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Is Your Boomerang Child Sinking Your Retirement Plans?

Filed under: Retirement, Life Events

It’s a day every parent dreams about. Your child finishes their education, enters the working world and embarks on a life of independence. For many baby boomers, however, that day hasn’t yet arrived. Although their children are grown and are done with school, they haven’t yet become financially independent.

The phenomenon is so prevalent that it’s inspired its own term—“boomerang kids,” referring to the grown child’s tendency to return home and rely on support from mom and dad. In fact, a study by American Consumer Credit Counseling found that one-third of all American households provide some level of financial support to grown children.1

While it’s natural to want to help a struggling child, that support can also cause serious issues for the parents. If you’re in this situation, you likely know the challenges. You may be approaching retirement, or you may be retired already. Your funds need to be working toward supporting your retirement, not supporting your grown children.

The good news is that there are steps you can take to resolve the situation in a way that is positive for both you and your child. Below are three helpful tips to guide you through the process. Try implementing these steps to help your grown child become independent.


Set a phased independence plan.

It would be nice if you could flip off the financial support and your child could immediately become independent. Unfortunately, that may not be possible. Your child could be facing very real financial problems, such as significant student loans or a soft job market.

Instead of turning off the support all at once, set a phased transition schedule. Establish dates at which you will transition bills to them or reduce the amount of money you provide. At the same time, help them develop a budget, apply for jobs and perform other tasks that are important for improving their situation.

If you cut off the support gradually over time, you may prevent them from needing support again in the future. You may also avoid any hard feelings and protect the relationship.


Set firm limits.

Your support of your child shouldn’t be open-ended. If you make the decision to support your child, be sure to put limits on that support. Set a maximum amount you will provide. If the support is a loan, draft a repayment schedule and loan agreement, and treat the arrangement like a legal transaction.

Also, place limits on yourself. Set rules for what you will and will not do. For instance, you may state that you won’t tap into your IRA or reduce your retirement contributions to support your child. Or you may state that you won’t take on any kind of debt to fund the support. Put the rules in writing to make them real.


Share your financial challenges with your child.

Young people often don’t have the same perspective on money as those approaching retirement. They could have a different definition of what makes a person wealthy. They may assume that because you have hundreds of thousands, or even millions, of dollars in savings, you can afford nearly any request.

Sit down with them and share your retirement needs and the obstacles you still have to overcome. Show them why you can’t take money out of your savings at this time. Better yet, bring them to a meeting with your financial professional. That may make them think twice about asking you for help.

Do you need help supporting your child while also protecting your retirement? Contact us at Ambrose Financial & Insurance Services in Walnut Creek, California. We can help you develop a plan that works for both you and your child. Let’s connect today and start the conversation.


This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.

CA Insurance License No. 0F95178

16067 – 2016/8/31