When Mom and Dad Retire, and Kids Still Need Financial Help

I get by with a little help from my folks.

Most parents want to help their children however they can, and most kids appreciate the support. But that dynamic can get complicated when the parents are retired and the children are fully grown, and it’s increasingly common. More than half of millennials and one-third of Gen Xers still feel financially dependent on their parents, according to a Northwestern Mutual survey. For advisors, that can create a delicate balancing act: helping clients support their families without jeopardizing their own financial security.

“Some kids and grandkids eventually become independent, others never do,” said David Demming Sr., president of Demming Financial Services. “At some point, many parents have to cut the umbilical cord and stop the money.”

The Kids Aren’t All Right

When Gen Xers and millennials say they’re not financially independent, that can mean a range of things, said Daniel Kopp, founder of Wise Stewardship Financial Planning. Parents may be covering recurring expenses such as rent, groceries and insurance. In other cases, they may be helping with a down payment on a house, paying off credit card debt or simply serving as a financial safety net.

“The deeper issue is often not just dollars,” Kopp told Advisor Upside. “It is a delayed transition.” Adult children’s financial dependence can reflect long-standing family dynamics, anxiety about letting go or uncertainty about what financial adulthood should look like, he added. Kopp recommends that any assistance come with clear expectations and a timeline. “The trouble starts when the support is open-ended, unspoken, or begins to undermine the parents’ own financial security,” he said. “I want clients to be able to answer a few basic questions. What exactly are we paying for? For how long? Under what conditions? And at what cost to our own goals?”

This Has Gone Too Far. In some cases, the situation can become financially damaging. Robert Persichitte, founder of Delagify Financial, said he works with retirees who are overspending their assets by roughly $2,500 a month covering their kids’ bills. “The clients’ children could be financially dependent, but mom and dad still want to support them,” he told Retirement Upside. “They haven’t cut off the kids yet, but it’s a conversation we are having on mom and dad’s side.”

The survey also found:

• Boomers, Gen Xers and millennials all agree achieving financial independence is harder today than it was for previous generations.
• Gen Z, however, remains optimistic, with 82% saying they expect to become financially self-sufficient. 

“Youth tends to come with optimism,” Kopp said. “The question is whether confidence is paired with habits, skills and a realistic timeline.”