One of the reasons we bought the house we live in today is that it was in a development full of families with children around our son’s age.
Sixteen years later, our development is still full of families with children around our son’s age – only a few of those kids left home for good. They’re not even kids - they graduated from school a few years ago, so technically they are young adults.
The number of young adults who are lingering longer in our neighborhood nest is a small part of a bigger phenomenon witnessed in the U.S. The number of young adults still living with Mom and Dad has reached a 130-year high, according to the Pew Research Center. Even more significant, a sizeable percentage of adults ages 21 to 45 receive financial support from their parents. The Society of Grownups, a consumer outreach program from MassMutual, found that 35 percent of all adults in that age bracket get some help from The First National Bank of Mom and Dad. Nearly one-third of those in their 30s and about 20 percent of those in their early 40s receive “significant, ongoing” financial support from their parents.
What does this “significant, ongoing” financial support look like? According to the report, one in three young adults receives help from their parents for everything from paying cell phone and insurance bills, to buying food, to helping with rent.
The phenomenon of young adults receiving ongoing financial support has implications beyond the fact that one-third of this age group is not financially independent. It also has an effect on their parents’ ability to pay for retirement.
It’s commonly believed that once the last kid is done with school and the mortgage is paid off, the parents can turn their attention to saving for retirement. But that’s not the case, according to Boston College's Center for Retirement Research. The center’s researchers found that once the kids leave the next, households increase saving through their 401(k)s, by only 0.3 to 0.7 percentage points.
About 55 percent of households age 55-64 have less than $25,000 in retirement savings, including 41 percent who have no savings, according to the Government Accountability Office.
Here is where professional advice is urgently needed to help families change focus from child-oriented spending to retirement-oriented saving. Otherwise, warned Teresa Ghilarducci, an economist at the New School for Social Research, it’s likely the U.S. will see a dramatic increase in the number of poor and near-poor retirees in the coming decades.
Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].
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