Reading this gave me emotional whiplash because I kind of hate everyone in this article. From Bloomberg:
Cathy Egan has been supporting herself since she was 18, when she worked as a waitress in Minneapolis. Her 23-year-old son lives at home and relies on his single mother for transportation, food, and other expenses. Egan, now 50, only began putting money aside for retirement five years ago, after she started working as a licensed practical nurse for the Veterans Health Administration—her first job with benefits. Although she also has a son in high school, the single mother can’t bring herself to cut off her eldest, who earns $8.50 an hour plus tips delivering takeout orders part time for a restaurant in St. Paul. “Right now, I’m still the supporter,” she says.
Baby boomers are putting their retirements at risk by spending too much on their adult children. With real wages stagnant and unemployment among those age 16 to 24 running above 12 percent, large numbers of households continue to dole out cash to children no longer in school, covering rent, cell phones, cars, and vacations.
A July 2014 survey by American Consumer Credit Counseling, a Boston nonprofit, found that a higher proportion of U.S. households (1 in 3) provide financial assistance to adult children than support for elderly parents (1 in 5). “This is putting a huge wrench into retirement savings,” says Pamela Villarreal, a senior fellow with the National Center for Policy Analysis in Dallas. “The more boomers put out for adult kids, the less they can put aside for themselves, which is scary as they live longer and need savings to last them into their 80s and 90s.”
More than a third of adult millennials receive regular financial support from their parents, and 1 in 5 still live at home and don’t pay rent or expenses, according to a November 2014 survey by Bank of America. It isn’t just the unemployed or the low-paid who are needy. The poll, which had 1,000 respondents between the ages of 18 and 34, found that among those earning more than $75,000 a year, 25 percent had their parents pay for groceries at some point and 21 percent got money for clothing.
Brett Goldstein, a financial adviser in Jericho, N.Y., hasn’t had much success dissuading clients from prematurely withdrawing money from their individual retirement accounts to cover expenses for grown children. “I’ve learned it’s very hard to get between a parent and his or her children, even when the parent has very modest savings,” he says. One client in his mid-50s recently withdrew $32,000 from a $140,000 IRA account to pay for his daughter’s wedding, Goldstein says. Another couple with IRA accounts totaling about $200,000 cashed out $61,000 to help pay for their daughter and son-in-law’s first home.
Parental largesse doesn’t have to reach such extremes to be potentially harmful. Consider that couples age 55 to 64 had just $111,000 in savings for retirement in 2013 (the median balance in 401(k) and IRA plans), according to the Federal Reserve’s most recent Survey of Consumer Finances. That will amount to a little more than $4,000 a year in retirement, assuming an annual 4 percent withdrawal rate. If parents have extra money left over each month, they should be maxing out their contributions to 401(k) plans or paying down mortgages or other debt, not subsidizing their kids, financial advisers say. “You can’t take out a loan for retirement,” says John Sweeney, executive vice president for retirement and investing strategies at Fidelity Investments. “So the less well-off you are, the more you have to say to grown children, ‘I don’t have it to give.’ ”
Gillian Anderson, head of Anderson Wealth Management in Westport, Conn., says so many of her clients are helping their 20- and 30-something kids financially that she advises other parents who consult her to budget for the possibility that they may have to do the same. “It runs the gamut from giving regular allowances because millennials often aren’t earning enough to cover rent and food, to help with legal bills if a child is going through a divorce, to occasional payments for a coat or plane ticket,” she says.
Whatever the reason, this prolonged support is squeezing even affluent boomers. The executive director of a nonprofit in Seattle gave her daughter and son-in-law a total of $12,000 in 2014 to pay for child care, home repairs, and other bills—and plans to give at least as much this year. The 66-year-old woman earns $230,000 a year, while the couple are working professionals in their 30s with a combined annual income of about $115,000. The mother, who asked not to be identified because she didn’t want friends and work colleagues to know about her situation, says she’d like to retire, but her financial planner has warned her that the $2.5 million she’s set aside will run out by her early 80s at her current rate of spending.
