Baby boomers could end up $227000 richer if they stop bankrolling their adult children


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Photo/Alan Diaz

  • Parents who pay for their adult children might be
    hurting their retirement.
  • Paying for their children’s expenses could cost parents
    up to $227,000 in retirement savings, according to a NerdWallet
    analysis.
  • Parents need to figure out whether they can afford to
    pay for their adult children. If not, they should ask their
    kids to start pitching in.

Parents sometimes pay for their adult children’s expenses — and
it could be hurting their retirement.

In fact, they might be missing out on a quarter of a million
dollars in retirement savings by supporting their adult children,

according to an analysis by NerdWallet
.

Eighty percent of parents with adult children are paying or have
paid for at least some expenses for those children after age 18,
according to a survey on the spending and saving habits of US
adults by Harris Poll on behalf of NerdWallet.

Looking under the hood of that data, the survey found that
parents of adult children were paying or had paid for the
following:

  • 56% for groceries
  • 40% for health insurance
  • 21% for rent or housing outside the family home
  • 39% for the child’s phone bill
  • 34% for car insurance

The two most expensive costs are living expenses and college
tuition. And parents’ retirement savings could be $227,000 higher
if they chose to save that money instead of spending it on their
children’ living or schooling expenses, NerdWallet found.

Andrea Coombes, a retirement and investing specialist at
NerdWallet, said parents should run the numbers to figure
out whether they can actually afford to help their children with
their expenses
.

“Parents who need to ramp up their savings rate should have a
conversation with their children,” Coombes said. “Parents can let
their children know they’re at risk of financial insecurity later
in life and they don’t want to be a burden to their children.

“And parents should ask their adult children to start pitching in
on some of these expenses. It’ll be good for the parents’
retirement, plus it models to the children the importance of
budgeting, saving, and planning for the future.”

To figure out the projected savings, Nerd Wallet found the
average of all those costs and calculated the potential impact on
the parents’ retirement savings if they paid for their adult
children’s bills for one, three, or five years. They assumed that
the parents would put that money into a retirement savings
account like a 401(k) or an IRA instead of spending it on their
kids.

Interestingly, over half of all adults surveyed (meaning, not
only those with adult children) said they felt confident they
were contributing enough to their retirement savings. And almost
a quarter of parents saving for retirement expected their
children to help them financially in some way after retirement.

Helping adult children foot the bill might not necessarily hurt
parents in retirement, if they can afford to pay for everything.
But if paying for college, the phone bill, and groceries comes at
the expense of retirement savings, parents will feel the pain in
retirement.

“As parents, we tend to want to do everything we can to help our
children succeed,” Coombes said. “But sometimes we focus on the
present at the expense of the future.”

Article source: http://www.businessinsider.com/baby-boomers-retirement-problems-paying-adult-children-expenses-2017-12

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