Parents have long played a role in supporting their children as they navigate the challenges of adulthood. From helping with weddings to contributing to home purchases, parental financial assistance has been a common thread. However, a new trend indicates that this support is extending further into adulthood, potentially putting parents at risk of sacrificing their own retirement savings.
According to a recent report from the Pew Research Center, an astounding 59% of parents have provided financial assistance to their young adult children in the past year.
Eliminate your late tax debt
Each year, the IRS forgives millions in unpaid taxes. If you have more than $10,000 in tax debt, or have 3+ years of unfiled taxes, you could get forgiveness too. You might be eligible to lower the amount you owe, or eliminate your tax debt completely.
Easy Tax Relief could help you lower or get out of your tax debt for good. They’re well respected in the industry and have been recognized for their ethical standards when dealing with tax debt. While most tax companies just put you on a payment plan and file your taxes for you, Easy Tax Relief talks to the IRS directly. They can help you pay off your tax debt faster while potentially reducing what you owe.
Important: Not everyone will qualify. To take advantage of this special program you must owe more than $10,000 in past-due taxes.
Why kids need the extra support these days
The extension of parental financial support into adulthood is a result of various factors. Younger generations today take longer to achieve traditional adult milestones, and the costs associated with these milestones have increased compared to previous generations. It's harder than ever to break out of the paycheck-to-paycheck cycle and save money.
In short, it’s harder for today's young adults to launch than it was for their parents.
Additionally, a growing wealth gap between older and younger Americans provides some parents with the means and motivation to assist their adult children. As a consequence, adulthood no longer signifies financial independence from parental support.
How parents are helping
For individuals like Kami Loukipoudis and her husband Adam Stojanik, both 39, the rising costs in expensive real estate markets, such as New York City, made parental assistance crucial, reports the Wall Street Journal. The couple needed help to make a down payment on their apartment. While they could manage the mortgage, the down payment seemed insurmountable, prompting Loukipoudis's mother to contribute the funds needed.
Such financial aid has become increasingly common as young adults face challenges in achieving financial milestones independently. In fact, 38% of homebuyers under 30 receive down payment assistance from their parents according to Redfin.
But what about retirement?
This assistance threatens to push parents who are helping back on their retirement plans. While having their children live with them to assist them financially has improved the parent-child relationship for 74% of older parents, 18% report it has had a negative impact on their finances.
If you find yourself in this situation, here are some tips for finding balance between your children's needs and your retirement needs.
1. Establish clear boundaries
When providing financial support to adult children, it's crucial to set clear boundaries. Define the extent of assistance and establish a plan for gradually reducing or eliminating support over time.
2. Encourage financial independence
Foster financial independence in adult children by encouraging responsible financial practices. Provide guidance on budgeting, saving, and making informed financial decisions to help them become self-reliant.
3. Prioritize retirement savings
Parents must prioritize their retirement savings to secure their financial future. Allocate a portion of income specifically to retirement accounts and investments, ensuring a steady accumulation of funds for post-retirement life.
4. Maintain open communication
Maintain open communication with adult children about financial matters. Discuss the importance of both generations securing their financial well-being, emphasizing the need for parents to safeguard their retirement savings.
5. Explore alternative support structures
Instead of direct financial aid, explore alternative support structures. Help adult children find affordable housing options, guide them in pursuing educational opportunities with lower associated costs, or assist in developing career paths that lead to financial independence.
Bottom line
While supporting adult children is a common and understandable practice, it's essential for parents to strike a balance between helping their children and safeguarding their retirement savings. Setting clear boundaries, encouraging financial independence, and prioritizing retirement savings are crucial steps in navigating this financial challenge.
Ultimately, finding alternative ways to support adult children without compromising parents' long-term financial security is key to a balanced and sustainable approach to family financial dynamics.
More from FinanceBuzz:
FinanceBuzz is not an investment advisor. This content is for informational purposes only, you should not construe any such information as legal, tax, investment, financial, or other advice.