“I’ve learned it’s very hard to get between a parent and his or her children, even when the parent has very modest savings.” —Brett Goldstein, financial adviser
A 48-year-old woman who lives in Westport, Conn., sheepishly admits that she and her husband, a finance executive, give their 22-year-old daughter tens of thousands of dollars each year to supplement the $30,000 she earns as a writer at a beauty website. The money covers her share of the rent on a Brooklyn (N.Y.) apartment, her frequent use of Uber car services, clothing purchases, and regular manicures and pedicures. “I tell my daughter, ‘We’re going to help you, but do you really need to buy $4 lattes every day and $14 kale salads?’ ” says the mother, who didn’t want to be named because she doesn’t want to embarrass her daughter or her husband. “When I was 22, I ate pizza every night.”
The couple have a comfortable six-figure income but haven’t purchased long-term care insurance for themselves or put aside all they’ll need—at least $10 million—to maintain their lifestyle in retirement. They wonder if and when their daughter will become self-sufficient and whether their son will also expect continued support after he graduates from college in a few years. “We’re stuck between a rock and a hard place, because we want our kids to be happy,” she says.
Egan is also torn. “I wanted to give my boys more help than I got growing up,” she says. She makes about $23 an hour working a 5:30 a.m.-to-2 p.m. shift at a VA hospital in Minneapolis and earned about $50,000 last year, including overtime. Egan puts 3 percent of her income into an employer-sponsored savings plan, which gets matched, and has accumulated about $15,000 so far. She’ll also be eligible for a small pension if she continues working for the federal government for at least another five years. She knows she’s a long way from having enough to retire comfortably. “I don’t want to be a burden on my kids when I’m old,” she says.
Fidelity’s Sweeney says it’s a bad idea even for affluent parents, to fund their adult kids. “Giving them tens of thousands of dollars a year for apartments, cars, and restaurant meals sends the message that you’ll keep paying for a lifestyle they can’t afford on their own—and you probably can’t or don’t want to fund forever,” he says. “Better to teach them to burn less than they earn, and save all you need for a long old age.”
Egan has began practicing a little of the tough love Sweeney preaches. She recently began charging her son $150 a month for rent, and he now pays for his cell phone and car insurance.
Ok, first of all, I'm all about the tough love. GTFO. these people are awful.
But...I'm questioning those poll results. "had parents pay for groceries or got money for clothes" is really vague and I think I'd answer yes to that because my MIL will do things like show up at our house with random household items because she 'bought too much', gives us way too much xmas and birthday money, and buys MH socks - whenever she buys socks for her H she just gets like 3463968769856 pairs and splits them between FIL, BIL and MH. Some of it is just habit - she shops at Costco and seriously hasn't been able to break the habit of buying for two teen boys.
I don't think that's what this is really about though. Much more along the lines of my BIL, who moved back in with them last year. He's 26.
I'm fairly confident they're in good shape for retirement though. I sure as shit hope so anyway.
Post by jeaniebueller on Mar 6, 2015 8:53:37 GMT -5
Whatever the reason, this prolonged support is squeezing even affluent boomers. The executive director of a nonprofit in Seattle gave her daughter and son-in-law a total of $12,000 in 2014 to pay for child care, home repairs, and other bills—and plans to give at least as much this year. The 66-year-old woman earns $230,000 a year, while the couple are working professionals in their 30s with a combined annual income of about $115,000. The mother, who asked not to be identified because she didn’t want friends and work colleagues to know about her situation, says she’d like to retire, but her financial planner has warned her that the $2.5 million she’s set aside will run out by her early 80s at her current rate of spending.
There aren't enough eye rolls on the planet for this paragraph. Poor boomer mom earning 230K a year. How will she ever retire?? And really, when my mom visits, she regularly buys meals, sometimes buys us groceries, buys my kids clothes, toys, etc. BECAUSE SHE WANTS TO!! My mom is set financially for retirement and figures she might as well spend money on her kids and grandkids. This article is annoying.
