Nest Eggs Are Dwindling as Empty Nests Fill Back Up

At age 55, Kathleen Walker, who works at an insurance agency, and her husband, are still providing financial assistance to two of her three grown children. The oldest, age 38, lives in his own apartment, but makes only $12 an hour as an electronics technician at a local family fun center.  Since he also pays child support, his wages barely cover basic necessities, so Walker contributes to gas and groceries. The youngest, age 23, is an unemployed part-time student and lives in the Walker's house with her boyfriend, who comes from a broken home. Neither pay rent or contribute to household expenses. "I'm angry, apathetic, discouraged, and generally disgruntled that I'm spending my declining years working to support them when I should be enjoying life," she says.

Walker's situation is becoming far more commonplace, largely due to extreme financial hardships among the younger generation. "We're seeing greater numbers of empty nesters not being empty nesters," says Jean Setzfand, AARP's vice president for financial security. Recent Census data shows that 5.5 million young adults moved back with their parents in 2010, a 15 percent increase from 2007. The percentage of men ages 25 to 34 living in their parents' home rose from 14 percent in 2005 to 19 percent in 2011, while the gain for women was 2 percent. 

Much of that can be attributed to a widening wealth gap between generations. A report this month by the Pew Research Center found that in 2009, the median net worth of households headed by an adult age 65 or older was 42 percent more than that of their same-age counterparts in 1984. The net worth of a typical household headed by an adult under the age of 35 in 2009 was 68 percent less than that of their same-age counterparts in 1984. The current age-based wealth gap "is unprecedented," the Pew report says, ballooning from boomers making 10 times more in 1984 to 47 times more by 2009.

Though it’s not unusual for the older generation to be in better financial shape as they accumulate wealth with age, young adults "just aren't keeping up with the gains of older households," says Richard Fry, senior economist for Pew. He says delaying marriage, which is associated with building a nest egg; spending more time in school; and high unemployment among young adults are big factors. It's unclear whether this situation will just delay the time it takes for the younger generation to accumulate wealth, says Suzanne Bianchi, a professor of sociology at the University of California, Los Angeles, or if they’ll never catch up. But she says that the affluence of their parents' generation also gives them the leeway to take more time before entering the work force. "You can take more risks if you have that parental safety net," she says.

The record-high 18 percent unemployment rate among those ages 18 to 29, twice that of the general population, doesn't help. "The unemployment rate for those with a college degree is twice what it was four years ago," says Carl Van Horn, a professor of public policy and director of the John J. Heldrich Center for Workforce Development at Rutgers University. Recent college graduates are having trouble getting into the labor market, so they're forced to accept part-time or minimum wage jobs and rely on their parents for financial support, he said. 

This means that parents are providing more financial assistance than ever to their grown children, everything from incidental living expenses to assistance repaying student loans and help with down payments on a starter home. TD Ameritrade's July 2011 Investor Index Survey found that 39 percent of Gen X and 41 percent of Gen Y have received financial support from their parents after college, including money for food, rent, and discretionary expenses like cell phones.
Though college grads have historically relied on mom and dad for a little help transitioning into the workforce (33 percent of boomers received financial support from parents after graduating), for boomers, it was usually a one-time event. The financial support for Gen Y is more long-term. A May 2011 survey by the National Endowment for Financial Education found that 59 percent of parents are providing financial support to their adult children when they're no longer in school. "Parents are continuing their financial involvement longer than we expected," says NEFE President and CEO Ted Beck.

Parental assistance in buying a home is extensive, with 26 percent of first-time homebuyers admitting to receiving some form of down payment assistance from a friend or relative, usually a parent, according to a 2011 National Association of Realtors survey. This isn't surprising, since larger down payments are now required, along with an extensive credit history that young buyers lack, says Paul Bishop, the NAR's vice president of research. While parents have helped out in this area in the past, "it's a trend that's increasing," says Timothy Burke, CEO of National Family Mortgage. His year-old firm, which specializes in setting up loans from parents to children for down payments, has benefitted, processing 500 of such loans this year alone.

AARP's Setzfand says skyrocketing college costs are another area where parents feel compelled to help out, either by paying tuition or assisting in repaying college loans. Her concern is for this older generation of parents: "There is a sharing of the burden that's not allowing the older generation to really take care of themselves and prepare for retirement." she says.

A September 2011 survey by the John J. Heldrich Center for Workforce Development found that 35 percent of those who are postponing retirement cite supporting grown children as a primary reason. AARP surveys indicate that a big fear for parents is being a burden to their children, Setzfand says. But "the more they're helping them now, the more they're putting themselves in danger of relying on them in the long run," she says. And that could ultimately prove to be the biggest financial hurdle yet for the younger generation.