By Eileen Ambrose, The Baltimore Sun
September 18, 2011
A couple of years ago, Joe and Marlene Everett were 50-something empty nesters with a daughter out on her own and a son away at college.
Now, thanks to the weak economy, the Everetts are once again all living under the same roof in Woodbine.
It's a bit of a financial strain, admits Marlene Everett, but one the couple has taken on willingly to help kids who don't yet earn enough to live on their own.
"We enjoy them being here right now," the 54-year-old mother says. "This is the last time they will live at home before branching out."
More American families are finding themselves in a similar situation, according to the federal government. The number of "doubled-up households" — those that have an extra adult who is not a student or partner — rose by 2 million to 21.8 million from spring 2007 to 2011, the Census Bureau reported last week. More than half of this doubling-up came from so-called "boomerang" children — offspring ages 25 to 34 who have moved back home to live with mom and/or dad.
It's only natural for parents to want to help a child regain financial footing. And if that adult child helps with bills that a parent struggles to make, the setup could be mutually beneficial.
But before parents lay out the welcome mat, the family should discuss how long the arrangement will last and what contribution the child will make to the household. Otherwise, parents could be taking on a huge financial burden at a time they should be focused on preparing for retirement.
The weak job market gets much of the blame for young adults returning to the nest.
The unemployment rate for 25-to-34-year-olds is now 9.5 percent, up from 4.6 percent four years ago. It's even worse for younger job seekers, reaching 14.8 percent for 20-to-24-year-olds and 10.2 percent for 25-to-29-year-olds.
Another reason some 20-somethings are staying home longer is that they now need advanced degrees to land positions that used to require far less education, according to Fred Amrein, a financial adviser in Wynnewood, Pa.
But financial planners say some young adults cling to the higher standard of living parents can provide.
"It's so easy for them to move back in with their parents and maintain the lifestyle they are accustomed to without having to sacrifice going out on their own," says Douglas O. Robinson, a financial adviser in Bel Air. "They like their cars. They want that big-screen TV … and all the stuff that comes with a bigger house."
Moving back to a parent's house clearly improves young adults' finances. The poverty rate among 25-to-34-year-olds living with their parents was 8.4 percent, according to the census. But that jumps to 45.3 percent if the rate is figured solely on the child's income.
For young adults, living with parents immediately lowers expenses, says Stuart Ritter, a financial planner with Baltimore-based investment firm T. Rowe Price.
"And if you take the money that would have gone to those expenses and put it toward savings and building a foundation for your financial future, it can give you a big leg up."
For the parents, some of the big expenses — taxes and the mortgage — remain the same no matter how many people are living at home. But food, utilities and other household expenses will go up.
"You got to make sure that's not compromising your own future," Ritter warns parents.
Some planners say that's happening. A poll commissioned by the National Endowment for Financial Education in May found that 26 percent of parents with boomerang kids took on debt, 7 percent postponed retirement, and 13 percent delayed a major event such as buying a home or getting married.
"We see this problem with a lot of our clients," says Mari Adam, a financial planner in Boca Raton, Fla., who wrote about it in a recent newsletter. "Raising these issues is not easy. It's hard to do this diplomatically."
Adam broached the subject a few years ago with a widow in her 60s who was supporting two children in their 30s. The underemployed children had been living rent-free in a family-owned condo, while the mother also paid off a daughter's student loans.
Adam warned the mother that she was putting her own future in jeopardy: When she retired, Adam told the woman, her savings would last just five years. Only when the mother saw on paper how much of her salary was going toward the children and how little to retirement, Adam says, did she start to wean the kids off the dole and save more for herself.
Denise Leish, a financial adviser in Silver Spring, says she's noticed that it's often a son who returns home and stays for years. In fact, two-thirds of the boomerang kids identified by the census were men.
Before a child moves back in, parents and offspring need to have an adult conversation so everyone knows what to expect.
Children should be required to contribute to the household. They might pay rent, the utility bill or chip in for groceries. If they don't have a job, they should at least pick up chores.
Make sure children have a game plan and a timeline for how long they will remain at home, says Robinson, the Bel Air adviser. For example, the child might stay home for one year while returning to school for training.
"If you force them to contribute to expenses and hold them to that or give them a timeline, it forces them to have that incentive to get a job or get a higher-paying job," Robinson says. "If you continue to give, give and give without having them giving anything in return, that's not good for anyone."
Everett, the Woodbine mother, says she hasn't asked her children to pay rent or set a deadline to move out.
"It's very difficult to do that with the economy as it is," says Everett, who is director of government contracts for a group representing office furniture manufacturers.
She and her husband will likely delay retirement a few years, she says, but that's largely because of other big bills in recent years, for college, health care and car repairs.
The mother says having her children home again gives her "peace of mind," but she acknowledges it's difficult for them.
"At this point of their life, they feel they should be able to afford to live on their own," she says. "They are both frustrated."
Justin, 22, and Rhiannon, 21, work two part-time jobs each and pay for their cars and other personal expenses.
Rhiannon moved back in with her parents a year ago and plans to remain there while attending community college starting next year.
Justin graduated recently from Hood College. He expected to land a job as a police officer but is bumping up against hiring freezes. He says he might go back to school if nothing in his field of study opens up within a year.
For Rhiannon and Justin, living with their parents is an adjustment. Rhiannon says she misses the feeling of independence.
Justin says, "It was tough having to get back into the routine of having to take into account parents getting up in the morning to go to work at 6 when a roommate didn't get up until 9 or 10 for class."
But it could be worse.
"It's a roof over my head," he says. "I can't complain."
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