One of the biggest money drains for Americans nearing retirement may be their grown children.
Four out of five parents provide some type of financial support for their adult offspring, USA Today reports, and they spend twice as much on them as they do saving for retirement.
Even more disturbing, half of parents are willing to draw down savings, and a quarter would go into debt or pull from retirement savings to support kids who’ve left the nest, according to a new survey from Merrill Lynch and Age Wave, a research firm.
One couple in their late 50s—clients of Ken Nuttall, a certified financial planner in New York—wanted to retire in six or seven years. To do that, Nuttall says they needed to sock away about $2,200 a month.
But the couple is burdened by $350,000 in private loans they took out to put their two children through college and graduate school. Now, they pay $1,700 a month toward the loans and contribute just $500 toward retirement. The loans won’t be paid off until the parents are 76, and they won’t be able to retire until they’re 70 or older.
Missy Spickler, a Merrill Lynch adviser, often helps the children of her clients create budgets, so they can make ends meet on their own.
Here are other steps parents can take:
- Be frank about how much you can contribute.
- If your child needs money for a specific purchase, let them borrow and pay you back in affordable payments.
- If your child moves back home, they should help out with the regular expenses such as utilities, groceries and possibly a small rent.
- If you want to help pay back student loans, contribute to your child’s wedding or give a lump sum for a down payment on a house, start planning early.
