Continuing Support of Adult Children Affecting the Financial Well Being of Older Adults
According to a study by Merrill Lynch, 79% of parents continue to provide some form of financial support for their adult children 18 to 34 years old. Not only are they paying for the traditional expenses of weddings and college tuition, but they are also paying their adult children's everyday living expenses, such as rent, groceries, and cell phone bills. The U.S. Census Bureau reported 34.1 percent of people 18 to 34 still live at home with their parents. And approximately 25% of those still living with their parents neither attend school or work.
34.1 percent of people 18 to 34 still live at home with their parents
What’s the impact of this? Parents of adult children are contributing collectively over $500 billion annually to the support of their adult children. That’s twice what they are contributing to their own retirement. The effects of providing a financial crutch to their children could be dire when those parents reach retirement age. According to the Bureau of Consumer Financial Protection, a larger share of older adults reaching age 60 carry mortgage and
other debts, and have limited or no retirement savings.
Retiring comfortably at 65 is now out of reach for millions of Americans
Americans are living longer and are having to fund their retirement from their 401Ks vs. the employer-funded pension plans previous generations enjoyed. Older adults are facing working until their 70s if their health and employers permit it. For many adults who have sacrificed contributing to their retirement to support their adult children, circumstances may be dire. They may have to depend on those children to support them in their old age, provided those children are financially capable of doing that.
Demographers have defined a new stage between childhood and adulthood as “Emerging Adulthood.”
According to the U.S. Census Bureau's report, The Changing Economics and Demographics of Young Adulthood: 1975–2016, young men are falling to the bottom of the income ladder. In 1975, only 25 percent of young men had incomes below $30,000 a year. By 2016, that share rose to 41 percent (incomes in both years are in 2015 dollars). Whether this financial picture improves for them as they mature is not known. The same report states in the 1970s, 8 in 10 young adults married by the time they turned 30. Today, not until the age of 45 have 8 in 10 of that same age group become married. These children do eventually grow up and become fully functioning adults, but not until much later in life than their parent's generation.
Times are different for this generation. Rents are high, jobs are scarce, and wages are stagnant. The cost of living for young adults in comparison to what wages they’re likely to earn does not allow them to emancipate. Financially, as a parent of adult children, you likely cannot afford to support your adult children at the detriment of your retirement. However, morally, can you abandon your children who cannot support themselves?
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