How Parents Can Help Their Boomerang Child - Without Derailing Their Own Retirement
Retirement savings | Family | Adult children | Boomerang child | March 19, 2025
This Week's Quote: "Impossible is for the unwilling."
- John Keats
Boomerang children are threatening their parents’ retirement.
The phenomenon—where an adult child who has graduated high school or college and lived independently returns to live at home—has been on the rise. According to Thrivent’s 2024 Boomerang Kids survey, 46% of parents have had their adult children ages 18 to 35 back home to live with them at some point, up from 35% last year. Inflation, the high cost of housing and student debt are among factors fueling this phenomenon.
“As a result, many parents are deprioritizing their own financial needs and more than a third are finding it harder to save for long-term goals like retirement,” says Nick Cecere, an executive vice president at Thrivent who oversees the financial-services group’s U.S. financial advisers.
The financial burden for parents is concerning. According to Thrivent’s analysis, 38% of parents are struggling to pay off debt, and 37% are finding it harder to save for long-term goals like retirement or housing. That is a jump from 23% and 16% last year, respectively.
Financial advisers say that parents should take care of their financial needs and retirement security before helping their boomerang children. But that isn’t always easy. Here are three steps parents can take to help their children get back on track and shore up their nest eggs.
Set clear boundaries
More than three-fourths of parents don’t set financial expectations with their adult boomerang children, according to research by Thrivent, which surveys the Boomerang effect on American households annually.
“This is one of the biggest mistakes parents make,” says Cecere. “The first step is to have a timeline and set clear guidelines on how much financial support parents can give and for how long.”
It should be clear from the outset that they are a financial contributor to the household. This can include paying rent, groceries, utility bills and their own personal expenses such as car insurance and cellphone bills.
“Do a cost analysis to quantify what food, rent, laundry and other expenses will cost monthly once the adult child moves back home. Then sit down with your child and decide how living expenses will be shared,” says Karen Altfest, executive vice president and principal adviser at Altfest Personal Wealth Management.
Having a written document—an informal contract—that lists shared financial responsibilities and sets a timeline for the living arrangement is an important first step, she says.
“As a rule of thumb, if your boomerang adult child is still living with you past the one-year mark, that’s a red flag that you may be endangering your own retirement,” says Altfest.
Encourage responsibility
Help educate your adult child on ways to achieve financial independence. Start by having them get a handle on their income and expenses, including debt payments.
“Have your boomerang adult child establish a budget so he or she can meet monthly living expenses,” says Kristi Rodriguez, senior vice president of thought leadership at Nationwide Retirement Institute for Nationwide Financial.
Not all adult children are adept at money management, she says, and this will help keep them on track. It will also help them keep tabs on discretionary spending for entertainment, clothes, hobbies and more that they can cut back on, she adds.
“In addition, have them come up with a savings plan, even if it is just a few dollars a month,” Rodriguez says.
A savings and payment plan is especially important if a child is burdened with a large amount of student and credit-card debt. If parents decide to pay off some or all of the student debt to put their child on a better financial footing, they should have him or her sign a promissory note, financial planners advise.
The legal document spells out how you will be repaid for the loan. It can be in installments that can range from several months to years or as a lump sum, says Rocky Fittizzi, managing director and wealth strategist at Bank of America Private Bank. “It’s a good way to ensure you get the money back and protect retirement savings,” he says.
But lending to family members can be tricky when it comes to Internal Revenue Service rules, so it’s best to consult with a tax professional to avoid any misstep.
Give priority to your retirement
While helping your adult child get back on his or her feet financially is commendable, parents need to keep abreast of how their assistance is affecting their retirement goals, financial professionals say.
“Start by reviewing what your overall expenses are once the child has moved out,” says Lauren Lindsay, a certified financial planner at Beacon Financial Planning. “You want to determine your monthly income surplus. The extra cash can be used to pay down debt, add to your emergency fund, and build up retirement savings again.”
If you are still working, one way to fast-track savings is to maximize your 401(k) contributions and get your full employer match annually. You can also make catch-up contributions to your traditional and Roth 401(k)s and other qualified retirement accounts when you are 50 or older thanks to the IRS’s catch-up contribution rules, which also indexes these contributions to inflation. Starting next year, workers age 60 to 63 can make super catch-up contributions of up to $11,250 annually to their 401(k)s.
Catch-up contributions can also be made to IRAs and other qualified retirement accounts for those age 50 or older. Visit IRS.gov for details.
Credit goes to Lori Ioannou, published in the Wall Street Journal, December 3, 2024
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This Week’s Author, Belinda Stickle