Failure to launch

Psychology Today columnists note that the phrase “failure to launch” is a common way to describe young adults who have failed to move to a state of independence. The idea is that launch refers to key life milestones, such as leaving the house or getting married. Aside from being a popular movie, failure to launch is an actual phenomenon, usually involving adult children ages 18 to 28 who lack confidence in their skills sufficient to live on their own.

But, it doesn’t explain all adult children who live at home. Many adult children live at home for short periods of time to ride through unemployment or recover from other financial crises (like divorce).  Some cultures also consider it normal for children to live at home until they get married.

And, the trend of adult children living with parents is on the rise. According to research conducted by the Pew Research Center, Americans ages 18-34 are more likely to live with their parents than independently, with friends, partners or spouses. In that age group, nearly one third of Americans live at home with a parent. That is the highest ratio of adult children living with parents in 130 years.

While financial factors obviously play a huge role in why adult children are staying home with their parents, the key could also be that adults and kids like each other more than ever. Pyschology Today also reported that “in a 2013 poll of parents of 18-29-year-olds, about three-quarters said their relationship with their adult child was mostly positive….”

For parents nearing retirement, how does this failure to launch phenomenon affect retirement? It depends on the status of the child living at home and the retirement readiness of the parent. It used to be assumed that those in their 60s would contribute the most to their retirement accounts. The theory was that with college expenses behind them and mortgages nearly paid off, the parents would have more cash to contribute to their accounts. But with children lingering in college and possibly returning to the nest in need of that cash, the assumptions may have changed but possibly, not in a negative way.

On the one hand, adults moving into retirement may feel more confident with shifting to a limited or fixed income if they have a wage earner living at home, even if that adult child makes too little to obtain a place of their own. At the same time, having an additional person in the home increases costs for utilities and groceries. The impact of the child living at home can be positive if the child is able to contribute enough to offset their costs and possibly add a little extra green to the nest.

Retirement analysts also cite as a positive to those close to retirement having adult children living at home that adult children can provide assistance with household chores that become harder, such as snow shoveling or trash removal. These chores, if performed by a contractor, would obviously increase household costs. Additionally, having children at home to help with chores may free up time for the parent, allowing them to volunteer more or pursue other activities that would be beneficial to health and mental wellness.  Community engagement through volunteering is associated with positive health outcomes for seniors.

For those parents with adult children living at home that don’t contribute rent or groceries, the impact on retirement may be significant.  The Wall Street Journal suggests that having an adult child return could cost parents between $8,000 or more and $18,000 a year, depending on how much parents pay for non-essentials.

How can plan sponsors assist soon to be retirees harness the upsides (additional help with incidentals like groceries and utilities) with the down sides (potential loss of catch up funds for retirement accounts) of those adult children at home? It may be as easy as simply charting out how the adult children benefit the retiree and cost the retiree and helping that employee balance the equation. Certainly asking adult children to contribute more in rent or groceries can be a challenging conversation for a parent nearing retirement, but sponsors can help by providing training and webinars from a neutral perspective.