How to prepare for retirement with adult children living at home

You hoped to be empty nesters by this stage of your life, when retirement rests on your doorstep. However, there’s just one glitch – you have grown children still living under your roof.

Don’t fret. There’s hope. Many parents have figured out ways to support and encourage smart financial habits in their adult children living at home without neglecting (or draining) their retirement savings. Learn steps you can take to make this happen.

Adult children living at home — the facts

For the first time in more than a century, more young adults are choosing to live with mom or dad than with a spouse or partner, by themselves, or with someone else. In fact, almost 33 percent of Millennials ages 18 to 34 live with a parent. In comparison, 23 percent of people in the same age group lived with a parent in 1960.1

This trend isn’t going away. For example, instead of making a nest of their own, 37 percent of college seniors planned to return to their parents’ home after graduation.2

There are many reasons why young adults are boomeranging back to the nest. More than a decade after the 2008 financial crisis and Great Recession, jobs are returning. However, although just 5.1 percent of 25- to 35-year-olds were unemployed in 2016 (compared to 10.1 percent in 2010), the percentage of people in this group who were living at home rose from 12 percent in 2010 to 15 percent in 2016.1

A few reasons are the high cost of home ownership, as well as college loan repayment, which averages $400 a month.3 These young people’s fresh-out-of-college jobs just don’t pay enough to care for all of their financial needs.

That said, your grown child’s financial expenses shouldn’t become your burden to bear.

Be open and honest about goals and plans

You and your child find yourselves living under the same roof again. But this time you’re both a little older. And with age comes wisdom.

This means you understand the importance of communication — in both the big-picture and day-to-day stuff. Ask him about both his long-term and short-term plans and goals. (It doesn’t need to be an inquisition, but rather a conversation.)

Let’s say your child has a job but doesn’t earn enough money to live on his own. Financial goals might include:

  1. Putting money into an emergency fund for when he is on his own (that three to six months’ worth of income will come in handy for an emergency car repair or ER visit)
  2. Taking full advantage of his employer’s retirement benefits
  3. Saving enough money to put toward a security deposit on an apartment or a down payment on a house.2

Consider hiring a financial advisor to meet with your child to help establish financial goals — many times a one-time session is all that’s needed.4

You’re happy to help your child by opening your home. But you do eventually want him to fly the nest – for good. So, be sure to agree upon an end date when your child should strive to be flying solo.

Whether it’s a year, 18 months or three years, openly communicate an agreed upon date, and be open to making any needed adjustments if circumstances change.

While living at home, your adult child should contribute to household expenses by paying rent, for groceries, and perhaps utilities. She can also contribute to household chores. Maybe you can save some money by canceling your lawn or snow removal service since you have an extra set of hands to help with these tasks.

A positive aspect of your child returning home is that you get to reconnect. You’ll have the opportunity of spending time with the child you raised – and getting to know him in a different light.

Keep your retirement goals in check

Many parents of adult children are cutting into their retirement savings to provide for them financially. Four out of five parents will spend double the amount on their kids as they do saving for their own retirement.5

Groceries (37 percent), cell phones (22 percent), car expenses (30 percent), and student loans (18 percent) are just some of the expenses parents are partly contributing to.5

Don’t put your retirement at risk

If a child moves back home, keep contributing the same amount to your retirement as you do now. And don’t do it by dipping into your savings or taking out loans from your retirement account. And don’t take on additional debt.

Maybe you’re among the two-thirds of parents over age 50 who’s given financial support to a child over the age of 21 in the last five years.4 The money parents are giving to their adult children isn’t chump change. On average, it adds up to be about $6,800 a year.4

That money could grow significantly in a tax-deferred retirement account that averages 6 percent annual gains. Putting away $6,800 annually for 10 years could grow to more than $100,000.4 That’s a lot of money you can save for your golden years.

Not sacrificing your retirement is imperative for your financial future as well as the health of your relationship with your children. You don’t want resentment to build between you. So don’t delay having a conversation about how having them live in your home could be impacting your future.3

Encourage good financial habits in your children

Financial habits your child develops now can last a lifetime. And she has a great opportunity to develop good ones while living at home with you.

And if you’re subsidizing your child’s living expenses, he or she can skip purchasing those “must-have” luxuries. 

Also make sure he or she understands to use credit wisely. Encourage him or her to pay off any current debt and not take on new debt. This means not opening a credit card (no matter how much money you can “save” by doing so) at a favorite retail store.

Make your wishes known

You are determined to not let anything stop you from enjoying your empty nest – once again. However, unforeseen events can happen at any time.

It’s a good idea to review your will and any directives and beneficiary information to ensure everything is up to date, in case anything should happen to you while your child needs to live under your roof.

This new living situation won’t last forever – so take advantage of and enjoy your family time together. You’ll be glad you did.    

Want more retirement preparation tips?

Visit the retirement section of our Insights & Tools library.    

Read articles

1. Kagan, Julia. “Kids In Parents' Pockets Eroding Retirement Savings (KIPPERS),” Investopedia.com, April 11, 2019.

2. Konrad, Walecia. “When your adult child moves home: the surprising benefits for Mom and Dad,” Considerable.com, September 25, 2018.

3. Haller, Sonja. “Adult kids are robbing parents of retirement. So mom and dad could be taking their jobs,” usatoday.com, April 24, 2019.

4. Harris, Diane. “How to stop your grown kids from ruining your retirement,” forbes.com, November 29, 2017.

5. Herron, Janna. “Paying for your grown kid’s rent and vacation? How to help without risking your retirement,” usatoday.com, October 2, 2018. 

DOFU 7-2019
898827