This article also ignores the fact that millenials are fucked because of the boomers and greatest generation.
This article also ignores the fact that millenials are fucked because of the boomers and greatest generation.
I actually kept waiting for the article to say that there was some poetic justice in Boomers being forced to provide financial aid for their grown children thanks to the shitty economic environment they themselves created.
Some of the numbers in this piece made my palms sweat: $32,000 from a $114,000 ITA to pay for a wedding? AYFKM?
the only reason I'm ever touching my retirement accounts is if it's a like...life or death. I can't even fathom cracking it open for a wedding.
We had a thread on reasons to touch retirement on MM before. My answer was to pay a ransom...for like one of six people lol. You take the 7th closest person to me and I will pray for you both.
That was one of the three reasons that popped into my head. Ransom for my baby or husband. Maybe my mama (she's lived her life...). Definitely my sister. My brother might be SOL.
the other two reasons I talked myself out of - one was to save my house if I was about to lose it - but no, fuck that. Get out. Default. Rent a small place for a while and put my shit back together. And the other was to pay for life saving medical treatment if my insurance somehow wouldn't cover it - but I'd just rack up a giant bill and figure it out later. Or they have loans for that, don't they?
These are my parents too. I really wish we could tell all the parents that while it seems wonderful to help your kids out, let them stay rent free, etc, a really much better gift is to be able to support yourself in old age. My parents are both 71, mom completely disabled, Dad still works. We do what we can for them, but dad is old school and never wants to take anything from anyone. So we worry.
On the flip side, I frequently comment that we used to plan to retire at 55. After DS, we moved it back to 58. Now after DD, we'll be lucky to retire at 60. Still worth it.
Ok, first of all, I'm all about the tough love. GTFO. these people are awful.
But...I'm questioning those poll results. "had parents pay for groceries or got money for clothes" is really vague and I think I'd answer yes to that because my MIL will do things like show up at our house with random household items because she 'bought too much', gives us way too much xmas and birthday money, and buys MH socks - whenever she buys socks for her H she just gets like 3463968769856 pairs and splits them between FIL, BIL and MH. Some of it is just habit - she shops at Costco and seriously hasn't been able to break the habit of buying for two teen boys.
I don't think that's what this is really about though. Much more along the lines of my BIL, who moved back in with them last year. He's 26.
I'm fairly confident they're in good shape for retirement though. I sure as shit hope so anyway.
I thought this same thing. MIL is coming tonight and bringing dinner with her. She brings dinner almost every time she comes (every other month) because she is kind and knows it is hard for us to get home after work and cook a full meal for her and FIL. Plus magically, anything Grandma makes tastes good.
That was one of the three reasons that popped into my head. Ransom for my baby or husband. Maybe my mama (she's lived her life...). Definitely my sister. My brother might be SOL.
the other two reasons I talked myself out of - one was to save my house if I was about to lose it - but no, fuck that. Get out. Default. Rent a small place for a while and put my shit back together. And the other was to pay for life saving medical treatment if my insurance somehow wouldn't cover it - but I'd just rack up a giant bill and figure it out later. Or they have loans for that, don't they?
There was a compelling story about medical treatment where even the most rigid among us agreed you have to do what you have to do, but yes, essentially life or death situations is how it shook out. In theory, I don't want to judge anyone for doing what they think they need to do. In practice, I'm kind of side-eyeing the hell out of that guy for paying for his child's friends to eat steak, chicken or fish one night when he's going to have to eat Ramen like 123 nights to compensate. Hopefully there's missing information like several properties owned outright, pensions and another retirement account. I don't think Brett would leave out very obviously relevant information though lol.
