How Supporting Adult Children Can Ruin Your Retirement

Joseph Meyer
Written by
Last update:

How Supporting Adult Children Can Ruin Your Retirement

As we get older, it is important to realize that our adult children are no longer kids we should be supporting (financially or emotionally) with irresponsible spending.

As parents, we do not have the luxury of not supporting them, but we should set appropriate boundaries on how we choose to support them.

Being a parent means we choose to support our children and their endeavors with their finances up to a certain degree, in a responsible manner, at the appropriate times…. and that is all.

There is a clear line between supporting and spoiling or even enabling, and it is not as blurry as we might hope it is. If you have spent your life enabling your children, you might have to change your view when providing for your old age.

In today’s challenging economic times, adult children are choosing to return home after college and not setting out on their own to struggle. There are now more parents helping their adult children and moving in together. This is because, in many cases, adult children have not found jobs that pay enough to support themselves, so they choose to move back home. Also, many parents are being asked to help support adult children financially because they have been laid off or had their hours reduced.

4 Reasons You Should Put Retirement Savings First

Supporting your adult children should be a secondary motivator when planning for your retirement. If you’ve been a parent who has conserved during your pre-retirement years to enjoy retirement, you know firsthand how much it chafes to support your adult children financially. And yet, even if you haven’t had the pleasure of being forced into supporting your children, it’s quite likely that you’re aware of someone who has.

A recent study by the St. Louis Fed found that one out of every five households with a head aged 55 to 64 were still supporting their adult children.

It’s not only financially draining for the over-55s, it can also set them back financially. By continuing to support your children past 55, you are delaying your retirement savings and losing out on the potential to generate substantial income during your post-retirement years. Delaying your financial independence when planning for retirement can put your retirement in jeopardy.

Here are some of the reasons why retirement planning should take precedence over supporting your adult children.

Reason #1: Giving to adult kids can create ongoing dependency issues.

Sharon Krowen, PhD, a mutual funds and personal financial adviser and author of “Kid Money: Raising Financially Fit Kids,” says, “The biggest mistake parents make is continuing to financially support adult children. Money can’t make up for the emotional gap between parent and child, but if parents want to do it for the sake of money, it’s better to teach kids how to manage the money and then let them take or leave the money.”

Supporting adult children can create a sense of dependency on the part of adult children if the support isn’t based on the child “earning” money or being given money as a result of meeting a legitimate financial need.

Paying for your children’s college education, for example, may not be a bad thing if you create a plan prior to the education start time and make significant changes to your retirement plan based on your new life goal.

Paying for extracurricular activities and vacations is another area where parents can set themselves up for problems. A better option may be to pay for half and have the child pay for the other half. And this can be a good time to teach the value of dollar.

#2: You may burden your children later in life.

It is natural to feel joy for your adult child as their lives progress and you become a loving grandfather. However, this joy may cloud your judgment and you may start giving heavily to your adult child.

This may stem from misplaced guilt, as it may feel as though you have given little to your child growing up. When they start making more money, you may feel obligated to give back.

It’s also a common mistake to give in to emotional pleas from adult children who feel that they’re not making enough money. Giving money to adult children in hard times may help but it’s not a long-term solution to their problems.

Giving generously to your adult children can bog you down financially. You may find yourself unable to afford items such as assisted living or a major bill such as a new car … because you gave large amounts of money to your children.

Keep in mind that the rules of inheritance upon your death can differ from those in place when you were alive. Your estate may not be distributed evenly among your family members. Rather, it may be given to only one of your children.

Giving a lot of money to your children now can destroy the legacy of your retirement. It can make leaving a large inheritance unachievable.

#3: You can’t borrow for retirement.

A huge chunk of the money that you plan on using in your retirement years is supposed to come from Social Security. And because of the way the system is designed, it’s financially advantageous to delay starting to collect it as long as possible.

This deferred gratification gives you more time to put your money to work for you and grow it so it’s worth more in the future.

The downside is that if you start collecting Social Security anytime before full retirement age, it will be reduced by 25% (30% if you’re still working). But once you start collecting, it will never increase.

The system is also designed so that the only way you’ll get the full Social Security payment amount is to wait until full retirement age. That’s why it’s one of the biggest mistakes that you can make to take Social Security before retirement or to delay past full retirement age.

So where does that leave adult children? If you’re not fully retired, you may be able to delay taking Social Security till the time that your children are fully grown and in college.

#4: You may be setting your kids up for failure later on.

Instead of helping your kids get started in life, you may be holding them back. If you pay your kids’ rent, it’s hard for them to learn to manage their money and motivate themselves to save and work. If they’re constantly in debt to you, they may never learn to make smart financial decisions and give themselves an opportunity to be financially independent.

Final Thoughts

You may be thinking that this doesn’t apply to you ” I’m not a parent.

But did you know that in addition to the amount of money you have for retirement, how long you stay retired makes a big difference in how well you live?

Longer retired lives are not necessarily better lives.

If you don’t plan for retirement properly, you can end up with a low income and a high standard of living.

But if you do plan for retirement properly, you can have a high income and a low standard of living.

There is no one best way for everyone.

This means that you have to think about your own situation and find your own best way.