Every day, about 10,000 baby boomers
reach the traditional retirement age of 65.
That's long past the age of paying allowance. But whatever you call it, a
number of older parents are paying it --- and paying the price.
A record total of 21.6 million members of the millennial generation were living at their parents' homes in 2012, according to a Pew Research Center analysis of U.S. Census Bureau data. That's 36 percent of the country's young adults, ages 18 to 31.
It's not just housing that older parents are providing.
A May 2011 survey commissioned by the National Endowment for Financial Education found that 59 percent of U.S. parents of children aged
18 to 39 are providing or have provided financial support of some sort for their adult
children after they're out of school. The trend may be even more notable
among affluent boomers. In a study conducted in late 2011 by Ameriprise Financial, 93 percent of boomers with at least $100,000 in investable assets said they have provided financial support to their adult children,
including housing, college tuition or loans, and help with buying a car. Boomer
parents also are helping pay car insurance, rent or utility payments, home down
payments, mortgage payments and health insurance, the study says.
"A new generation is graduating
college and they're nominally adults but they're functioning as dependent
children," says Darryl Dahlheimer, program director at LSS Financial Counseling Service in
What's more concerning: 26 percent of the adults
surveyed by the National
Endowment for Financial Education reported
going into debt to support their adult children. Seven percent delayed
retirement to help their adult children.
Credit counselors have seen the
evidence firsthand. One retired woman who sought help at ClearPoint Credit Counseling Solutions took out
five payday loans to help her unemployed son. "He came to her even though
Social Security is her only source of income," says ClearPoint spokesman Bruce
McClary. "He appealed to her emotions to get her to borrow the money. However,
he was not helping her repay the debt. She was struggling to keep up and not
able to get out of the cycle."
Counselors helped her set up a
self-managed plan to take care of the loans and encouraged her not to take out
any more loans. They also suggested she refer her son for counseling.
For some parents, new loans aren't
the problem. Instead they're prolonging existing debts, a practice Dahlheimer
calls 'back-door debting.' "Maybe they don't pay off their
credit cards," he says. "Maybe they get a five-year car loan instead of two."
I have seen 40-, 50- and 60-year-olds still relying on help from well-heeled parents in their 70s, 80s and early 90s.
Jayne Di Vincenzo
Lions Bridge Financial
Sometimes that help continues until
the adult children are nearly old enough to retire, says Jayne Di Vincenzo,
president of Lions
Bridge Financial in Newport
News, Va. "I have seen 40-, 50-
and 60-year-olds still relying on help from
well-heeled parents in their 70s, 80s and early 90s," Di Vincenzo says. "You
can tell it's been a lifelong thing and it's become an expectation."
At best, ongoing financial assistance
robs young adults of independence and fosters a sense of entitlement, McClary
says. At worst, it can lead to financial abuse of older adults. Offspring may pressure
their parents into adding them to bank and credit card accounts and then take
advantage of this access, he says.
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Numerous factors contribute.
Dahlheimer cites fewer jobs available for young people, the natural desire of
parents for their children to have an easier life, and a tendency of boomer
parents to be friends with and hang on to their children. "They feel financial
assistance is an expression of love for their children," McClary says.
But, says McClary, M-O-N-E-Y doesn't
spell love. "There are a number of other ways that are more meaningful and
longer lasting than financial help to express your love for your children," he
says. "The key question is, 'How can I express love by helping my child grow
Easing kids out of the nest
Here are some tips on how to prevent your
kids from depending on you long after they should be on their
Define for your kids when it's appropriate to ask for help. A medical crisis?
Job loss? Car trouble? Foreclosure looming?
Let them know how -- loan, gift,
moving in with you -- you will assist them and how often. One strike and you're
out? Twice and done?
Tell them what is expected while
you're helping. This might include giving you access to their budget and
spending information, as well as status reports on looking for a first or
Outline the terms of repayment for
any loans, including payoff periods and any interest you plan to charge.
One financial string you may not want to cut: Keeping your kids on your health insurance up to age 26, as allowed under the Affordable Care Act, might be a good
idea. It provides parents peace of mind and is different from depleting assets to
bail out adult children, Di Vincenzo notes.
Weaning them off the dole
Parents who have already become the
Bank of Mom and Dad should consider these steps to get children on their own feet:
Have a frank discussion to assess
whether the children still need financial help, McClary says. If they no longer
need help, pull the plug. If they still need help and the parents can afford to
continue to help, outline strict rules about repayment and disclosure. For
example, one parent agreed to pay a debt management plan if a daughter attended
debt counseling and Gamblers Anonymous.
Parents who can no longer afford
financial help or no longer want to help should offer nonfinancial support
such as helping children network, apply for jobs or look for affordable
housing, says Suzanna de Baca, vice president of wealth strategies at
Insist on full disclosure, including
checking and credit card statements, Di Vincenzo says. "Are they spending money
on extravagant trips?" she says. "Does their kid really need a new PlayStation
and a new bike every Christmas? They have to show some responsibility in their
Come up with a deadline when help will end. "Tell
your child, 'After Jan. 1, my financial adviser has told me I can't afford
to spend more than my living expenses or I'll be out of money in five
years.'" Di Vincenzo says.
'Reality is the best
Diane Summerville of Greensboro, N.C., provides a good
example of how to set boundaries. She gave her oldest son -- who graduated from
college in 2012 and had a job -- until Oct. 15, 2012 to move out. In the
meantime, she charged him rent. Summerville says she wouldn't have dreamed of
going into debt "to support an adult who is as capable as I am of earning a
Setting a solid date is key, Summerville says. "He had to
believe his things would be sitting by the curb on that day," she says. "And he
did believe it." Her son moved out on the appointed date.
He had to believe his things would be sitting by the curb on that day.
Mother of two adult sons
Summerville's second son graduated high school in 2012, but
wasn't pursuing higher education or a job. She told him that to stay, he either
needed to be enrolled in school and working part time or working full time. If
he didn't meet those conditions, he had to be out of the house by Feb. 15 -- and
he knew she'd make it stick, based on what happened with his brother.
Summerville told him he could move back in once he met those conditions, but if
he slipped again, he'd be asked to leave with no chance of coming back. "I knew
there would be a chance he would be out in the cold," she says. "But I firmly
believed it was for his long-term benefit."
Son No. 2 moved out on the appointed date and eventually got
his act together. He has a job as a waiter, is training to become a firefighter
and has returned home where he's also helping with home maintenance.
"I'm a strong believer in natural consequences and reality
being the best teacher," Summerville says.
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