Millennials and the boomer parents or grandparents who support them financially are under siege, says a new study that shows the generational squeeze is felt by all.
As more adult children return to their parents' homes to live while they pay off student debt, look for full-time employment or an affordable place to live, the result is that parents' ability to successfully prepare for retirement is being compromised, concludes a recent survey by TD Canada Trust.
Sixty-two per cent feel the "boomerang" situation is preventing them from saving enough for retirement, says the survey of 365 non-retired baby boomers aged 52 to 70.
With one in four boomers saying that they support adult children or grandchildren, 58 per cent are also reporting that this less-than-ideal situation is leaving them feeling stressed about their finances.
"This year it seems as though clients want to open with, 'Hey, Johnny moved back home,'" says Tim Raposo, a senior financial planner with TD Wealth Management in Toronto. "So it is something that is happening more and more."
According to Statistics Canada, the percentage of 25- to 29-year-olds living at home grew from 11.3 per cent in 1981 to 25.2 per cent in 2011.
Children, though, are similarly concerned about the situation. The survey included 523 millennials who ranged in age from 18 to 34 who rely on their parents or grandparents for financial support. Almost 44 per cent are aware of the knock-on effect the situation can have on retirement savings, the survey showed. On top of that, 43 per cent of them said they would be willing to cut costs before asking their parents or grandparents for help.
However, while Mr. Raposo admits that the findings have him concerned about his clients' ability to reach their own retirement goals, he adds that the situation is not insurmountable.
In the best-case scenario, clients can absorb the additional financial burden and stay on course for their desired retirement. For others it might lead to a readjustment of a retirement plan and in the worst-case scenario, a lowering of expectations.
He suggests getting the children to pitch in, if they have a part-time job or other employment, to help cover costs such as utilities or food. Most of his clients are more than happy to help their children establish a good financial footing. In some cases, they are able to give back the money the child has paid, to help with a downpayment or rent once they do move out.
"Having the child stay home for a few more years to help pay down some of their student debt, if that's the case, or just build up a little bit of savings to put toward their own home or possibly just an emergency reserve so that they have some cash on the side, most parents are willing to do that," he says.
Mr. Raposo says that in this day and age, being prepared for any eventuality is a good rule of thumb, and if life does throw some financial curveballs, going over the retirement plan with a financial planner is the best way to minimize the long-term damage.
"We do account for things like emergency reserves or unexpected circumstances," he says. "This would fall into that, where maybe you don't expect that the child comes back home, but we have a plan in place for it."