June 8, 2011

Biggest Boomer Retirement Risk: Their Children

Boomers' sense of obligation to the support adult children is hampering their retirement plans

Of all the risks boomers face in securing a comfortable retirement, advisors shouldn't lose sight of what boomer clients themselves are doing to their portfolios. A survey released Wednesday by TD Ameritrade found three-quarters of boomers would feel obligated to help their adult children financially if they were asked to.

The 2011 Investor Index found boomers are putting their children's future before their own. Fifty-seven percent of respondents said they were willing to support their grown children, even if it took away from their retirement income. Of more than half of respondents who said their children returned home for at least three months, 42% said that it had a negative impact on their finances.

“While boomers may have the best intentions, they could be setting the wrong precedent by financially supporting their adult children, particularly when it comes to discretionary items,” said Lule Demmissie, managing director of investment products and retirement at TD Ameritrade.

Among Gen Y respondents, many of whom are turning to their boomer parents for support, 41% said their parents helped them pay for food, rent and discretionary bills like cell phones.

“No parent wants to see their child struggle financially, but assistance should come within reason – and with firm expectations. While food and housing might be reasonable, a data plan for your son’s smartphone shouldn’t come between you and your retirement,” Demmissie added.

Many boomers are delaying retirement because they haven't accumulated enough savings, but according to the survey, 17% have to continue working because they are supporting children or other relatives. In fact, boomers' sense of obligation doesn't stop at their children. Eighty-two percent of boomers with independent parents said that they would sacrifice saving for retirement if their parents needed financial support.

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