The slumping economy is now forcing baby boomers to move back with their parents, resulting in financial consequences for all. Some have lost jobs. Others are suffering the consequences of overextending themselves with larger houses then they could afford, real estate investments gone bad, or just buying to much "stuff". While this is inconvenient for the "kids", it can be devastating for the parents.
According to an Associated Press article more and more "kids" are moving back home with their parents to help make ends meet.
Financial planners report receiving many calls from parents seeking advice about taking in their grown children following divorces and layoffs. Kim Foss Erickson, a financial planner in Roseville, Calif., north of Sacramento, said she has never seen older children, even those in their 50s, depending so much on their parents as in the last six months. "This is not like, 'OK, my son just graduated from college and needs to move back in' type of thing," she said. "These are 40- and 50-year-old children of my clients that they're helping out."
Parents "jeopardize their financial freedom by continuing to subsidize their children," said Karin Maloney Stifler, a financial planner in Hudson, Ohio, and a board member of the Financial Planning Association. "We have a hard time saying no as a culture to our children, and they keep asking for more."
But plenty of well-meaning parents must delay retirement or scale back their dreams because they have to help their children, Stifler said. Parents feel guilty if they don't offer help, but she warns them to be careful with their savings.
A new survey by the retiree-advocacy group AARP found that one-fourth of Generation Xers, those 28 to 39 years old, receive financial help from family and friends. The on-line survey of nearly 1,800 people ages 19 to 39 also found 57 percent believed they were "financially independent." But in a separate question, 33 percent said they received financial support from family and friends."
This combined with the inflation, decreasing home values and an unstable economy, could jeopardize the retirement of many seniors. One option that will become more and more necessary for some is to access the equity in their home through a government insured Reverse Mortgage. Used judiciously, a Reverse Mortgage can supplement the retirement income without having to eat up the principle of the retirement account.
Feel free to call if you have any questions. Larry Morris 503-421-0096.
Larry Morris is a Certified Mortgage Planning Specialist in Portland, Oregon. He specializes in USDA Guaranteed Rural Home Loans, FHA Purchase and Refinance, FHA 203k Rehab loans, FannieMae HomePath loans, Oregon VA Loans and conforming purchase and refinances in the states of Oregon, Washington and Idaho.
He can be reached at 503-421-0096.
It just goes to show..one income just doesn't cut it anymore in many parts of the country. I can't imagine trying to buy a house here in CA with one income...
Rogan McGillis
www.reversemortgagecity.com
Larry, in our community the low end homes are in the low 200's. How is a family just starting out suppose to make that work? I have seen family members step up and help with down payments and such but that's a rough mortgage to come up with every month!
Larry:
In Northern Virginia we have an additional concern for some of these parents. If they bought into a 55+ community (aka. Active Adult), there are rules against having children under the age of 18 living in the home. The HOA can force you to sell your home for violating this one, from what I understand. So imagine the case of the 40-something moving back in with Mom and Dad, bringing their under 18 child with them, in an Active Adult Community. Bad news.