As they approach retirement age, parents can make up some of the lost ground. But they can’t close the gap completely. By age 50 to 59, each child is associated with a 1.9 percentage point rise in a parent’s risk of falling short on the NRRI.
A 2 percentage point jump in retirement risk isn’t catastrophic. Other factors can have a much more profound effect on your likelihood of saving enough. For example, researchers found that access to a traditional pension at work is associated with a 40.5 point drop in retirement risk.
Still, the financial damage of being a parent multiplies the more children you have. And the chances of falling short are higher for the middle class than for other groups.
For the bottom third of workers by income, savings are less important because they can rely on Social Security to meet more of their retirement needs. For the top third of workers, researchers admit that their method may be underestimating the financial hit caused by children. Many well-paid parents appear to have healthy savings, according to the NRRI, but they’re likely to spend huge amounts sending kids to college. “It makes households look more prepared for retirement than they actually are,” the authors write.
Even after children graduate, move out and start their own careers, a parent’s job isn’t necessarily done. According to another Boston College study released last month, many parents continue donating time and money to children well into adulthood.
About a third of parents help adult children with gifts of time, presumably for child care and other chores. They contribute an average of 366 hours a year, researchers found, or 7 hours a week. Eventually, some children return the favor, especially as parents get older and need help. A quarter of parents report receiving the gift of time, an average of 324 hours per year, from their children.
About 31 percent of parents also say they give money to their adult kids, an average of $3,084 in the past year. Money rarely flows in the other direction, however: Only 9 percent of parents report taking money from adult kids in the past year, and the average amount received is just $595.
This article was provided by Bloomberg News.