Many parents are already worried about outliving their nest eggs due to the rising cost of living. When they have to assume responsibility for an adult child moving back to the nest, it can make the goal of a comfortable retirement even harder to attain.
"For parents, it becomes an additional expense they had not planned on, and it does affect the potential for their expected retirement date," said Cameron Short, a senior vice president for Stifel Nicolaus, a Downtown investment firm. "That retirement date could be pushed further out when they are taking care of an adult child they had not expected to."
Grown children -- also known as "boomerang kids" -- are moving back home at an increasing rate, and too often expect a free ride at their parents' expense. A recent survey by the Pew Research Center found 3 in 10 parents of adult children -- 29 percent -- report that the economy had forced a grown child to move back in with them in the past few years.
Problems arise when parents stretch too far financially trying to help children returning home, at a time when they should be padding their own retirement stash to meet skyrocketing health care costs and other needs they will have as they age.
"I know of families that take out home equity loans to pay off debt for their children," said Stacy Julien, AARP finance expert in Washington, D.C. "Nobody wants to put a child on the street. You should do what you can for your child, but don't put yourself in a financial bind.
"It can work if you both have an agreement early in the process so you know what the boundaries are in terms of a time limit, rent payments and chores," she said. "Don't assume your child will come back home and have a strategy. It's nice if they do, but don't make that assumption. Parents may have to assist with that."
While parents may struggle emotionally with the question of whether to let an adult child move back into the old bedroom, the answer could likely come down to a business decision.
Financial advisers say it's important for parents to let children know their financial limitations and their expectations for the child. Will the younger generation pay rent for room and board? Will they do chores around the house? Can they drink alcohol in the house and have overnight visitors? What happens if they disobey rules? Will you set a deadline on how long they can stay?
"If there are no guidelines and no expectations, I've seen it happen where children end up relying on parents for a very long time," Mr. Short said, adding that if the living circumstances or financial arrangement becomes too comfortable, boomerang kids may never want to leave.
The growing trend of adult children moving back home is linked to several negative life events including divorce, substance abuse and unemployment. Add high unemployment and large amounts of student debt and it can be even harder to make ends meet on their own.
Clark University professor Jeffrey Arnett has been examining emerging adults 18 to 29 years old since the 1990s and recently directed the nationwide Clark University Poll of Emerging Adults, which examined their feelings about their careers, their financial independence and their reliance upon and relationships with their parents.
What he found was that parents are not being financially drained as much by adult children moving home as they were being squeezed by adult children asking for help with monthly bills.
"Most parents are providing some financial help to emerging adult children throughout most of their 20s," Mr. Arnett said. "They are helping pay rent, car payments and insurance, and keeping them on the family cell phone plan.
"The cell phone is usually the last vestige of parental support."
His study found parents would rather help children with monthly bills than have them move in.
"Most of the time parents are ready to move on with their own lives and not have daily parenting responsibilities [such as cooking and cleaning] when their kids are in their 20s," Mr. Arnett said.
Eleanor Blayney, a Washington, D.C.-based certified financial planner, recommends parents consult with a financial adviser to get a true baseline understanding of their current expenses and their progress toward their own goals. Then they can project what the additional expenses will be as a result of the child returning home.
"This analysis can be shared with the child," Ms. Blayney said. "He or she could even be a part of the discussion with the [financial professional]. This has the advantage of keeping the discussion objective and factual, and out of the usual parent-child conflict zone."
She also recommends taking an arm's-length business approach and creating a contract between the parent and child, detailing specific expectations for shared household expenses and responsibilities, and the time period for the living arrangement.
Marion Somers, the author of "Elder Care Made Easier," said parents should help their children if they are able to, but must take care of their own retirement and long-term needs first in the event their adult children cannot repay the favor.
"If you continue to treat them as the child, you may inhibit them from really maturing," Ms. Somers said. "You are now dealing adult to adult. You have to drop the parent-child mentality.
"A parent cannot lose track that they must keep themselves on track. Otherwise, the needs of the child could suck them under," she said. "The child needs to understand this is short term. Otherwise, they will get too comfortable."
Tim Grant: email@example.com or 412-263-1591. First Published June 20, 2012 12:00 AM