May 1, 2012

Baby Boomers Sacrifice Retirement for Kids—Again

Study reveals that 93% of boomers have provided financial support to their adult children

More than half of boomers allowed their adult children to move home and live rent free. More than half of boomers allowed their adult children to move home and live rent free.

Many baby boomers delayed saving for retirement to save for the steep cost of their children's college education. Now, even though many baby boomers’ portfolios are recovering, it doesn't mean they're out of the financial wilderness just yet.

More than half (55%) of boomers admit they’ve allowed their adult children to move home and live rent free—but the support that most boomers provide their kids and aging parents extends well beyond room and board, according to new findings from the Money Across Generations II study, released April 24 by Ameriprise Financial. In fact, boomers continue to prioritize their families’ needs over their own, despite increased uncertainty about their own financial security.

“Boomers are feeling the pressure financially and emotionally,” Suzanna de Baca, vice president of wealth strategies at Ameriprise Financial, said in a statement. “In many cases they’re sandwiched between children who are unemployed or struggling to pay down their student loan debt and aging parents who are facing complex health and financial issues. At the same time, they’re trying to prepare for their own retirement. The demands on their time and money can feel endless.”

By telephone, researchers interviewed 1,000 baby boomers with at least $100,000 in investable assets, along with 300 parents and 300 adult children of baby boomers.

In 2007, when the original Money Across Generations study was conducted, 44% of boomers said they were trying to grow their savings. Now only one in four (24%) say they’re putting away money for the future and just as many (24%) report simply trying to maintain what they have.

While boomers’ attitudes have changed, the level of support they’re providing family members has not. More than half (58%) report assisting their aging parents in some way, including helping them purchase groceries (22%) or pay medical (15%) and utility bills (14%).

When it comes to their children, boomers are even more generous. Most boomers surveyed (93%) say they have provided some kind of support to their adult children. A majority have helped them pay for college tuition or loans (71%) or helped them buy a car (53%). Many are also helping their kids pay for car and health insurance, as well as cover basic expenses like rent, utility and car payments.

Only 10% of boomers admit that helping their parents has slowed down their retirement savings, while one-third (34%) feel the same about the support they’ve provided their adult children.

So if they aren’t tapping into their retirement accounts, where are boomers coming up with the extra cash? Most say they’re relying on day-to-day spending or regular savings. Unfortunately, by diverting funds from their retirement savings or by failing to take advantage of catch-up contributions, many boomers may fall short of their own goals.

Boomers are faced with difficult decisions when their family members require help. More than two-thirds (68%) say they would continue to contribute to their retirement savings instead of helping a child pay off credit card debt. But when it comes to health care for their elders, more than half (57%) say they would help a parent pay for long-term care insurance in lieu of contributing to their own retirement savings.

Despite uncertainty around meeting their own financial goals, a majority of boomers (86%) say that if they had to do it again, they would still support their adult children financially. Meanwhile, 20% express guilt about not being able to provide financial assistance to their adult children who currently need it.

They may be offering support willingly, but some boomers question their adult children’s ability to manage their own finances. Nearly half (47%) say they worry that their children do not understand what it takes financially to prepare for retirement, and 35% express concern that their children have not learned responsibility when it comes to money.

If asked, boomers’ children may partially blame their parents for their lack of financial savvy. More than half say that while growing up, their parents rarely or never talked to them about how they budgeted the family’s money (56%) or the importance of saving for retirement (52%). And while a majority say that their parents’ approach to spending and saving was fairly balanced, 30% feel their boomer parents’ attitude toward money was “live for today.” Only one in 10 (11%) feel their parents conveyed an attitude that encouraged preparing for the unexpected.

“Family and personal values are important when making any kind of decision, but it can be difficult to prioritize our family members’ needs against our own,” de Baca says. “Unfortunately, unconditional financial support can threaten or even sabotage retirement goals and security. It’s important to have open conversations with your family about your current financial situation and evaluate your ability to meet your own goals before offering any kind of support.”

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