Retirement planning is an essential part of comprehensive estate planning, but these days many Canadians are having a difficult time saving for retirement because of a common factor: they still support their adult children.
According to Statistics Canada, in 2011 more than 40 per cent of Canadians in their 20s lived at home with their parents. That percentage represents a 10-point increase from 20 years earlier. In fact, two-thirds of parents who responded to a recent survey said their estate assets are being depleted because their adult children still need financial support.
The Canadian Imperial Bank of Commerce commissioned the survey, to which 1,054 Canadian parents responded. Twenty per cent of the respondents said they had delayed retirement in order to support their adult children, and about 50 per cent said their ability to save has been hindered by supporting their kids aged 18 or older.
The expenses covered by the parents included groceries, cellphone bills, car payments, other loan payments, and rent for housing other than the family home. The main expense parents reported covering, however, is room and board. More than 70 per cent of respondents said they provided free room and board to their adult kids.
These days young adults may need their parents’ support for a number of reasons. For example, the job market is weak, and fewer people are getting married in their 20s.
It is also possible that many people in their 20s have higher standard-of-living expectations than young people did in previous decades, and many educated millennials have high expectations in terms of jobs, despite the weak market. Hence young adults live comfortably with their parents while searching for a job.
In any case, parents should consider having a discussion with their adult kids about budgeting and finances. In the absence of such a discussion, it is entirely possible that adult children are simply unaware of the burden they are placing on their parents’ retirement plans.
If you are a parent whose adult child still needs support, then consider speaking with an estate planning lawyer about updating your retirement strategy to account for your current family situation.