BOOMERS WITH THEIR BOOMERANGS
Adult children tapping their No. 1 resource — their parents
When the Baby Boomer generation left home, they didn’t look back. They couldn’ t. Not with younger siblings and physically smaller living quarters.
But a change in family dynamics, coupled with the economic deck stacked against many young adults, means that modern 20- somethings now are likely to return to the nest at some point, which can impact the retirement plans of their Boomer parents.
“Children are taking longer to leave home, they are staying in school longer if they don’t have immediate employment prospects or opportunities, taking longer to find stable jobs, longer to get married, longer to have kids,” said Daryl Diamond, financial planner and author
of Your Retirement Income Blueprint 2011.
Mr. Diamond said a gritty job market and costly rental housing sends those who have recently finished post- secondary school back to their childhood bedrooms.
On top of the added grocery and utility costs of having another person in the dwelling, parents are chipping in with the children’s cellphone bills, car expenses and debt, according to Barbara Mitchell, a professor of sociology and gerontology at Vancouver’s Simon Fraser University.
“Especially with middle- class type parents, there is sort of this mentality that to be a good parent you need to care for every need of your child,” Ms. Mitchell said.
Ms. Mitchell conducted a recent study of roughly 500 families in the Vancouver area who had children aged
The bank of mom and dad is not an endless resource
18 to 35 living at home. Eighty- five per cent were living at home for economic reasons and one- quarter of those were in “dire” debt situations, Ms. Mitchell said, with which parents feel obligated to help.
It is also a characteristic of the Boomer generation to feel the need to keep up with their neighbours, said Ms. Mitchell. “We are raising children within a society, whereby there are certain standards that we see in other families that everyone is trying to keep up with the Jones’s kind of thing.”
The willingness to continue support can come at personal financial cost.
“They want to help them out, but they’re finding that they are making sacrifices on their own financial situations and they may even be delaying downsizing to retirement,” Ms. Mitchell said. “We heard some stories where parents had to re- mortgage their homes.”
The excess burden on parents eats into their retirement savings. “This is cash flow that could be otherwise going to the retirement of the parent and is now finding its way into something that’s not going to impact the parent positively when they retire,” Mr. Diamond said.
He said the Boomer generation parents typically made long- term plans to help their child pay for post- secondary education, and maybe contribute to their wedding, but not much more.
Retirement planning can be thrown off when parents are unable to quantify the cost of having adult children live at home for an indeterminate period, making it difficult for parents to anticipate the hit to their wallets, Mr. Diamond said.
Parents are left with two choices: work longer or take a lower retirement income, he said.
The percentage of those aged 60 to 64 in the workforce rose to 47% in 2011 from 34% in 1989 and the percentage of those aged 65 to 69 working climbed to 23% from 11% over the same period, according to a May 2012 report by People Patterns Consultants.
“We are going to continue to move these goal posts out … for retirement because of all these financial interruptions,” Mr. Diamond said.
The financial planner said it would be wise to have a written understanding between parents and children about how much support the parents will be doling out and what they expect to get back.
“The bank of mom and dad is not an endless resource,” Mr. Diamond cautioned.
The Ottawa- based Vanier Institute of the Family notes that while the phenomenon of adult children at home isn’t new, the increasing age of those residing with their parents is, said Norah Spinks, the institute’s chief executive.
Pushing back financial independence means the boomerang generation may eventually have their own retirement woes. “From an economic standpoint, they have fewer years themselves to be investing in their future, it kind of makes you think what’s the next generation going to be like when they get to retirement?” Ms. Mitchell said.