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How to Balance Boomerang Kids & Your Retirement

Retirement Planning
parents help adult daughter unload van and learn to balance their boomerang kid and retirement planning

If your son or daughter recently graduated from college, there's a chance you may be familiar with the "boomerang kids" phenomenon. This is when your adult child moves back home, typically after college, in order to get their finances together, and often while seeking out their first big job.

According to U.S. Census data released in 2017, as of 2015 more than one-third of young adults live at home — and that figure is up by 8 percent since 2005. But how can parents plan for retirement when their adult children are back home eating food, running the water and using up electricity?

The good news is there are strategies for making retirement planning work when your boomerang kid (or kids) come back home.

Why Boomerang Kids Move Back Home

But before discussing how to manage boomerang kids, it's worth asking why so many of them are moving back home in the first place. It's certainly no secret multigenerational living is on the rise in the U.S. Probably the most obvious answer is student loan debt. The average student debt load stands at $37,172 — and that can be a lot to deal with right out of the gate. But there's more to it than just debt: Many graduates are still having a hard time finding good, steady jobs, even after graduating with a bachelor's degree.

If your adult child is in either (or both) of these categories, there's a decent chance they may come back home for a while. The real issue isn't whether you should or shouldn't let them move back in — the real issue is how all of you are going to handle this new living situation as adults, especially when it comes to saving for your own retirement.

First & Foremost: Expectations

Ultimately, you and your own boomerang kid(s) are more likely to coexist successfully by clearly defining expectations with one another. Before even beginning to think about adjusting your retirement planning, you'll need to talk about those expectations.

How much student loan debt does your son or daughter have? Do they have a job lined up? How much are they earning? Will they be contributing financially? If so, when will they start contributing? And do they have plans to move out at a definite future point? The answers to these questions will help you better plan for your specific needs and circumstances.

A possible financial solution would be to charge your adult child rent and then use that money to fund a retirement account. The rent probably shouldn't be at market rates, but should at least be enough to give your son or daughter an opportunity to learn some adult financial responsibility.

Your adult child can pay the reduced rent while also working on getting on their feet — and you'll receive some money for your retirement. You could also have your child pay their share of the utility bills. After all, you're all using up water and electricity! If you're over the age of 50, you could always use your children's bill payments as catch-up contributions to your retirement accounts. Your kids should be paying their own bills, too, as soon as they're able to — these might include transportation, food and cell phone service.

How much your child contributes financially greatly depends on the situation, however, which is why it's so important to set clear expectations up front. If they don't have a job right away, you'll probably need to layer these expenses in as their financial situation improves. The point is to make sure they're contributing financially so you're not supporting extra people as you save for retirement. This also helps ensure your adult child has something at stake while they learn financial responsibility.

Talk to Someone About Managing Expenses

So yes, having your son or daughter move back home as you near retirement can definitely throw a wrench into your retirement plans. The transition can also be an awkward one for everyone involved because, ultimately, you're all now adults. While this means you can't treat your son or daughter like a child, it also means they can't treat you like a bank.

If you need help getting through the first few months or figuring out new strategies for retirement, you may want to speak with a financial representative. They'll be able to help you figure out how much you can continue contributing to retirement plans, where to find additional savings when your situation changes, and where you can set financial boundaries with your boomerang kid.

Juggling boomerang kids with your retirement plans doesn't need to be difficult. By clarifying expectations and having your son or daughter contribute financially, you can get back on track to help ensure you meet your retirement goals. As a bonus, you can use this as an opportunity to teach your child crucial financial responsibility, which they'll need to know if they're to move out sooner rather than later.

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