Please let it be known that I'm being TIC with that one. The woman is only in her mid-50's. Lots of life left to live. I have a habit of taking her with me to GTG's so I don't want IIOY to out me as having said I'd throw her to the wolves.
There was a compelling story about medical treatment where even the most rigid among us agreed you have to do what you have to do, but yes, essentially life or death situations is how it shook out. In theory, I don't want to judge anyone for doing what they think they need to do. In practice, I'm kind of side-eyeing the hell out of that guy for paying for his child's friends to eat steak, chicken or fish one night when he's going to have to eat Ramen like 123 nights to compensate. Hopefully there's missing information like several properties owned outright, pensions and another retirement account. I don't think Brett would leave out very obviously relevant information though lol.
Please let it be known that I'm being TIC with that one. The woman is only in her mid-50's. Lots of life left to live. I have a habit of taking her with me to GTG's so I don't want IIOY to out me as having said I'd throw her to the wolves.
I LOLed when you said your mom has lived her life, because she isn't even close to old! Your secret is safe with me for now, but I can't promise I won't use this to blackmail you at some point.
As I've said before this is the biggest hurdle I face with my clients who are facing foreclosure. These kids are living the high life while their parents are drowning.
As I've said before this is the biggest hurdle I face with my clients who are facing foreclosure. These kids are living the high life while their parents are drowning.
When you question your clients about this, what reasons do they give for sacrificing their own financial security for their kids?
Whatever the reason, this prolonged support is squeezing even affluent boomers. The executive director of a nonprofit in Seattle gave her daughter and son-in-law a total of $12,000 in 2014 to pay for child care, home repairs, and other bills—and plans to give at least as much this year. The 66-year-old woman earns $230,000 a year, while the couple are working professionals in their 30s with a combined annual income of about $115,000. The mother, who asked not to be identified because she didn’t want friends and work colleagues to know about her situation, says she’d like to retire, but her financial planner has warned her that the $2.5 million she’s set aside will run out by her early 80s at her current rate of spending.
I am tempted to run some theoretical numbers because I suspect that if she were to retire now and not draw down $12k a year for her adult child she'd be pretty close to still having cash in thirty years.
ETA: I did it. $2.5k can theoretically give you just over $100k a year without touching the principal.
Post by redheadbaker on Mar 6, 2015 9:50:22 GMT -5
My parents help us out occasionally. After my last contract talked about bringing me on full-time, I was blindsided to be laid off. And I didn't expect to be unemployed this long. We were a bit short for rent last month, so they helped out.
My mom also shops at Sam's Club, and will give us meat, household products (toilet paper, toothpaste, ibuprofen, coffee) that she buys in bulk and splits between my brother/SIL and me. And that's even when we're all working.
But I suspect my parents are just fine, financially. They're on the 14th cruise right now. We are certainly not living the high life while they struggle.
As I've said before this is the biggest hurdle I face with my clients who are facing foreclosure. These kids are living the high life while their parents are drowning.
When you question your clients about this, what reasons do they give for sacrificing their own financial security for their kids?
It is a very delicate discussion. They are very vulnerable and ashamed - that is why I go thru a box of Kleenex every couple of weeks. I ask whether the kids (if they are over 18) are working. They will often say they are in college - (even when the "kids" are 28, 29, 30 - you get the picture) - then I explain that I worked 20 15 hours per week in college (edit: I just thought about it - it was 15 not 20 - don't want to gild the lily). I also explain that getting even some rent from them would help. It is really hard not to come off really judgey. I drilled down with one client (convenience store owner) and discovered after a few discussions that he was paying a full ride for his daughter at UCONN. At that point we did the "choices" discussion. Sigh.. It is exhausting.
My ILs have helped us quite a bit over the past few years as H has been building his career. MIL was the first to say that it made no sense for me to work when daycare would put me well into the red and offered help when H was ready to leave grad school over the finances. They're in excellent financial shape and have helped both of his sisters significantly as well.
