit one without guarantees.

Generational Clash

More often now, the act of moving in with parents is seen as a pragmatic way to get ahead, a survey by Harris Poll for Bloomberg News shows. Most agree younger generations are navigating a broken economic system. Still, putting old generational views aside can be difficult for parents.

“For boomers, moving back home was seen as a failure. But now, home means safety, not failure,” said Annina Schmid, a Toronto-based parenting coach and founder of Launch Support.

Maria Garcia, for one, never dreamed of moving back home or asking parents for help once she struck out on her own at 18. Now 48, with children ages 21, 24 and 27 at home, the data entry clerk wonders where she went wrong. 

Even though two children pay rent of $300 a month, higher costs, including for utilities, leave Garcia and her husband living largely paycheck-to-paycheck. The couple supports their kids now because they have the means, Garcia said, but if that changes, they’ll have no choice but to end support.

“It’s frustrating because I come from a generation where we were taught to be independent,” said Garcia, who lives in Berwyn, Illinois. “Once we moved out, it was our responsibility to fend for ourselves.”

Independence Day

At times, Kori Shafer and her husband have dipped into savings to support their kids. The bill for family counseling has definitely set them back. But mostly, she said they have been able to afford the added expense. 

Many parents are fine helping children financially to a degree, if they’re able. Almost two-thirds of parents said they’d sacrifice some financial security to help out their kids, according to the Merrill Lynch study. 

Shafer, however, said she’s had enough. She’s turning 50 next year and knows what she wants for a gift: “Both of them moved out by the Fourth of July. That is my independence day,” she said. 

To contact the authors of this story:

Paulina Cachero in New York at [email protected]

Suzanne Woolley in New York at [email protected]

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