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July 3, 2020 • 7 minutes
Boomerang kids—adult children who return home or rely on parental support—are increasingly preventing baby boomers from reaching retirement, as supporting them financially is taking a serious toll, a new study shows.
In fact, only 21% of baby boomers who support their adult children are retired–compared with 52% of baby boomer households whose adult children are financially independent, according to a survey by Hearts & Wallets, comprised of more than 30,000 household interviews.
Not only is this phenomenon impacting when boomers are retiring, but it also impacts how much they can save before retiring.
“It’s causing a financial drag on those individuals who are saving for retirement,” says Kevin McGarry, director of the Nationwide Financial Retirement Institute, noting that the cohort’s peak earning years are between ages 50 and 65. “Those kids who are moving back home are now becoming a financial drain from the standpoint of what the savings rate can be for those [parents’ retirement].
Whether due to student loan debt, a less-than-fruitful job hunt, or economic conditions, some twenty- and thirty-somethings are moving back in with their parents.
According to the U.S. Census Bureau, in 2015, a third of young people–or 24 million of those aged 18 to 34–lived with their parents.
So what’s making the kids of baby boomers “boomerang” back home? McGarry weighed in, shedding some light on the topic.
The stigma that was once attached to moving back home with mom and dad has appeared to lessen.
Findings from the New York Federal Reserve in 2019 revealed that millennials are $1 trillion in debt. This is an increase of over 22 percent since 2014. This level of debt can definitely create a financial situation where millennials have no choice but to move home.
More specifically, the level of student loan balances that young people are carrying has exploded in recent years.
More than half of adult-supporting baby boomers in the Hearts & Wallets survey say “saving enough for retirement” is their top concern, while 38% report moderate-to-high financial anxiety.
They also happen to report the lowest levels of financial advice-seeking, with just 24% reporting having ever talked to a financial professional about their future, the survey shows.
“Providing financial support to anyone, but especially to an adult child, can have tremendous consequences for retirement and estate planning,” said Chris Brown, a principal at Hearts & Wallets, in a statement. “Financial services firms would be wise to examine their client bases for this trait and adjust product and service offerings to meet the needs of the nearly [48] million Boomer households.”
Parents of these kids are 25% more likely to have heightened financial anxiety than their peers, according to the Hearts & Wallets’ survey, likely caused by financially supporting themselves and their children, while simultaneously trying to build up their retirement nest egg.
“You’ve got folks that are moving back home and also parents who are financially supporting them early in their career; that’s maybe $1,000 or $10,000 a year that they could have put away for their retirement but they didn’t because they’re supporting their kids,” McGarry says.
Education and communication are key in making sure your retirement plans don’t get derailed if your kids end up moving back home, McGarry says.
It is very important for anyone to know what they need for a secure retirement. A retirement planning calculator can help you identify how much you need, when you can retire and how well you are budgeting now and for your future.
Very often people don’t want to know their own financial facts, but it really is the first step to having peace of mind. The Boldin Retirement Calculator makes it easy to get started with fast answers about your financial health.
Maybe you really can afford to support your adult children. Maybe you can not.
“It becomes a conversation of accountability,” says McGarry. “Individuals who are saving for retirement [should] ask, ‘Do I need to spend $10,000 a year to have my child live at home who’s fully capable of getting a job, or should I take that $10,000 a year and save that for retirement?’ and then have that tough conversation with them.”
As you know, it is very hard to make ends meet when you are only providing for your own retirement. Add trying to provide for other adults and it can be a recipe for financial disaster.
“If parents are continuing to focus on the importance of retirement savings and understanding asset allocation, that continued philosophy as you raise your child into an adult can impact them to hopefully start saving at a younger age,” he says, noting that doing so could prevent the situation from occurring in the first place.
In some cases, parents whose children have moved back home can make the situation more financially viable.
Plus, the sharing of family finances can benefit many parents. “[When] parents charge their children rent, they help them understand the impact of the cost of living,” McGarry says. “You see a lot of folks doing that.“
It might be useful for you to identify the reason your child is home and help them with that specific concern.
So, what happens if you don’t save for retirement, or if you spend it all now? Think clearly about the future. Sit down and discuss this future with your children.
Not saving (or spending your retirement savings) now will have a profound impact on both you and your children. Are your children going to be able to take care of you in the future the way you are taking care of them now? Do they want that responsibility as you age? Do you want to give up your own autonomy and be beholden to them?
Walk through a retirement calculator with your children for a clear picture of your–and their–financial future.
A: Adult children living at home often increase daily expenses and reduce your ability to save or invest for retirement.
A: Yes. Many boomers report postponing retirement or working longer due to ongoing financial support for adult children.
A: It depends on your financial situation. Some parents charge rent to offset costs and teach financial responsibility.
A: Clear communication is key. Set expectations around finances, responsibilities, and your long-term retirement plans.
A: It’s possible—but it requires a solid financial plan and honest discussions about limits, trade-offs, and future goals.
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