There are still waters in the finances of older Americans that even seasoned financial advisors miss.
Retirement planners and professional advisors are usually aware of the biggest expenses in retirement, from housing to health care. But they often ignore the fact that older children’s financial struggles may spill over into their aging parents’ finances.
According to the 2025 Protected Retirement Income and Planning (PRIP) study, nearly one in six (17%) adults are financially supporting children over the age of 26 (1). Nearly one in ten provide financial support to their grandchildren.
This is not the end of the list. A small minority (7%) still support their parents or in-laws financially and 9% support other family members or loved ones.
If you are one of these statistics, this unpredictable loss in your finances can either destroy your retirement plan or reduce your lifestyle. Here’s why becoming an informal bank for relatives has a real cost and how you can deal with it before it’s too late.
Faced with a severe unemployment crisis and lack of a job market, it is becoming increasingly common for young people to turn to their parents for financial support.
According to a report by Savings.com, this trend continues to increase from 2022, and by 2025 nearly 50% of parents will offer at least one financial aid to their adult children (2). On average, these parents pay $1,474 per month in direct child support.
Not only is it a huge and recurring expense, it’s also very emotionally draining. Saying no to a loved one, especially if they are really struggling financially, is difficult for many parents. Setting boundaries is often complicated and can affect relationships.
This is why many leaders are pulling other levers to make these grants possible. Only 15% of parents surveyed for the PRIP study said they would consider reducing financial support for their loved ones (1). At the same time, 58 percent of them said they would consider a lower standard of living.
Another 54% said they would like to return to work, either part-time or full-time, to fill the gap in their budget, while 39% said they would consider giving up a personal hobby.
These uncomfortable choices may be the result of a lack of planning. However, it is difficult to plan how much support your family members will need in retirement. If you’re in your 30s or 40s, you may have considered the risks of inflation and health care costs, but it’s nearly impossible to predict whether your child might occasionally need help paying the rent.
Fortunately, there are ways to reduce this unpredictable and unpredictable cost.
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Parents may struggle to balance their needs with their older children. But it is important to appreciate the difference in time horizons.
If you’re in your 50s or 60s, you probably only have a few years left to save, invest, and grow your wealth. Your adult children may have more time to develop their careers and portfolios. With this in mind, it is important to prioritize your finances over your loved ones.
Financial expert Ramit Sethi recommends creating a personal policy for financial support, loans and gifts (3). For example, you can set a dollar limit for gifts or a time limit for loans before you give them to your loved ones.
It is also important to set clear boundaries. Don’t offer money you can’t afford. Clearly explain why your limits exist as well as any consequences for violating those personal financial boundaries. It is also necessary to adjust these limits when your personal financial situation changes.
“Clean borders create freedom, not restriction,” Setti says on her website. “They allow you to say yes to the right things and no to everything.”
Finally, generosity towards family can be appreciated, but protecting your retirement security must come first, because if your savings run out, there will be no one left to support you.
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LIMRA (1); Savings.com (2); I Will Teach You How To Be Rich (3)
This article provides information only and should not be used as advice. It is provided without warranty of any kind.
