One of the biggest surprises for many baby boomer clients comes when their adult children return to live at the family home. Their continuing dependency, after the completion of their schooling, can be a shock for their sandwich generation parents, both financially and emotionally.
“Boomerang kids have been a huge problem. I don’t think there’s been a higher incidence of this ever happening [before] in Canadian society, where the kids go to school and have huge student loans, then go home to their parents with that debt,” says Laurie Campbell, CEO of Credit Canada Debt Solutions Inc.
This makes the sandwich-generation issue distinctive for baby boomers, compared to generations before them, says Jane Olshewski, manager of financial life planning at Investors Group.
“Their children are taking longer to launch and become self-sufficient,” Olshewski says. “The boomers also have parents who are living longer than they ever expected. So, boomers are headed towards that perfect generational storm, as we continue to see this longevity revolution happening.”
While these clients may fully back the need to support their aging parents — an Investors Group survey on sandwich boomers found 66% feel they are repaying their parents in this way — 25% felt that supporting their adult children was an unfair burden. “A chunk of them were saying, ‘I wish they were more self-sufficient. I wish I didn’t have to do this,'” says Olshewski.
The poll revealed that more than half of its boomer participants expected that their children would be fully financially independent by the age of 25. However, six out of 10 boomers were, in fact, still supporting adult children over 25.
In helping clients address this increasingly common situation, financial advisors should focus primarily on protecting their clients’ retirement income. If supporting the child is taking a toll on a client’s nest egg, a frank conversation may be necessary, according to Olshewski.
“The advisor needs to say, ‘This is the impact it’s having on your retirement. Let’s talk about what needs to change,'” she says.
Research shows that these so-called boomerang children are indeed affecting some boomers’ retirement plans. According to a TD Canada Trust “Boomer Buyers Report” released last October, the majority of boomers surveyed planned to move once they retired. But of the one-third who wanted to downsize, 17% were prevented or delayed from doing so because of adult children living at home.
In cases where the dependent child has a job, there are various potential solutions that advisors can urge clients to consider. The client can require them to start paying rent, for instance. Or, suggest that the child put away a certain amount of money from their paycheques each month. This can be treated as an investment plan to help them save towards a future down payment on their own home.
Advisors can also offer to talk to the child directly about getting their debt under control and their savings on track.
“If the boomer is [financially supporting the adult child] because they want to educate their child on paying down debt while saving up for a home, that’s a segue for the financial planner to talk to the child and help them with that as well,” says Olshewski.
In cases where the boomer client is desperate to see the child move out, the advisor could suggest that the parent accompany the child to the bank to arrange a personal loan and an appointment with a credit counselor. The parent could also set a target move-out date — in writing — to drive the point home.
Campbell cautions, however, that this doesn’t mean telling the boomer client how to be a parent. The advisor should try to get the message across, without dictating to the client.
“If a financial planner comes out sounding too directive, it’s going to be a combative relationship,” Campbell says. “They are there to assist and guide and support.”
This is the last in a three-part series on the sandwich generation.