Whether it’s not contributing enough to a 401(k) or (shudder!) borrowing from a 401(k), it’s hard to deny that many parents are damaging their own retirement security by continuing to provide financial assistance to their adult children.
Parents with adult children are tightly linked financially, new research from home co-investing company Unison shows.
“Of course parents want to help their children, but it’s worrisome that so many are putting their own retirement security at risk by doing so, especially considering that most American Baby Boomers are already severely undersaved for their own retirement,” Unison CEO Thomas Sponholtz said.
Just 8% of American homeowners with adult children say they’ve never helped their adult children financially (meaning 92% have), and more than half (53%) currently provide some form of financial support.
Another recent study on the subject found 40% of parents still financially support their children in some way, and that study said the average empty nester spends $254 per month on a child.
At 70%, tuition tops the list of things that American homeowners have helped or are helping their adult children with according to the Unison study, but parents are helping their children with everything from transportation to student debt to groceries. Digging deeper, the research frequently finds moms are helping more than dads:
- 67% for other general expenses (63% men vs. 71% women)
- 64% for transportation
- 56% with groceries (46% men vs. 63% women)
- 53% with car insurance (47% men vs. 57% women)
- 52% with medical insurance (48% men vs. 55% women)
- 41% with student debt
In addition to providing financial help, parents are sharing resources with their kids.
Almost 60% of homeowners (53% of men and 64% of women) have shared or are sharing their home and more than a third (36%) of homeowners with adult children have an adult child currently living with them. Of those, more than half (53%) say that child has lived with them for 5 years or longer.
Further, 57% are helping by sharing their cellphone plan (51% men vs. 62% women) and 25% are helping by sharing their streaming plan (20% men vs. 28% women).
Negative impact on retirement savings
Fully half of parents who help their adult child(ren) financially say doing so has adversely affected their own personal finances and retirement planning.
Parents who help their adult children have drawn from a savings account/CD (41%), 401k/IRA/retirement fund (8%), taken out loans (8%), or tapped home equity (5%), but most (47%) say they just haven’t been able to save the way they need to.
One in 10 American homeowners who aren’t confident in their retirement savings say they haven’t been able to save enough because they’ve been supporting their adult child(ren) financially.
Among Boomers this climbs to 17% and for parents of Millennials, it’s even worse, with nearly a quarter (23%) of those who aren’t confident in their retirement savings saying it’s because they’ve been supporting their adult kids.
The financial impact of parenthood is felt disproportionately by moms, withy 55% of women saying helping their adult child has affected their personal finances, vs. 44% of men, and 10% of women say they’ve gone into debt to help their adult child, vs. 6% of men.
Despite this discrepancy, dads say they’re willing to go farther: 23% of home-owning dads say they’d delay their retirement or dip into their retirement savings to help their child(ren) own a home vs. 17% and 16% of moms, respectively.
To obtain the survey results, San Francisco-based Unison conducted an online survey in August questioning 2,000 U.S. adults from a national sample who are current homeowners. Respondents were required to have a household income of at least $50,000 or above, to have been a homeowner for at least 10 years, and to have not yet retired.
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
