That first summer after they graduate from college. When they get laid off. After a divorce. There are plenty of times in life when adult children, albeit reluctantly, move back in with their parents until they can get on stronger financial footing.
Unfortunately, this has a way of happening right about the time when parents may no longer have such financial obligations as college bills and auto loans, and maybe even have paid off the mortgage. It’s the time when they may be in higher earning years and can finally start socking away a larger portion of their income for retirement to help make up for any lost ground.
Then suddenly, the food and utility bills are higher, and they’re also paying for these “boomerang” children’s health and auto insurance, student loans and maybe even their cell phone bill. It can be difficult to teach financial responsibility to adult children when they may be at their lowest point.
If this is your situation, you can’t let your adult children negatively affect you, financially. It’s important that you preserve your assets and keep up with your savings goals. If we can help you figure out ways to adjust your budget to accommodate boomerang kids or explore insurance options for helping you meet your retirement income goals, please give us a call.
A recent Bankrate survey found that half of parents are sacrificing their financial goals to help out adult children — and that’s not exclusive to the ones who move back home. This alarming trend also prevents many near-retirees from downsizing to achieve savings in housing-related costs, including big-ticket expenses like property taxes, homeowners insurance and ongoing maintenance costs.1
Some of the more common suggestions for managing boomerang kids are to set deadlines for how long they can stay; put benchmarks in place for when you expect them to start paying their expenses, including rent; help with their transition to adulthood if necessary; and, if you can’t, let your financial professional be the “bad guy.”2
Today, about one-third of the millennial generation lives at home with their parents, with an average stay of three years. If you think that indicates a lazy generation, you might want to think twice before judging too harshly. While the last recession posed a difficult time for baby boomers and Generation X, it was hardest on millennials, many of whom were just starting out in adulthood. The economic setback set them back as well. As a result, the net worth of today’s young adult is half what it was for baby boomers at that age, and wages are 20% less on an inflation-adjusted basis.3
As for homeownership, widely considered the most common means of growing wealth, millennials clearly lag there as well. The rising cost of residential real estate, the shortage of available homes on the market and large amounts of student debt have proved to be a real game-changer for young homebuyers. In fact, the median age of first-time homebuyers in 2019 was 33, up from 29 in 1981, and the median age for second-time homebuyers is even more surprising: 55, up from age 36 in 1981.4
If you want to help your adult child but want him to have more independence, consider opportunities to give him a place to live that may also benefit you in retirement. You can do this by buying a small rental unit or even building a tiny home on your property, assuming you have the room. Many states are setting up ordinances for what they term “auxiliary or accessory residential units (ADUs).” These are smaller homes on your property that can serve as a guesthouse, in-law apartment, residence for a caregiver — or temporary housing for your boomeranger.5
1 Ron Carson. Forbes. Aug. 11, 2019. “Five Ways To Keep Boomerang Kids From Ruining Your Retirement.” https://www.forbes.com/sites/rcarson/2019/08/11/five-ways-to-keep-boomerang-kids-from-ruining-your-retirement/#29a78f276349. Accessed Jan. 15, 2020.
2 Rodney Brooks. U.S. News & World Report. May 24, 2019. “Don’t Let Boomerang Kids Endanger Your Retirement.” https://money.usnews.com/money/retirement/baby-boomers/articles/dont-let-boomerang-kids-endanger-your-retirement. Accessed Jan. 15, 2020.
3 Amica. 2019. “When Adult Children Move Back Home” https://www.amicalifelessons.com/infographic/when-adult-children-move-back-home/. Accessed Jan. 15, 2020.
4 Jessica Lautz. National Association of Realtors. Jan. 13, 2020. “Age of Buyers is Skyrocketing…But Not for Who You Might Think.” https://www.nar.realtor/blogs/economists-outlook/age-of-buyers-is-skyrocketing-but-not-for-who-you-might-think. Accessed Jan. 15, 2020.
5 Erik J. Martin. Dallas Morning News. Dec. 28, 2019. “Adding an auxiliary dwelling unit on your property may be worth it.” https://www.dallasnews.com/sponsored/real-estate/2019/12/28/adding-an-auxiliary-dwelling-unit-on-your-property-may-be-worth-it/. Accessed Jan. 15, 2020.
We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.
The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.
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