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August 06, 2015 at 11:58 AM
Despite an improving economy and U.S. labor market, a growing number of millennials are still living at home.
A new Pew Research Center analysis of U.S. Census Bureau data finds that 26% of 18- to 34-year-olds lived with their parents, as of the first four months of 2015. At the beginning of the recovery in 2010, 24% of young adults were living with parents, according to Pew, and in 2007, only 22% were.
Chris Carosa, a certified trust & financial advisor and chief contributing editor for FiduciaryNews.com, talked to ThinkAdvisor about the impact housing an adult child could have on a parent’s retirement fund, as well as some tips on how to mitigate the potential damage.
“From the pocketbook standpoint of the parent, if the child, say, doesn’t have a good-paying job, then the parent really has to continue to pay for the living expense of the adult children,” Carosa said. “And that could have an impact on the lifestyles of the parents.”
According to a recent TD Ameritrade study, financially supporting an adult child can cost $10,000 a year on average.
“The impact on the parent can be tremendous, and it’s not just on the amount they’re failing to save because they’re helping their children – but the lost earnings,” Carosa said. “If it is $10,000 a year, then you’re talking over the course of 10 years – if the child lives at home for 10 years – not only do you miss $100,000 but at 10% a year, which is the average market [rate of return], you’re missing out on $75,000. That’s a total of $175,000 that you won’t have when you retire. For some people, that can be pretty significant.”
Carosa, the author of “Hey! What’s My Number? How to Improve the Odds You Will Retire in Comfort,” says this could lead some parents to delay retirement.
