Parents Delay Retirement, Use Savings to Help Adult Children, Report Finds
- Feb 9, 2012
Friday, 03 Feb 2012 11:34 AM
By Forrest Jones
Retirement has become more elusive for many these days, and even those who have amassed savings for their golden years are finding themselves cashing in nest eggs to help their cash-strapped kids.
Blame high unemployment rates for the trend.
The average unemployment rate in 2011 for 20- to 24-year-olds, including those who have halted looking for work, was 15.4 percent, according to economist Matthew Dotson of the Bureau of Labor Statistics, The Tennessean reports, adding that even those with college degrees are struggling to find work.
The nationwide unemployment rate stands at 8.3 percent, according to January figures. Although better than 8.5 percent in December, jobless rates are much higher than pre-recession levels. In late 2006 and in early 2007, for example, the unemployment hovered between 4.4 percent and 4.6 percent.
Parents, naturally, want to help their children out, but the problem, experts say, is that dipping into retirement funds is a bad idea.
"The instinct of most parents is to help out a child, but a lot of times they could be hurting themselves," says Summer Parmer, a financial adviser based in LaGrange, Ga., The Tennessean adds.
"Taking out a lump sum of money could be a detriment to your future if you're having trouble taking care of yourself."
Experts say Americans are going to have to save more to plan for retirement, as old channels such as 401k plans and Social Security will require supplementing.
Even if one does open a 401(k) in his or her early twenties and faithfully saves with the employer matching through retirement — a rarity in itself — fees and other gotchas pop up along the way.
"When you look at how much money people have in their 401(k)s, on which they are becoming increasingly dependent, the money just isn't there," says Alicia Munnell, director of the Center for Retirement Research at Boston College, according to U.S. News & World Report.
"This notion that you can put in 6 percent of pay and your employer puts in 3 percent is just not right. If we're going to rely on these 401(k)s plans, we need to put in a number closer to 15 percent rather than 9 percent."
Category: General Business