The Great Recession left many Americans homeless and jobless. With few options, many adults who had left the nest years or even decades before found themselves back at home, under their parents’ financial wings. Now, with an economic recovery underway, one might think that fewer young adults are living with their parents, but that’s not the case. According to a Pew Research Center analysis of U.S. Census Bureau data, it’s actually becoming more common for young adults to live at home, whether because they “boomeranged” back or never left to begin with. And what’s more, they’re staying for longer stretches. How are these boomerang kids affecting their parents’ retirement?
If you have more people in the house, odds are you’ll be spending more money each month on everything from food and utilities (especially your electric, gas and water bills) to routine maintenance and repairs. Sometimes the added expenses extend well beyond the walls of the house: Many parents end up paying for their boomerang child’s car payments, auto insurance, gas, health insurance, medical expenses, spending money and the like.
These unforeseen expenses can be destructive to retirement budgets that may have been planned years in advance, consuming your emergency fund and making it difficult to stretch that nest egg. If your child is in a financial position to do so, set some rules from the beginning regarding how much money he or she will contribute to the household’s living expenses. If your kid can’t contribute now, establish guidelines for when you expect it to happen. Once that dollar amount is set, do what you can to stick with it and avoid bailing out your progeny.
When to Take Social Security Benefits
The added financial burden may lead some retirees to start collecting their Social Security benefits earlier than they would have otherwise. If you start collecting benefits at age 62 (early retirement age), you’ll pay a penalty of 25 percent or more in your monthly benefits. If you start collecting at age 66 or 67 (the full retirement age, depending on when you were born), you’ll get your full benefit, and if you wait until age 70 (delayed retirement), you’ll get a bonus—anywhere from 5.5 percent to 8 percent per year, depending on your age.
As a basic example, if you were born in 1943 or later and get $1,000 a month at full retirement age, you would receive only $750 per month by collecting at age 62, or $1,320 per month if you wait until age 70. The difference? Almost $7,000 a year if you wait until you’re 70 to collect, versus starting when you’re 62. If at all possible, stick to your original plan, even if it means being firm when asking your child to pay a fair share of the expenses.
The Decision to Downsize
Social Security isn’t the only thing you may have to delay. Many retirees who had planned on downsizing—moving to a smaller or less expensive house or an easier-to-maintain condo—will find themselves staying put to accommodate the extra person in the house. This has a couple of direct consequences.
One is lost income from the sale of the house, which means less spending money. The other is that maintenance and repair costs are likely to be higher if you stay in your older, larger house. There are, of course, other ways of downsizing, but keep in mind that a smaller house or condo might still work, even if you have that additional person there. Odds are you would still have an extra bedroom for the kids and grandkids.
Whether you downsize or not, there will still be housework to do, including laundry, food shopping, cooking, cleaning, changing the litter box, yard work and the like. You may have had a difficult time getting your kids to do their fair share as teenagers, but now—when you are all adults—it can be plain awkward. To avoid any problems, try creating a schedule that outlines the daily household jobs for which each person is responsible, as well as weekly and monthly chores (such as mowing the lawn and changing the air filters).
Your child may set this up independently to show a willingness contribute. But in some cases you might end up doing everything if it’s not spelled out in a schedule—and that probably is not how you wanted to spend your retirement. You likely understand your kid well enough to know what type of schedule you’ll need to keep things fair.
Boundaries and Communication
It can be difficult for retirees and boomerang kids alike to adjust to this unexpected living situation. Setting boundaries from the beginning—for expenses, housework and even curfews (they may be adults, but you probably don’t want them waking you up in the middle of the night)—gets everybody on the same page and makes it easier to get along.
It’s also important to keep the lines of communication clear, so everyone knows what to expect. It’s best if parents and boomerang kids can keep an open mind. You never know: Spending time together as adults could bring you closer together. Just remember to set a few boundaries.