How to Survive a ‘Boomerang’ Hit to Retirement Planning

As if planning for a decent 21st-century retirement these days wasn’t challenging enough for most Americans, consider the plight of the not-yet-empty nesters: According to a recent Harris Interactive poll, 40 percent of U.S. adults between 18 and 39 – thirty-nine — who aren’t students are currently living at home with their parents. It isn’t just cheap or free rent they’re tapping their folks for, either. The typical support package for ‘generation boomerang‘ includes transportation costs, insurance, food and living expenses, and medical bills.

All of which has an immediate spillover effect on parents’ finances:.

The Boomerang Effect

  • 26 percent have taken on additional debt
  • 13 percent have delayed buying a home or taking a vacation
  • 7 percent are delaying retirement

Most parents, of course, don’t hesitate to take on the additional burden: Another recent survey by TD Ameritrade found that 57 percent of baby boomers said they would be willing to support their adult children even if meant putting retirement plans at risk — this at a time when 55 percent of boomers are already planning to retire later than expected.

Small wonder, then, why many couples facing this potential boomerang hit to their retirement plans need some specialized financial guidance – especially if they’re still supporting 30-somethings. Following are some smart guidelines to follow from several financial planners:

1. Set boundaries

Ensure that you can meet your own expenses before offering to take on more. Explain to your kids how much you feel comfortable giving them and when the assistance will be cut off. Consider the financial sacrifices you’re willing to make: Are you willing to take on more work? Take fewer vacations?

2. Close the bank of mom and dad

Adults who move back home can be expected to pay rent. Having them around may allow for some good parent-child time together, but it comes with a cost: all of your bills will creep upward. It’s reasonable to ask your kids to share in the expenses.

3. Be a responsible lender

If you’re willing to lend children money, make it official. Write up a simple contract with interest terms and a payback schedule. This reminds “children” about the real-world implications of loans, whether those are student loans, mortgages, or credit cards.

4. Dust off your financial plan

If you have been supporting your adult children, map out or update your financial plan. Discuss it with your advisor. Figure out a budget that won’t jeopardize long-term goals. This may also be a smart time to update living trusts, estate plans, and wills, which most parents created when the kids were minors.

5. Make it a learning experience

Take the opportunity to assume the authoritative role of financial advisor to your kids. Find out how much money they think they will need – for what and for how long. Help devise their own financial plan — which will ultimately protect yours.

Consider a free financial consultation with Personal Capital today.


The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.
Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

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