That said, we have tracked every penny they gave us and have begun paying them back (over their protests; they would rather see us save a down payment and buy a house before paying them back). Much of it was things like health insurance premiums and things that were non negotiable but cost prohibitive.
I feel guilty, but MIL has repeatedly assured us that they haven't dipped into savings for this help.
When you question your clients about this, what reasons do they give for sacrificing their own financial security for their kids?
It is a very delicate discussion. They are very vulnerable and ashamed - that is why I go thru a box of Kleenex every couple of weeks. I ask whether the kids (if they are over 18) are working. They will often say they are in college - (even when the "kids" are 28, 29, 30 - you get the picture) - then I explain that I worked 20 hours per week in college. I also explain that getting even some rent from them would help. It is really hard not to come off really judgey. I drilled down with one client (convenience store owner) and discovered after a few discussions that he was paying a full ride for his daughter at UCONN. At that point we did the "choices" discussion. Sigh.. It is exhausting.
It can be very difficult. I practiced family law for the first 6 months of my career, and I made a switch because I concluded that I was essentially a glorified therapist who happened to do some legal work on the side. I just didn't have the emotional bandwidth to be there for my clients in this capacity.
It is a very delicate discussion. They are very vulnerable and ashamed - that is why I go thru a box of Kleenex every couple of weeks. I ask whether the kids (if they are over 18) are working. They will often say they are in college - (even when the "kids" are 28, 29, 30 - you get the picture) - then I explain that I worked 20 hours per week in college. I also explain that getting even some rent from them would help. It is really hard not to come off really judgey. I drilled down with one client (convenience store owner) and discovered after a few discussions that he was paying a full ride for his daughter at UCONN. At that point we did the "choices" discussion. Sigh.. It is exhausting.
It can be very difficult. I practiced family law for the first 6 months of my career, and I made a switch because I concluded that I was essentially a glorified therapist who happened to do some legal work on the side. I just didn't have the emotional bandwidth to be there for my clients in this capacity.
I am starting to think the same thing... I have coping mechanisms but they don't always work too well.
My parents like to pay for stuff. For example they bought me a car for finishing grad school, paid for college and my wedding, will likely give us money for a house downpayment, etc. Most of the time I refuse it, but part of their theory is that they want to transfer the majority of their money to us before they die to avoid the "death tax." It probably helps that I don't have any concerns about their retirement savings considering that they have well-funded retirement accounts, my dad's pension, and my mom's LLC income.
Their attitude is not necessarily a boomer thing though, since they got it from my grandfather.
Unfortunately I'm in the opposite situation that the article describes - my husband & I are early 40's with young kids, and my parents haven't saved a goddamned dime for their retirement. At least my dad has a pension, so he should be good, but my mom has literally zero, and she just told me that they're about to take her house.
Most people I know are more in my situation than the one the article describes. I'm a bit older than the kids in the article though. I can't tell you how much it pisses me off that my parents have screwed themselves - to my detriment. As a result, we are saving like fiends for our retirement ... 529s be damned.
I have parents at both ends of the spectrum. My father has helped me out in tough times and he gave us money towards our house. However, he is currently retired and quite comfortable.
My mother has nothing saved for retirement and she is in her early 60s. She can barely keep a roof over her head half the time, retirement has always been on the back burner. I have no idea what she is going to do. She wants to move closer to me and I am terrified. There is a lot of history that I will spare you from but this could end very badly.
Unfortunately I'm in the opposite situation that the article describes - my husband & I are early 40's with young kids, and my parents haven't saved a goddamned dime for their retirement. At least my dad has a pension, so he should be good, but my mom has literally zero, and she just told me that they're about to take her house.
Most people I know are more in my situation than the one the article describes. I'm a bit older than the kids in the article though. I can't tell you how much it pisses me off that my parents have screwed themselves - to my detriment. As a result, we are saving like fiends for our retirement ... 529s be damned.
