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Parents struggle to keep retirement savings as adult children stay home longer

Children are flying the coop slower than they ever have, and it’s cramping the retirement plans of their Canadian parents.

Instead of socking money into retirement nest eggs, parents in increasing numbers are helping support everyday living expenses such as groceries, cell phones and car payments of their cling-on adult kids.

“I am worried about my retirement,” says Jackie Barber, a 49-year-old single mother from Winnipeg, who is supporting 21- and 24-year-old sons. “I am probably going to have to work longer because my kids are taking so long to get it together.”

She’s not alone. A CIBC poll shows that 66 per cent of Canadian parents are feeling the financial pinch thanks to the economic dependence of adult children (kids over 18 and not in school). Issued in September, the poll found that one in four parents are spending more than $500 a month to pay for their kids’ groceries and rent. The extra expenses end up postponing retirement and limiting discretionary spending on enjoyable pursuits such as travel or home improvements.

“I don’t do things,” says Barber, who works as a client services manager with a financial planning company. “I’m not taking care of myself and enjoying my life because I’m looking after my kids. They go for coffee every day – I don’t.”

The CIBC poll was prompted by 2011 Census data that showed 42 per cent of the 4.3 million young adults between the ages of 20 and 29 lived at home, compared to 32 per cent in 1991 and 27 per cent in 1981.

While the survey didn’t address why more kids are staying home longer, a lack of employment, expensive housing costs especially in major cities and helicopter parenting styles are likely culprits, says Jamie Golombek, managing director of tax and estate planning with CIBC.

To keep your retirement savings intact, Golombek recommends parents meet with an independent financial advisor to hammer out a plan for your financial future. Once, you’ve created a budget, sit down with your kids and tell them what you can and can’t afford to cover.

“In our survey we found 35 per cent of parents were helping their kids pay their cell phone bill,” he says. “Clearly a cell phone is a necessity especially if you’re looking for work. But if a child cannot even pay their monthly cell phone, there’s a problem because clearly they should get a part time job or something to be able to come up with these discretionary expenses every month.”

It's reasonable to want to help adult children financially, but doing so can foster dependence. (CNBC)
It's reasonable to want to help adult children financially, but doing so can foster dependence. (CNBC)

Today’s parents are guilty of spoiling their kids and, as a result, often don’t know where to draw the line, says Karen Diamond, a retirement income specialist based in Winnipeg. Parents need to set and stick to priorities on how they plan to help their children become self reliant.

“Kids quite often don’t want to be dependent,” says Diamond. “So parents need to take responsibility for drawing a line and setting the limits for their kids and even defining how they would like to help the kids. An example would be, ‘I would like to give you some money for your first house but I can’t afford to do both. I can buy you groceries now or give you money down the road for something important.’ “

But Edmonton’s Jim Yih, a financial planner who specializes in retirement planning, says tough love may be the only way to go at a certain point.

“When you help someone too much odds are they don’t stand on their own two feet,” says Yih. “If you want to make your kids financially independent, let them become financially independent.”

If that doesn’t work, you’re likely looking at a handful of options such as working longer than initially anticipated or working part time once you retire to supplement the gap in your retirement savings. Instead of approaching retirement cold turkey, many may need to look at what Yih describes as the new retirement -- a transitional approach, which means going from a five-day work week to perhaps two or three days.

Another option, he says, is to rein in highfalutin dreams. If retirement means big price tag items such as first-class flights and champagne, it may be time to re-evaluate your dreams.

Barber thinks schools need to pick up the ball when it comes to financial literacy, especially since many children don’t listen to the advice of their parents. In the meantime, she’s hopeful her children will learn to become independent.

“If they don’t I will sell my house and run,” she half jokes. “I know parents who do that. They sell their house and say to their kids, ‘You have to find somewhere else to live.’ They downsize into a one bedroom apartment or small condo.”

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