Don’t let your grown kids ruin your retirement

A third of Baby Boomers – or eight million households — still support their children, according to Hearts & Wallets, a financial research company.

The survey, Dissecting the Baby Boomers, also says Boomers who support adult children are 25 percent more likely to have heightened financial anxiety than their peers and they are the most concerned about saving enough for retirement of all Boomer in the study.

As this the trend continues, financial professionals recommend that Boomers take steps to help ensure that their retirement isn’t going to be adversely affected when their children return – whether it’s Millennials returning from college because they have no job prospects or older children returning home after a divorce or job loss.

“Typically, it used to be when people graduate from college or high school, it meant moving out and starting careers immediately after graduation,” says Alicia Lewis, president of Layman Lewis Financial Group in Loveland, Colo. “But today’s grads and even college gads are not nearly as financial independent as they were.”

As much as we want to help our children, that is not good news for Boomers nearing retirement.

“We look at the fact that this ultimately affects not only their savings, but also when they can retire,” she says. “We had a gentleman who wanted to retire so bad… He was working because he had to work and wanted to get rid of the stress. Digging into his situation and how we can get him to retire, we found out his 25 year old was living with him. He was pumping out $1,000 a month, paying his debt.
“I said you are delaying your retirement in order to support your child,” Lewis recalled. “And, I think the biggest question people have is: ‘I am reluctant to throw my kid out on street. How do I manage this situation?
“We always come back to setting the boundaries,” she says. “Help empower these kids to take on life for their own and stop living your life based on the kids life.”
“We encourage the parents to get the kids moving in that right direction setting boundaries and setting a specific time they can stay in house,” she says. “Get a job, even if it has nothing to do with their degree. Also get them to contribute to the household. It’s a hard conversation. “
She says while the parents are trying to do the best thing for their kids, it is hurting them financial and delaying their retirement.
“Retires and pre-retirees know it, but they don’t really know it until we show them,” she says. For the wannabe retiree who had his 25-year-old living with him: “We said you can continue, but you are delaying your retirement by three years.”
Charles Winfrey, senior advisor at the Rollover Company in Nashville, Tenn., says setting parameters with your children when they come back imperative to your financial health.
“I think there are a number of things you should do,” he says. “The first thing is set a time table for how long they plan to stay, and their exit strategy. If we have no time table, it doesn’t hold children accountable. There is an implied belief that I can stay as long as I want. Make sure everyone is on the same page.
Next, have a discussion of what the kids will pay. “Call it rent or the shared cost of utility,” he says. “We know there will be an increase in expenses, whether it’s additional electricity or food
“Many times the parents are already in retirement or approaching retirement,” he says. “They have adjusted their lifestyle to those expenses. They have enough left over that they can enjoy life. Expenses go up because you have additional person. So, while we are here together, let’s share costs.”
That is not to say you shouldn’t show empathy and understanding to the situation you children are in, Winfrey says. “The economy is not what it was. Be compassionate, I am grateful I have this house you can come back to. If that part is not there, the other part feels more like a landlord. This is still your child. Be understanding, but have rules.”
When it comes down to the impact on retirement, Lewis says she spells it out and lets the numbers speak for themselves.
“If it is detrimental to their retirement, a matter of them retiring or not, absolutely (we have a conversation)” she says. “But if it is a sacrifice they are willing to make, we incorporate that into their retirement roadmap.”
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