This is where I'm at. My parents have made some extremely bad choices, and are now counting on inheritance from my extremely fickle and eccentric grandmother. They are the perfect example of what not to do when it comes to money management and financial planning. I really think there is every possibility that they will not see much if any of the money they are expecting, and I am petrified of what is going to happen down the line.
I am tempted to run some theoretical numbers because I suspect that if she were to retire now and not draw down $12k a year for her adult child she'd be pretty close to still having cash in thirty years.
ETA: I did it. $2.5k can theoretically give you just over $100k a year without touching the principle.
But since she's earning $230K a year, maybe she's spending closer to what she earns than she is to spending $100K.
That's her own poor choice, then. Come the heck on with that crap. No one needs to be spending $230k/yr in retirement.
I always wondered, even in high school/college, where it ends. Like I knew people with a brand new car at age 16. Then I knew people whose parents bought them ANOTHER brand new car at age 20. Cause the first one was old. So do you get another at 24, eve though you're working? What if you can't afford it? So what about when you're 28?
I have a friend who works at a popular coffee company chain, usually 4-5 days a week. Her roommate works at a popular makeup retail chain, one day a week. They live in a fabulous apartment that costs, AFAIK, around $3500/month. At least north of $3k. Yeah. I don't actually wonder how they can "afford" that, since her parents have both a indoor and outdoor pool at their house. Also, this friend and her roommate usually take 1 international vacation per year.
Anyway, the article was all over the map. My parents set expectations. One was that I would at least work summers starting at age 16. School came first, so I could only work weekends during the school year, but I was not going to be just sitting around all summer. It wasn't to contribute to household expenses; it was for my own things that I wanted, rather than needed. Clothes. Movies with friends. Starbucks.
I was also expected to go to college. After college I was expected to find a job. If I had moved home, I would have been expected to pay rent. Not market rate or anything, but some kind of contribution as befits an adult with a full time job. After I graduated, my dad was like, "you're going to start paying your own car insurance now, right?"
Not that there weren't times in my early 20s when I needed a little extra help, like for plane tickets or gas on trips where I was visiting my parents. But I see the ability for parents to help their kids at their discretion because they CAN as a very, very different thing from subsidizing their kid's lifestyle so they can get a mani/pedi once a week and go out to eat 4 nights/week.
I mean fuck, I paid for my own wedding. I definitely don't feel a burden to pay for my future kids to get married, and especially not at the expense of my retirement.
My parents like to pay for stuff. For example they bought me a car for finishing grad school, paid for college and my wedding, will likely give us money for a house downpayment, etc. Most of the time I refuse it, but part of their theory is that they want to transfer the majority of their money to us before they die to avoid the "death tax." It probably helps that I don't have any concerns about their retirement savings considering that they have well-funded retirement accounts, my dad's pension, and my mom's LLC income.
Their attitude is not necessarily a boomer thing though, since they got it from my grandfather.
this is where I am at too. They have done extensive estate planning and they want to give us the money now vs later. Plus they know that I will be the one helping them in their old age and not my brother.
DH's mom, who isn't as well off, tries to give us money but we ask her to save it for her retirement. That doing that would make us happier than anything we could buy with the money.
ETA: when I lived in Chicago and lived in crappy apartments that I could afford, my parents were always offering to rent me something nicer. I always passed. Now that I am back in my home state my dad says that he is so proud that I turned down the offer. To which I queried, why did you offer then if you didn't really want me to take the money. His reply (which is classic dad stuff), I offered because I knew you wouldn't take it.
My mother has nothing saved for retirement and she is in her early 60s. She can barely keep a roof over her head half the time, retirement has always been on the back burner. I have no idea what she is going to do. She wants to move closer to me and I am terrified. There is a lot of history that I will spare you from but this could end very badly.
Me, you, and omgzombies should start a support board to commiserate about this crap. My mom & I don't get along either, and her living with us would be awful, for so many reasons. It would be easier to say "oh sure come live with us!!" if we had a good history and a good relationship.